MANU/SC/0728/2001

Equivalent/Neutral Citation: 2001(3)AC R2848(SC ), AIR2002SC 182, 2002(1)ALD(C ri)585, 2002 (44) AC C 369, 2002 (46) ALR 190,
2002(1)ALT(C ri)230, 2002 (1) AWC 80 (SC ), I(2002)BC 280(SC ), IV(2005)BC 59(SC ), IV(2005)BC 59(SC ), 2002(1)BomC R218,
IV(2001)C C R316(SC ), 2002C ivilC C 13, [2001]45C LA374(SC ), [2002]108C ompC as48(SC ), (2002)1C ompLJ58(SC ), (2002)1C ompLJ58(SC ),
(2002)1C ompLJ58(SC ), 2002C riLJ266, 2002(1)C rimes156(SC ), 2001 INSC 572, JT2001(9)SC 563, 2001(2)KLJ985, 2002-1-LW(C rl)356,
2002(1)RC R(C riminal)318, RLW2002(1)SC 116, 2001(8)SC ALE191, (2002)1SC C 234, [2002]39SC L270(SC ), [2001]Supp5SC R265, 2002(1)UC 104,
2002(4)WLN721

IN THE SUPREME COURT OF INDIA

Appeal (crl.) 1173-1174 of 2001, SLP (Crl.) 289-290 of 2000
Decided On: 19.11.2001
M.M.T.C. Ltd. and Ors. Vs. Medchl Chemicals & Pharma (P) Ltd. and Ors.
Hon'ble Judges/Coram:
K.T. Thomas and S.N. Variava, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: V.R. Reddy, Sr. Adv., Ashok Sharma and V.G.
Pragasam, Advs
For Respondents/Defendant: S.M. Deenadayalan, Adv. for K.V. Vijayakumar
Case Note:
Negotiable Instruments Act, 1881 - Sections 138, 139 and 142-Code of
Criminal Procedure, 1973-Section 482-Dishonour of cheque-Complaint by
company-Whether can be quashed on ground that complaint is signed and
presented by person neither authorised agent nor person empowered under
Articles of Association or by resolution of Board?-Held, "no"-As per Section
142 complaint under Section 138 can be made by payee or holder in due
course of cheque-Complaints are by appellant company which is payee of
cheque-Whether High Court can go into question that cheques issued as
security and not for any debt or liability?-Held, "no"-High Court cannot go into
merits of case-Section 139 enables Court to draw presumption that holder of
cheque received it for discharge of debt or liability until contrary proved-
Whether complaint maintainable when payment of cheque stopped by
drawer?-Held, "yes"-Offence under Section 138 still made out-Order of High
Court quashing complaint not sustainable and set aside.
Section 142 of the Negotiable Instruments Act, 1881 provides that a
complaint under Section 138 can be made by the payee or the holder in due
course of the said cheque. The two complaints, in question, are by the
appellant company who is the payee of the two cheques.
Anyone can set the criminal law in motion by filing a complaint of facts
constituting an offence before a Magistrate entitled to take cognizance. It has
been held that no Court can decline to take cognizance on the sole ground
that the complainant was not competent to file the complaint. It has been
held that if any special statute prescribes offences and makes any special
provision for taking cognizance of such offences under the statute, then the
complainant requesting the Magistrate to take cognizance of the offence must
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satisfy the eligibility criterion prescribed by the statute. In the present case,
the only eligibility criteria prescribed by Section 142 is that the complaint
must be by the payee or the holder in due course. This criteria is satisfied as
the complaint is in the name and on behalf of the appellant company.
Even presuming that initially there was no authority with the person lodging
complaint on behalf of the company, still the company can, at any stage,
rectify that defect. At a subsequent stage, the company can send a person
who is competent to represent the company. The complaints could thus not
have been quashed on this ground.
The power of quashing criminal proceedings should be exercised very
stringently and with circumspection. It is settled law that at this stage, the
Court is not justified in embarking upon an enquiry as to the reliability or
genuineness or otherwise of the allegations made in the complaint. The
inherent powers do not confer an arbitrary jurisdiction on the Court to act
according to its whim or caprice. At this stage, the Court could not have gone
into merits and/or come to a conclusion that there was no existing debt or
liability.
