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Section 138 NI Act – Prima Facie Indication That Complaints is Filed By Authorized Person of Company Sufficient for Magistrate to Take Cognizance: Supreme Court

Team SoOLEGAL 23 Feb 2022 4:24pm

Section 138 NI Act – Prima Facie Indication That Complaints is Filed By Authorized Person of Company Sufficient for Magistrate to Take Cognizance: Supreme Court

NEW DELHI: When the complainant/payee is a firm, an authorized employee can represent the company in a cheque bounce case, according to the Supreme Court.


“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. Such averment and prima facie material is sufficient for the Magistrate to take cognizance and issue process”, a three judges bench headed by CJI NV Ramana observed.


The Panel, which also included justices AS Bopanna and Hima Kohli, stated that the issue of adequate authority and knowledge can only be decided at trial and that in such cases, admitting a petition under Section 482 to dismiss the Magistrate’s decision taking cognizance would be unreasonable.


In this matter, the complainant corporation was represented by the General Manager (Accounting) who filed the complaint under Section 138 and 142 of the Negotiable Instruments Act, 1881. The complaint was taken up by the Sub Divisional Judicial Magistrate, who issued summonses to the defendants. The accused petitioned the High Court under Section 482 Cr.P.C., arguing that the complaint was made by an incompetent person and lacked the necessary averments. The High Court granted the petition, noting that there is no allegation in the complaint as to whether the General Manager (Accounting) had knowledge of the transaction or was a witness to it. The High Court cited A.C. Narayanan V, State of Maharashtra & Anr. (2014) 11 SCC 790, noting that there is no reference in the complaint or affidavit of when and how the corporation allowed its General Manager (Accounting) to file the complaint. They claimed that there is no allegation in the complaint that the General Manager (Accounting) had my knowledge of the transaction or was a witness to it.


The plaintiff corporation claimed before the Supreme Court that the High Court misinterepted the concept enunciated in A.C. Narayanan (supra) to make it unsuitable. To sustain the complaint, the accused maintained that there should be unequivocal averment that the individual making the complaint is authorized by the complainant and has knowledge of the conduct in issue.


It was observed in AC Narayanan, as follows: “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.”


The court remarked that the corporation is having approved the General Manager (Accounting) and the General Manager (Accounting) having personal knowledge had been clearly averred in this case.


“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 NI Act was satisfied.”


While granting the appeal, the court highlighted the significance of the observations made in AC Narayanan:


“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 NI Act, the complainant necessarily should be the company which would be represented by an employee who is authorized. Prima facie, 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 authorization therefore 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.”




Tagged: Supreme   Court   Cheque   Bounce   Dishonor   Complaint   Cognizance   138   NI   Act   Payee   Drawee   Drawer   CJI   Ramana   NV   Prima   Facie   Authorized   Company   Magistrate   Justices   AS   Bopanna   Hima   Kohli   Section   482   142   CrPC   Cr.P.C.   High   Court   1881   AC   Narayanan   General   Manager  
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