2006 (6) TMI 212 - HC - Companies Law

Summary

Issues Involved:
1. Proper representation of the company in the legal proceedings.
2. Authenticity of the signature on the cheque.
3. Rebuttal of statutory presumption under Section 139 of the Negotiable Instruments Act, 1881.
4. Validity of the resolution under Section 289 of the Companies Act, 1956.

Detailed Analysis:

1. Proper Representation of the Company:
The appellant contended that the company was properly represented by PW1, Pius, based on Exhibit P1 authorization executed by Vijayan Eapen, the executive director, who was authorized by Exhibit P9 resolution. The respondent argued that Exhibit P9 was not valid as it lacked the signature of one director, thereby not complying with Section 289 of the Companies Act. The court found that Exhibit P9 was not duly passed as it was not circulated to all directors, specifically one named Umman. However, the court acknowledged that PW1 had the authority to represent the company based on precedents allowing substitution of representatives in corporate legal actions, and the lower court's order allowing such substitution.

2. Authenticity of the Signature on the Cheque:
The appellant argued that the signature on Exhibit P2 cheque was not disputed during the cross-examination of PW1, and the accused only claimed the signature was not his during the Section 313 CrPC statement. The court noted that the accused's defense during cross-examination was inconsistent with his later statement, which deprived the complainant of the opportunity to prove the signature's authenticity. The court also observed that Exhibit P3 memo from the bank indicated the cheque bounced due to insufficient funds, not signature discrepancy, supporting the conclusion that the signature was indeed that of the accused.

3. Rebuttal of Statutory Presumption under Section 139:
The court held that the accused's mere suggestion during cross-examination that the cheque was given as a blank cheque to another party was insufficient to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act. The court emphasized that without substantial evidence to the contrary, the presumption that the cheque was issued in discharge of a legally enforceable debt stands.

4. Validity of the Resolution under Section 289:
The court examined Section 289 of the Companies Act, which requires resolutions to be circulated to all directors in India and approved by a majority. The court found that Exhibit P9 resolution was not validly passed as it was not circulated to one director, Umman, and thus did not comply with statutory requirements. Consequently, the authorization to Vijayan Eapen and his subsequent delegation to PW1 was deemed invalid. However, the court relied on judicial precedents to uphold the authority of PW1 to represent the company, stating that a company can rectify such defects at any stage by substituting a competent representative.

Conclusion:
The court reversed the acquittal of the accused, finding him guilty of the offence punishable under Section 138 of the Negotiable Instruments Act. The accused was sentenced to pay a fine of Rs. 35,000, which, if realized, would be paid to the complainant. In case of default, the accused would undergo simple imprisonment for three months. The court granted the accused three months to pay the fine. The appeal was allowed.