By virtue of Section 139 of the Negotiable Instruments Act, the Court has to
draw a presumption that the holder of the cheque received the cheque for
discharge of a debt or liability until the contrary is proved. At the initial stage
of the proceedings, the High Court was not justified in entertaining and
accepting a plea that there was no debt or liability and thereby quashing the
complaint.
Even though the cheque is dishonoured by reason of 'stop payment'
instruction, an offence under Section 138 could still be made out. The
presumption under Section 139 is attracted in such a case also. Even when
the cheque is dishonoured by reason of stop payment instructions by virtue of
Section 139, the Court has to presume that the cheque was received by the
holder for the discharge, in whole or in part, of any debt or liability. Of course,
this is a rebuttable presumption. The accused can thus show that the "stop
payment" instructions were not issued because of insufficiency of paucity of
funds. If the accused shows that in his account, there was sufficient fund to
clear the amount of the cheque at the time of presentation of the cheque for
encashment at the drawer bank and that the stop payment notice had been
issued because of other valid causes including that there was no existing debt
or liability at the time of presentation of cheque for encashment, then offence
under Section 138 would not be made out. The important thing is that the
burden of so proving would be on the accused.
JUDGMENT
S.N. Variava, J.
1. Leave granted.
2. Heard parties.
3. These Appeals are against a Judgment dated 18th December, 1998. By this common,
Judgment two complaints, filed by the appellants under Section 138 of the Negotiable
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Instruments Act have been quashed.
4. The appellant is a Government of India Company incorporated under the Companies
Act. The appellant has a Regional Office at Chennai. The 1st respondent is also a
Company. The 2nd and 3nd respondents were are the Directors of the 1st respondent
Company. It is stated that 2nd respondent has now died.
5. The appellant and the 1st respondent entered into a Memorandum of Understanding
dated 1st June. 1994. This Memorandum of Understanding was eighthly on 19th
September, 1994. Pursuant to the Memorandum of Understanding two cheques, one
dated 31st October, 1994 in a sum of Rs. 20,26,995/- and another dated 10 th
November, 1994 in a sum of Rs. 22,10,156/- were issued by the 1 st respondent in
favour of the appellant. Both the cheques when presented for payment were returned
with the endorsement" payment stopped by drawer." Two notices were served by the
appellant on the 1st respondent. As the amounts under the cheques were not paid the
appellants lodged two complaints through one Lakshman Goel, the Manager of the
Regional Office of the appellant.
6 . Respondents filed two petitions for quashing of the complaints. By the impugned
order both the complaints have been quashed.
7 . At this stage it must be mentioned that respondents had also issued to the
appellants, four other cheques. Those cheques were also dishonoured when presented
for payment. Four other complaints, under Section 138 of the Negotiable Instruments
Act, had also been filed by the appellants. Those four complaints had also been lodged
by the same Shri Lakshman Goel. In those four cases the respondents filed separate
applications for discharge. Those discharge applications were on identical grounds as
urged by the respondents in the two petitions for quashing the complaints. The
Magistrate accepted the contention and discharged the respondents. The High Court
allowed the Revision filed by the appellants and set aside the Order of discharge. The
High Court held, as between the same parties, that the Magistrate had erred in holding
that the complaints filed by Lakshman Goel were not maintainable. The High Court held
that a this stage, it was not possible to accept defence that complainant/appellants were
not entitled to present the cheques as respondents had expected the goods. The High
Court restored the four complaints and directed the Magistrate to proceed with the trial
in accordance with law. The respondents filed SLPs before this Court which were
summarily dismissed.
8 . In this case the respondents have taken identical contentions in their petitions to
quash the complaints viz. that the complaints filed by Mr. Lakshman Goel were not
maintainable and that the cheques were not given for any debt or liability. It was
pointed out to the learned Judge that between the same parties and on identical facts, it
had already been held that as case for discharge was made our. Yet the learned Judge
chose to ignore those findings and proceeded to hold to the contrary.
