1996 (12) TMI 385 - HC - Companies Law

Summary

Issues Involved:
The judgment involves issues related to the acquittal of accused under Section 138 of the Negotiable Instruments Act, maintainability of the complaint filed by a Director without proper authorization, and the existence of an enforceable liability at the time of issuing the cheque.

Acquittal under Section 138 of the Negotiable Instruments Act:
The appellant, a company, filed a complaint under Section 138 alleging that the accused issued a bounced cheque. The accused contended that no existing debt or liability existed at the time of issuing the post-dated cheque, as goods supplied were substandard and rejected by the jail authorities. The Court held that without an enforceable debt, no offense under Section 138 was constituted, as per the Explanation to the Act. The appellant's attempt to recover the amount was deemed a civil dispute due to the lack of an existing liability.

Maintainability of Complaint by Director:
The complaint was filed by a Director of the company without proper authorization. It was argued that only the company, as the holder in due course, could file the complaint under Section 142(A) of the Act. The absence of a resolution or authorization letter authorizing the Director to file the complaint rendered it not maintainable. The Court emphasized that a Director cannot be considered a payee or holder in due course as per the Act, necessitating proper authorization for filing such complaints.

Existence of Enforceable Liability:
The Court noted that the complainant supplied goods before the cheque was issued, with discrepancies in the grade and pricing of the materials. The appellant's attempt to justify the substandard material based on revised rates was rejected as the revised rate was not part of the contract. The Court found that the complainant took advantage of receiving payment and supplied substandard goods. The absence of an enforceable debt or liability at the time of issuing the post-dated cheque led to the conclusion that no offense under Section 138 was committed.

Conclusion:
The appeal was dismissed based on the findings that no offense under Section 138 was constituted due to the absence of an enforceable liability at the time of issuing the cheque and the complaint being filed by a Director without proper authorization, rendering it not maintainable. The Court upheld the lower court's decision in acquitting the accused and found no merit in the appeal.