2021 (11) TMI 457 - SC - Indian Laws

Dishonor of Cheque - insufficiency of funds - complaint had not been filed by the payee in terms of Section 142 of the NI Act - rebuttal of presumptions - format of the complaint filed - HELD THAT - The Managing Director has filed the complaint on behalf of the Company. There could be a format where the Company s name is described first, suing through the Managing Director but there cannot be a fundamental defect merely because the name of the Managing Director is stated first followed by the post held in the Company. The description of the complainant with its full registered office address is given at the inception itself except that the Managing Director s name appears first as acting on behalf of the Company. The affidavit and the cross-examination in respect of the same during trial supports the finding that the complaint had been filed by the Managing Director on behalf of the Company. Thus, the format itself cannot be said to be defective though it may not be perfect. The body of the complaint need not be required to contain anything more in view of what has been set out at the inception coupled with the copy of the Board Resolution. One of the most material aspects is 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 does, thus, 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. The order of the High Court cannot be sustained and are required to be set aside - the finding is, thus, reached that the complaint was properly instituted and the 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. Appeal allowed.

Issues Involved:
1. Competency and manner of filing the complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
2. Validity of the Board Resolution authorizing the complainant to file the complaint.
3. Presumption under Sections 139 and 118 of the NI Act.
4. Compliance with Section 142(a) of the NI Act.
5. Technical objections raised by the respondent regarding the format of the complaint.

Issue-wise Detailed Analysis:

1. Competency and Manner of Filing the Complaint:
The primary issue was whether the complaint was filed by a competent complainant. The respondent argued that the complaint was filed in the personal capacity of Mr. Bhupesh Rathod, not on behalf of the Company. The appellant contended that the complaint was filed on behalf of the Company, as indicated by the cause title and the attached Board Resolution. The Supreme Court emphasized that the complaint was indeed filed by the Managing Director on behalf of the Company, as evidenced by the cause title, the address of the registered office, and the affidavit filed during cross-examination.

2. Validity of the Board Resolution:
The trial court and the High Court questioned the validity of the Board Resolution, noting that it was not signed by the Board of Directors. The Supreme Court clarified that the resolution was a true copy and did not require signatures from the Board Members. The resolution authorized Mr. Bhupesh Rathod to take legal action, including filing complaints and attending legal proceedings, which was sufficient to establish his authority.

3. Presumption under Sections 139 and 118 of the NI Act:
The appellant argued that there is a presumption under Sections 139 and 118 of the NI Act that the holder of a cheque received it for the discharge of debt or liability. The respondent did not dispute the signatures on the cheques or provide an alternative explanation. The Supreme Court reiterated that the respondent failed to rebut the presumption, and the duly signed cheques indicated a financial liability.

4. Compliance with Section 142(a) of the NI Act:
The High Court had dismissed the appeal on the grounds that the complaint was not filed by the payee or holder in due course as required under Section 142(a) of the NI Act. The Supreme Court noted that the complaint, supported by the Board Resolution and affidavit, met the eligibility criteria of being filed by the payee or holder in due course.

5. Technical Objections Regarding the Format of the Complaint:
The respondent raised technical objections regarding the format of the complaint, arguing that it did not explicitly state that it was filed on behalf of the Company. The Supreme Court found these objections to be hyper-technical and emphasized that the substance of the complaint indicated it was filed by the Managing Director on behalf of the Company. The Court noted that the format used, though not perfect, was sufficient to establish the complaint's legitimacy.

Conclusion:
The Supreme Court set aside the judgments of the trial court and the High Court, concluding that the complaint was properly instituted and the respondent failed to disclose why he did not meet the financial liability. The respondent was sentenced to one year of imprisonment and a fine twice the amount of the cheque, with an option to suspend the sentence upon payment of an additional ?1,60,000/- to the appellant within two months. The appeal was allowed, and costs were awarded to the appellant.

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