9 . In the impugned Judgment it has been held that the complaints filed by Mr.
Lakshman Goel were not maintainable. It was noticed that in those two complaints at as
subsequent stage, one Mr. Sampath Kumar, the Deputy General Manager of the
appellant was allowed to represent the appellants. The High Court held that it is only an
Executive Director of the Company who has the authority to institute legal proceedings.
It is held that the complaint could only be filed by a person who is in charge of or was
responsible to the Company. It is held that authorisation must be on the date when the
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complaint is filed and a subsequent authorisation does not validate the complaint. It is
held that the absence of a complaint by duly delegated authority is not a mere defect or
irregularity which could be cured subsequently. It is held that if the record does
disclose any authorisation, then taking cognizance of the complaint was barred by
Section 142(a) of the Negotiable Instruments Act. It has been held that Senior Manager
(who had lodged the complaints) and the Deputy General Manager (who was
substituted) had not been authorised by the Board of Directors to sign and file the
complaint on behalf of the Company or to prosecute the same. It is held that the
Manager or the Deputy General Manager were mere paid employees of the Company. It
is then held as follows:
"Therefore it is clear that the legal position as crystallised by the rulings is to
the effect that a complaint under Section 138 of the Negotiable Instruments Act
can be filed for and on behalf of a Body such as Corporation, who has only
artificial existence through a particular mode and when that mode is not
followed any proceedings initiated or any complaint filed will be vitiated from
its very inception. In my opinion, here the complaint is signed and presented by
a person, who is neither an authorised agent nor a person empowered under
the articles of Association or by any resolution of the Board to do so. Hence the
complaint is not maintainable. The taking cognizance of such a complaint is
legally not acceptable. Hence these two complaints filed for and on behalf of
MMTC Limited against the Petitioners herein, which were taken on file in C.C.
Nos. 3324 of 1995 and 3325 of 1995 are not maintainable at all and that
cognizance of the said complaints ought not to have been taken by the
Magistrate."
10. In our view the reasoning given above cannot be sustained. Section 142 of the
Negotiable Instruments Act provides that a complaint under Section 138 can be made by
the payee or the holder in due course of the said cheque. The two complaints, in
question are by the appellant Company who is the payee of the two cheques.
11. The Court has as far back as in the case of Vishwa Mitter v. O.P. Poddar reported in
MANU/SC/0378/1983 : 1984CriL J1 , held that it is clear that anyone can set the
criminal law in motion by filing a complaint of facts constituting an offence before a
Magistrate entitled to take cognizance. It has been held that no court can decline to take
cognizance on the sole ground that the complainant was not competent to file the
complaint. It has been held that if any special statute prescribes offences and makes
any special provision for taking cognizance of such offences under the statute, then the
complainant requesting the Magistrate to take cognizance of the offence must satisfy the
eligibility criterion prescribed by the statute. In the present case, the only eligibility
criteria prescribed by Section 142 is that the complaint must be by the payee or the
holder in due course. This criteria is satisfied as the complaint is in the name and on
behalf of the appellant Company.
1 2 . In the case of Associated Cement Co. Ltd. v. Keshvanand reported in
MANU/SC/0894/1998 : 1998CriL J856 , it has been held by this Court that the
complainant has to be a corporeal person who is capable of making a physical
appearance in the court. It has been held that if a complaint is made in the name of a
incorporeal person (like a company or corporation) it is necessary that a natural person
represents such juristic person in the court. It is held that the Court looks upon the
natural person to be complainant for all practical purposes. It is held that when the
complainant is a body corporate it is the de jure complainant, and it must necessarily
associate a human being as de facto complaint to represent the former in court
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proceedings. It has further been held that no Magistrate shall insist that the particular
person whose statement was taken on oath at the first instance, alone can continue to
represent the company till the end of the proceedings. It has been held that there may
be occasions when different persons can represent the company. It has been held that it
is open to the de jure complainant company to seek permission of the court for sending
any other person to represent the company in the court. Thus, even presuming, that
initially there was no authority, still the Company can at any stage rectify that defect. At
a subsequent stage the Company can send a person who is competent to represent the
company. The complaints could thus nor have been quashed on this ground.
