Sec 142 NIA | When complainant is a company, an authorized employee can represent the company and such averment is sufficient to take cognizance and issue process: Supreme Court

Supreme Court of India
PC: Supreme Court Observer
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  • Post published:February 23, 2022
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Three Judges Bench of the Supreme Court comprising of Hon’ble the Chief Justice N. V. Ramana, Justice A. S Bopanna, and Justice Hima Kohli have observed that when the complainant/payee is a company, an authorized employee can represent the company. Such averment and prima facie material is sufficient for the learned Magistrate to take cognizance and issue process.

The Court further observed that, If at all, there is any serious dispute with regard to the person prosecuting the complaint not being authorized or if it is to be demonstrated that the person who filed the complaint has no knowledge of the transaction and, as such that person could not have instituted and prosecuted the complaint, it would be open for the accused to dispute the position and establish the same during the course of the trial.

As noted in Samrat Shipping Co. Pvt. Ltd., dismissal of a complaint at the threshold by the Magistrate on the question of authorisation, would not be justified. Similarly, we are of the view that in such circumstances entertaining a petition under Section 482 to quash the order taking cognizance by the Magistrate would be unjustified when the issue of proper authorisation and knowledge can only be an issue for trial, the Court observed in the judgment authored by Justice A. S Bopanna.

In the instant case, the appellant assailed the judgment passed by the High Court of Orissa at Cuttack. Through the said judgment, the High Court while disposing of the petition has quashed the order passed by the learned SDJM, Jharsuguda by which cognizance was taken and summons was issued in a complaint under Section 138 of the Negotiable Instrument Act, 1881.

Brief Facts:

-The respondent herein had issued seven cheques dated 13.03.2015, in all amounting to Rs.1,10,00,000/­ (Rupees one crore ten lakhs) in favour of the appellant company.

-On presentation, the said cheques were dishonoured by the Bank and returned with the endorsement, ‘account closed’.

-The appellant in that view issued notices dated 14.04.2015 through registered post, acknowledgement due.

-Though the notices were received on 16.04.2015 as per the postal acknowledgement, the respondent failed to comply with the demand or respond to the same.

-In that view, the appellant filed the complaint before  the  learned Sub­Divisional Judicial Magistrate Panposh, Uditnagar Rourkela under Section 138 and 142 of Negotiable Instruments Act, 1881.

-The said complaint was registered based on the affidavit filed on behalf of the complainant, in lieu of oral sworn statement.

-The learned SDJM on being satisfied that there is sufficient material and the complaint under Section 138 of N.I. Act against the accused is in accordance with law, took cognizance of the complaint and directed summons to the respondent ­accused.

-The respondent herein however filed a petition under Section 482 of the Criminal Procedure Code before the High Court claiming to be aggrieved by the order dated 05.11.2015.

-The respondent, in the said petition had contended that the complaint filed was by an incompetent person without the requisite averments in the complaint, despite which the learned SDJM had taken cognizance and issued summons.

-In that light, the respondent had contended that the order taking cognizance and the summons issued to them, is liable to be quashed.

Reasoning given by the High Court while quashing the Order:

The High Court after placing reliance on the judgment of this Court in A.C. Narayanan vs. State of Maharashtra & Anr. (2014) 11 SCC 790 has held that there is no mention in the complaint or affidavit as to when and in what manner the company had authorized its General Manager (Accounting) to represent the company to file the complaint.

It has further held that there is no averment in the complaint as to whether the General Manager (Accounting) had knowledge about the transaction or he was a witness to the transaction.

It was also held, neither any resolution of the Board of Directors of the complainant company nor any authorisation of the company in favour of the person representing it in the complaint was filed for perusal of the Magistrate.

Only an authorisation letter issued by the Managing Director of the complainant company in favour of the General Manager (Accounting) was produced and the said authorisation does not indicate whether the Board of Directors had authorised the Managing Director to sub­delegate his powers to the General Manager (Accounting) to file the complaint on behalf of the company.

Observations:

The Court, while answering the contention of the respondent i.e., Complaint filed by Mr. Subhasis Kumar Das, General Manager (Accounting) on behalf of the company is not competent for want of authorisation and that there is no averment with regard to his knowledge about the transaction, referred to the judgment in A.C Narayanan vs State of Maharashtra & Anr. wherein it has observed thus:

“31) While holding that there is no serious conflict between the decisions in MMTC (supra) and Janki Vashdeo Bhojwani (supra), we clarify the position and answer the questions in the following manner:

33.1 Filing of complaint petition under Section 138 of N.I Act through power of attorney is perfectly legal and competent.

33.2 The Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions.

33.3 It is required by the complainant to make specific assertion as to the knowledge of the power of attorney holder in the said transaction explicitly in the complaint and the power of attorney holder who has no knowledge regarding the transactions cannot be examined as a witness in the case.

33.4 In the light of section 145 of N.I Act, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the complainant in support of the complaint under Section 138 of the N.I Act and the Magistrate is neither mandatorily obliged to call upon the complainant to remain present before the Court, nor to examine the complainant of his witness upon oath for taking the decision whether or not to issue process on the complaint under Section 138 of the N.I. Act.”

33.5 The functions under the general power of attorney cannot be delegated to another person without specific clause permitting the same in the power of attorney. Nevertheless, the general power of attorney itself can be cancelled and be given to another person.

