Complaint filed by Company cannot be denied merely because Managing Director’s name appeared first in complaint

Bhupesh Rathod Vs Dayashankar Prasad Chaurasia (Supreme Court of India)

Complaint filed by Company u/s 138 of NI Act could not be denied merely because Managing Director’s name appeared first in complaint.

Conclusion: Merely because Managing Director’s name appeared first as acting on behalf of the Company on the registered complaint, respondent could not contended that the compliant was not on the behalf of company. Moreover, respondent failed to disclose why he did not meet the financial liability arising to a payee, who was a holder of a cheque in due course.

Held: Respondent had issued eight (8) cheques of Rs.20,000/- each totalling to Rs.1,60,000/- in favour of M/s. B Telesystems Limited. All the cheques got dishonored on account of “funds insufficient”. On the cheques being dishonoured, legal notices were issued by the beneficiary under Section 138(b) of the Negotiable Instruments Act, 1881. The demand was, however not met within fifteen (15) days of the receipt of the notice nor was any reply sent which resulted in the complaint bearing No.160/SS/07 being filed on 07.07.2006 by Mr. B (managing director) before the Special Metropolitan Magistrate, Mumbai. The complaint was accompanied by a Board Resolution of the Company authorising Mr. B to initiate legal action against the respondent on behalf of the company. The description of the complainant with its full registered office address was given at the inception itself except that the Managing Director’s name appeared first as acting on behalf of the Company. Respondent contended that the complaint and the Board Resolution did not lead to a conclusion that it was filed on behalf of the Company. The Board Resolution was also not signed by the Directors of the Company nor does it find that it authorised the complainant to file the complaint. It was held that the format of board resolution itself could not be said to be defective though it might not be perfect. The body of the complaint need not be required to contain anything more in view of what had been set out at the inception coupled with the copy of the Board Resolution. One of the most material aspects was that the signatures on the cheques were not denied. Neither was it explained by way of an alternative story as to why the duly signed cheques were handed over to the Company. There was no plea of any fraud or misrepresentation. It did appear that faced with the aforesaid position, the respondent only sought to take a technical plea arising from the format of the complaint to evade his liability. There was no requirement of a loan agreement to be executed separately as any alternative nature of transaction was never stated. Respondent failed to disclose why he did not meet the financial liability arising to a payee, who is a holder of a cheque in due course. The punishment prescribed for such an offence under Section 138 of the NI Act was imprisonment for a term which might extend to two years, or with fine which might extend to twice the amount of the cheque, or with both. Respondent should be sentenced with imprisonment for a term of one year and with fine twice the amount of the cheque, i.e., Rs.3,20,000/-.

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