13. The learned Judge has next gone into facts and arrived at a conclusion that the
cheques were issued as security and not for any debt or liability existing on the date
they were issued. In so doing the learned Judge has ignored well settled law that the
power of quashing criminal proceedings should be exercised very stringently and with
circumspection. It is settled law that at this stage the Court is not justified in embarking
upon an enquiry as to the reliability or genuineness or otherwise of the allegations
made in the complaint. The inherent powers do not confer an arbitrary jurisdiction on
the court to act according to its whim or caprice.
At this stage the court could not have gone into .merits and or come to conclusion that
there was no existing debt or liability.
14. It is next held as follows:
"This is a special provision incorporated in the Negotiable Instrument Act. It is
necessary to allege specifically in the complaint that there was a subsisting
liability and an enforceable debt and to discharge the same the cheques were
issued. But we do not find any such allegation at all. The absence of such vital
allegation, considerably impairs the maintainability."
15. In the case of Maruti Udyog Ltd. v. Narander reported in MANU/SC/0803/1999 :
(1999)1SCC113 , this Court has held that by virtue of Section 139 of the Negotiable
Instruments Act, the Court has to draw a presumption that the holder of the cheque
received the cheque for discharge of a debt or liability until the contrary is proved. This
Court has held that at the initial stage of the proceedings the High Court was not
justified in entertaining and accepting a plea that there was no debt or liability and
thereby quashing the complaint.
1 6 . A Similar view has been taken by this Court in the case of K.N. Beena vs.
Muniyappan and anr. reported in MANU/SC/0661/2001 : 2001CriL J4745 :
2001CriL J4745 , wherein again it has been held that under Section 139 of the
Negotiable Instruments Act the Court has to presume, in a complaint under Section 138,
that the cheque had been issued of a debt or liability.
17. There is therefore no requirement that the Complainant must specifically allege in
the complaint that there was a subsisting liability. The burden of proving that there was
no existing debtor liability was on the respondents. This they have to discharge in the
trial. At this stage, merely on basis of averments in the Petitions filed by them the High
Court could not have concluded that there was no existing debt or liability.
1 8 . Lastly it was submitted that a complaint under Section 138 could only be
maintained if the cheque was dishonoured for reason of funds being insufficient to
honour the cheque or if the amount of he cheque exceeds the amounts in the account. It
is submitted that as payment of the cheques had been stopped by the drawer one of the
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ingredients of Section 138 was not fulfilled and thus the complaints were not
maintainable.
19. Just such a contention has been negatived by this Court has, in the case of Modi
Cements Ltd. v. Kuchil Kumar Nandi reported in. MANU/SC/0171/1998 It has been that
even though the cheque is dishonoured by reason of stop payment instruction an
offence under Section 138 could still be made out. It is held that the presumption under
Section 139 is attracted in such a case also. The authority shows that even when the
cheque is dishonoured by reason of stop payment instruction by virtue of Section 139
the Court has to presume that the cheque was received by the holder for the discharge
in (SIC) or in part, of any debt or liability. Of course this a rebuttable presumption. The
accused can thus show that the "stop payment" instructions were not issued because of
insufficiency or paucity of funds. If the accused shows that in his account there was
sufficient funds to clear the amount of the cheque at the time of presentation of the
cheque for encashment oat the drawer bank and that the stop payment notice had been
issued because of other valid causes including that there was no existing debt or
liability at the time of presentation of cheque for encashment, then offence under
Section 138 would not be made out. The important thing is that the burden so proving
would be on the accused.
Thus a Court cannot quash a complaint on this ground.
20. In this view of the matter, the impugned Judgment cannot be sustained and is set
aside. The learned VII Metropolitan Magistrate, G.T. Chennai is directed to proceed with
the complaints against respondents 1 and 3 in accordance with law. it is made clear that
the setting aside of the impugned Order will not tantamount to preventing the
respondents from taking, at the trial, please available to them including those taken
herein.
21. The Appeals stand disposed of accordingly. There will be no order as to costs.
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