Para 33 of the judgment – A C Narayanan vs State of Maharashtra

The Court after referring to the judgment in A.C. Narayanan (supra) made the following observations:

“11. A cumulative perusal of the facts of the instant case would indicate that the requirement as indicated in A.C. Narayanan, (supra) are in fact satisfied. Firstly, as noted above, the complaint was filed in the name of the company i.e., “the payee”, through Mr. Subhasis Kumar Das, General Manager (Accounting). The authorisation dated 23.05.2015 by the Managing Director in his favour (Annexure P­17) discloses that Mr. Priyabrata Panda, Managing Director of the appellant company had authorised Mr. Subhasis Kumar Das, General Manager (Accounting) to institute criminal proceedings, including proceedings under the provisions of the N.I. Act and civil proceedings on behalf of the company against M/s. SMS Asia Private Limited (respondent), to represent the company and take all necessary actions in the matter in learned SDJM’s Court. The specimen signature of Mr. Subhasis Kumar Das has also been attested by the Managing Director. The Managing Director apart from himself being the key managerial personnel of the appellant company, has also been delegated the power by the Board of Directors through the document dated 06.04.1998 (Annexure P­16). Through the said document the Managing Director has been delegated, in general, all powers necessary for the management and operation of the company and it has been specified among others, to exercise the power relating to important issues affecting the company’s land and property. Through the said document, the Managing Director is also empowered to delegate where necessary and to the extent required, any of the powers delegated to him, to his subordinate officers. The above noted documents would disclose that the complaint under Section 138 NI Act was filed on behalf of the “payee” company with due authorisation”

Paragraph 11 of the instant judgment

The Court after considering the factual aspects of the complaint relating to the transaction and the affidavit supporting the complaint contain averments regarding authorization in favour of and knowledge on the part
of Mr. Subhasis Kumar Das, observed thus:

“14. A meaningful reading of the above would indicate that the company having authorized the General Manager (Accounting) and the General Manager (Accounting) having personal knowledge had in fact been clearly averred.

What can be treated as an explicit averment, cannot be put in a straitjacket but will have to be gathered from the circumstance and the manner in which it has been averred and conveyed, based on the facts of each case.

The manner in which a complaint is drafted may vary from case to case and would also depend on the skills of the person drafting the same which by itself, cannot defeat a substantive right. However, what is necessary to be taken note of is as to whether the contents as available in the pleading would convey the meaning to the effect that the person who has filed the complaint, is stated to be authorized and claims to have knowledge of the same.

In addition, the supporting documents which were available on the record by themselves demonstrate the fact that an authorized  person,  being  a  witness  to  the  transaction  and having knowledge of the case had instituted the complaint on behalf of the “payee” company and therefore, the requirement of Section 142 of N.I. Act was satisfied.

In  Vinita S. Rao vs.Essen Corporate Services (P) Ltd. (2015) 1 SCC 527, to which one of us (Hon’ble CJI) was a member of the Bench has accepted the pleading of such a nature to indicate the power to prosecute the complaint and knowledge of the transaction as sufficient to maintain the complaint.”

Paragraph 14 of the Instant Judgment

The Court concluded thus:

“17. In that view, the position that would emerge is that when a company is the payee of the cheque based on which a complaint is filed under Section 138 of N.I. Act, the complainant necessarily should be the Company which would be represented by an employee who is authorized. Prima­facie, in such a situation the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the complainant (Company) is represented by an authorized person who has knowledge, would be sufficient.

The employment of the terms “specific assertion as to the  knowledge of the power of attorney holder” and such assertion about knowledge should be “said explicitly” as stated in A.C.Narayanan  (supra)  cannot  be  understood  to  mean  that  the assertion should be in any particular manner, much less only in the manner understood by the accused in the case.

All that is necessary is to demonstrate before the learned Magistrate that the complaint filed is in the name of the “payee” and if the person who is prosecuting the complaint is different from the payee, the authorisation therefor and that the contents of the complaint are within his knowledge.

When, the complainant/payee is a company, an authorized employee can represent the company. Such averment and prima facie material is sufficient for the learned Magistrate to take cognizance and issue process.

If at all, there is any serious dispute with regard to the person prosecuting the complaint not being authorized or if it is to be demonstrated that the person who filed the complaint has no knowledge of the transaction and, as such that person could not have instituted and prosecuted the complaint, it would be open for the accused to dispute the position and establish the same during the course of the trial.

As noted in Samrat Shipping Co. Pvt. Ltd. (supra), dismissal of a complaint at the threshold by the Magistrate on the question of authorisation, would not be justified. Similarly, we are of the view that in such circumstances entertaining a petition under Section 482 to quash the order taking cognizance by the Magistrate would be unjustified when the issue of proper authorisation and knowledge can only be an issue for trial.

Para 17 of the Instant Judgment

The Court ultimately held that the High Court was not justified in entertaining the petition filed under Section 482 of Cr.PC and quashing the order dated 05.11.2015, taking cognizance of the complaint filed by the appellant.

Accordingly, the Court set-aside the judgment passed by the High Court of Orissa, Cuttack and restored the complaint.

Click here to download the judgment

Case Details:
M/s TRL Krosaki Refractories Ltd. Versus M/s SMS Asia Private Limited & Anr
Criminal Appeal No. 270 of 2022
Coram: CJI N.V. Ramana, Justice A. S. Bopanna and Justice Hima Kohli
Date of Judgment: 22-02-2022