2024 (2) TMI 492 - HC - Indian Laws

Dishonour of Cheque - insufficiency of funds - whether the prosecution initiated under Section 138 of N.I. Act by and on behalf of the company can be initiated through power of attorney? - Section 141 of N.I. Act - HELD THAT - It is a settled principle that if the payee is a company the complaint has to be filed 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. Further, where the company is a complainant, who will represent the company, and how the company will be represented in 138 proceedings is not covered by the Code. 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. This application has been pending since last 8 years and the trial could not proceed, it is in the interest of justice that the trial may be concluded expeditiously in accordance with law, preferably within a period of six months from the date of receipt of certified copy of this order without granting any unnecessary adjournments to either side. The instant application filed by the directions of the company is devoid of merit, and is, accordingly, dismissed.

Summary

Issues Involved:
1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act when filed through a power of attorney holder.
2. Responsibility and liability of directors in the context of Section 138 of the Negotiable Instruments Act.
3. Specificity required in the complaint regarding the knowledge and authorization of the person filing the complaint on behalf of the company.

Summary:

Issue 1: Maintainability of Complaint via Power of Attorney Holder
The applicant argued that the prosecution under Section 138 of the N.I. Act is not maintainable as it was initiated by a power of attorney holder without the necessary authorization documents being on record. The Supreme Court in A.C. Narayan vs. State of Maharashtra emphasized that a power of attorney holder can file a complaint if they have personal knowledge of the transactions. However, the opposite party countered with the Supreme Court's latest judgment in M/s TRL Krosaki Reractories Ltd., which clarified that an authorized employee can represent the company and that specific assertions in the complaint are not mandatory at the summoning stage. The court agreed with the latter view, emphasizing that the issue of authorization can be contested during the trial.

Issue 2: Responsibility and Liability of Directors
The applicant claimed that Ashok Sharma was a sleeping director and not responsible for the company's day-to-day affairs. The opposite party argued that signing the cheque contradicts this claim, and if Sharma had no authority, it would amount to a criminal breach of trust. The court noted that all directors are equally responsible for acts done on behalf of the company, and such defenses can be raised during the trial.

Issue 3: Specificity in Complaint Regarding Knowledge and Authorization
The applicant argued that the complaint lacked specific assertions about the power of attorney holder's knowledge of the transactions. The opposite party referred to the Supreme Court's clarification that the complaint need only demonstrate that it is filed in the name of the payee and that the person prosecuting the complaint is authorized. The court held that such averments and prima facie material are sufficient for the Magistrate to take cognizance and issue process.

Conclusion:
The court dismissed the application, stating that the trial should proceed expeditiously. It emphasized that the complaint filed by a company must be in the company's name and can be represented by an authorized employee or representative. The court directed that the trial be concluded within six months, highlighting that the case had been pending for eight years.