NI Act Doesn't Prescribe Who Will Represent Company Which Is Complainant U/S 138, Can Be Represented By An Employee: Allahabad High Court

The Allahabad High Court has held that Section 142 of the Negotiable Instruments Act,1881 and Section 200 of the Criminal Procedure Code do not prescribe who can file a complaint on behalf of a company under Section 138 of the Negotiable Instruments Act,1881.The Court held that when company is the payee, the complaint must be registered in the name of the company. “Section 142 of the N.I.Act does not specify as to who should represent the company, if the company is the complainant. A company can be represented by an employee or even by a known employee, who is duly authorized and empowered to represent the company either by resolution or by a power of attorney,” held Justice Prashant Kumar.The Court further held that “Section 200 of the Code mandatory requires an examination of the complaint, and whether the complainant is an incorporeal body, it is only one of its employee or authorized representative can be examined on behalf of the company. With the result, the company becomes a dejure complainant and the person, who is representing the company whether it is employee or the authorized representative becomes de facto complainant, thus, in every complaint lodged by a company, which is a separate juristic personality, there is a complainant dejure and a complainant de facto.”Regarding the liability of the directors of the accused company, the Court held that company being a separate legal entity can only be represented through its officers, directors, managing directors, chairman etc. Any offence committed by the company shall be attributable to the person acting on behalf of the company, held the Court. Accordingly, it was held that all directors shall be liable for the acts on behalf of the company. Factual BackgroundThe Complainant, Uttarakhand Engineering Products Private Limited supplied the products to M/s Trimurti Concast Pvt. Ltd.. The cheque given by M/s Trimurti Concast Pvt. Ltd. bounced for insufficiency of funds and a complaint was filed by the Complainant. Since the amount was not paid, the Complainant filed a complaint under Section 138 of Negotiable Instruments Act before Chief Judicial Magistrate, Muzaffarnagar.After evidence, the Court issued summons. The summon is being challenged by the person who signed the cheque on grounds that prosecution under Section 138 of the NI Act cannot be initiated by power of attorne in absence of any specific authorization by the Board of Directors of the company to initiate such proceedings. Counsel for petitioner argued that the complaint was not maintainable as the date of issuance of cheque or on date on which the cheque was dishonoured, who was in charge or responsible, and looking after day to day affairs of the company were not mentioned in the complaint. Relying on the decision of the Supreme Court in A.C. Narayanan vs. State of Maharashtra and another, it was argued that there was no mention of the fact that the applicant, being authorized signatory, had knowledge of the business transactions between the accused and complainant company. It was argued that in absence of such averments, only the Directors of the accused company could be deposed. It was argued that the applicant was a sleeping director of the company who was not aware or involved in the day to day affairs of the company, and had no authority to sign or issue cheques. Per Contra, counsel for respondent argued that the applicant cannot be a sleeping director when his signature is on the cheque. It was argued that in case the applicant did not have any authority to sign the cheque, then his action amounts to criminal breach of trust. Further, it was argued that the company is dejure complainant and the person representing the company is a defacto complainant and specific words regarding authorization to that effect need not be mentioned in the complaint. It was asserted that the authority to file the complaint can be adjudicated upon by the Magistrate himself at the stage of trial. Lack of specific words does not defeat the case of prosecution, he submitted. It was argued that under Section 168 of the Companies Act, directors of a company are liable even after their retirement for the acts committed during their tenure. High Court Verdict The Court relied on the judgments of the Supreme Court in A.C. Narayanan v. State of Maharashtra and another and M/s TRL Krosaki Reractories Ltd. v. M/s SMS Asia Private Limited and another to observe that “In view of the aforesaid facts and circumstances and the ratio laid down by the Hon'ble Supreme Court in the judgement of A.C. Naraynan (supra), that the power of attorney holder, who filed the complaint clearly needs to aver that he has knowledge of the complete transaction has been watered down by Hon'ble Supreme Court in the matter of M/s TRL Krosaki Reractories Ltd. (supra) wherein it is held that when a complainant is a company and authorized representative can represent the company, such averment and prima facie material is sufficient for the...

NI Act Doesn't Prescribe Who Will Represent Company Which Is Complainant U/S 138, Can Be Represented By An Employee: Allahabad High Court

Upasna Agrawal

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