Bhupesh Rathod vs Dayashankar Prasad Chaurasia . on 10 November, 2021


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Supreme Court of India

Bhupesh Rathod vs Dayashankar Prasad Chaurasia . on 10 November, 2021

Author: Sanjay Kishan Kaul

Bench: Sanjay Kishan Kaul, M.M. Sundresh

                                                                                 REPORTABLE

                                       IN THE SUPREME COURT OF INDIA
                                        CRIMINAL APPELLATE JURISDICTION

                                     CRIMINAL APPEAL NO.1105 OF 2021



                         BHUPESH RATHOD                                         … Appellant


                                                         Versus


                         DAYASHANKAR PRASAD CHAURASIA & ANR. …Respondents



                                                  JUDGMENT

SANJAY KISHAN KAUL, J.

1. Dayashankar Chaurasia, the respondent issued eight (8) cheques of

Rs.20,000/- each totalling to Rs.1,60,000/- in favour of M/s. Bell

Marshall Telesystems Limited (for short ‘the Company’). The cheques

were drawn on HDFC Bank, Vasai (E) Branch, Mumbai. These cheques

were drawn on different dates but were presented together for payment

on 10.05.2006. All the cheques got dishonoured on account of “funds

insufficient” as per Bank Memos issued on 12.05.2006. On the cheques
Signature Not Verified

Digitally signed by
RASHI GUPTA
being dishonoured, legal notices were issued by the beneficiary under
Date: 2021.11.10
17:53:06 IST
Reason:

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Section 138(b) of the Negotiable Instruments Act, 1881 (hereinafter

referred to as the ‘NI Act’) on 26.05.2006. 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. Bhupesh Rathod before the Special

Metropolitan Magistrate, Mumbai. The complaint was accompanied by a

Board Resolution of the Company dated 17.05.2006 authorising Mr.

Bhupesh Rathod to initiate legal action against the respondent on behalf

of the Company. On 24.12.2007, the Company filed an affidavit through

its Managing Director, i.e., Mr. Bhupesh Rathod, stating that it had

authorised him through the abovementioned Board Resolution to file a

complaint case against the respondent.

2. In view of the fact that much turns on the manner of description of

the complainant, we reproduce the description of the complainant as

under:

“Mr. Bhupesh M. Rathod
Managing Director of M/s. Bell
Marshall Telesystems Ltd.

Aged: 41 years, Occupation: Business
Having address at 1107, V Maker
Chamber, Nariman Point
Mumbai- 400021.”

2

3. The Board Resolution passed on 17.05.2006 is in the following

terms:

“RESOLVED THAT legal action be initiated against
Dayashankar Prasad Choursiya for the dishonour of chqs issued
by him and in discharge of this liabilities to the company and
Mr. Bhupesh Rathod/Sashikant Ganekar is hereby authorized to
appoint advocates, issues of notices through advocate, file
complaint, Verifications on Oath, appoint Constituent attorney
to file complaint in the court and attend all such affairs which
may be needed in the process of legal actions.”

For Bell Marshal Tele Systems LTD.

Sd/-

Dated: 17/05/2006
Director”

4. We reproduce the aforesaid as the competency and the manner of

filing of the complaint are the primary considerations debated before us.

5. The case made out in the complaint is that a sum of Rs.1,60,000/-

was advanced to the respondent by the Company and the cheques were

issued to repay the loan. The respondent took an objection that the

complaint was filed in the personal capacity of Mr. Bhupesh Rathod and

not on behalf of the Company. While on the other hand it was contended

by the appellant that the complaint was in the name of the Company and

in the cause title of the complaint he had described himself as the

Managing Director. The Company was a registered company under the

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Companies Act, 1956. The registration certificate, however, was not

placed on record. On this aspect, it was the further submission of the

respondent that it is only in the aforesaid title description that the

complainant is described as the Managing Director of the Company but

in the body of the complaint it is not so mentioned.

6. The trial court acquitted the respondent on 12.03.2009 based on a

dual reasoning –

(a) there was no document except the promissory note signed by

the respondent to show that the loan was being granted; and

(b) the Board Resolution itself was not signed by the Board of

Directors (it may be stated that this was really a true copy of the

Board Resolution).

7. The appellant preferred an appeal before the High Court. The

High Court by the impugned order dated 03.08.2015 dismissed the

appeal.

8. It may be relevant to note that the High Court traversed many

paths while coming to this conclusion. In a nutshell the reasoning was:

(a) it could not be said that the complaint had been filed by a payee

or holder in due course as mandated under Section 142(a) of the NI

4
Act;

(b) the payee was the Company and a perusal of the complaint did

not show that the complaint was filed by the Company. It had been

filed by the appellant who had described himself as the Managing

Director of the Company only in the cause title of the complaint;

(c) probably a conscious choice was made to not file the complaint

in the name of the Company as it was unclear whether the

Company was authorised to advance loans.

9. We may note that the High Court did not give its imprimatur to the

entire reasoning of the trial court as it noticed that the demand notice was

sent on behalf of the Company. Thus, the Company was aware that the

complaint had to be filed by the Company itself. It was observed that the

aforesaid aspect was probably left vague on purpose by the Company and

therefore, it was opined that the complaint had not been filed by the

payee in terms of Section 142 of the NI Act.

Complainant’s/Appellant’s submissions:

10. The appellant contended before us that it was quite apparent from

the cause title of the complaint which is an integral part of the complaint,

5
that the same had been filed on behalf of the Company. It was further

contended that this was the reason that the Board Resolution authorising

the Managing Director to file a complaint for dishonour of the cheques

was annexed. The address given was of the Company, which was the

registered office address. The affidavit filed in the cross-examination in

pursuance thereto left no manner of doubt that the complaint was filed as

the Managing Director of the Company.

11. It is the say of the appellant that there is a presumption under

Section 139 and 118 of the NI Act which was not rebutted by the

respondent. It was further contended that a duly signed cheque was

sufficient to raise a presumption under Section 139 of the NI Act against

the respondent as held in Triyambak S. Hegde v. Sripad1. It was not the

say of the respondent in defence that the cheque was not signed by him

or was signed under any fraud or misrepresentation.

12. It was submitted that a very hyper technical view of the matter had

been taken and it only related to the format of the filing of the complaint

and not the substance. The trial court itself had accepted that the

complaint was filed on behalf of the Company as otherwise it would have

refused to take cognizance under Section 142(a) of the NI Act. The
1
Crl. Appeal Nos. 849­850/2011 decided on 23.09.2021.
6
respondent had not even challenged the summoning order on the ground

that the complaint is not filed on behalf of the Company.

Respondent’s submissions:

13. Learned counsel for the respondent, however, contended that the

appellant had failed to prove his case beyond reasonable doubt and the

complaint itself was not in a proper form. 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 authorises the complainant to file the

complaint.

14. The respondent also contended that no loan was advanced by the

Company nor has it been proved as to whose account the alleged loan

was advanced to. No loan agreement in favour of the Company was

placed on record.

Our View:

15. We have examined the submissions of the learned counsel for the

parties.

16. To decide the controversy the relevant Sections of the NI Act are

7
extracted as under:

“138. Dishonour of cheque for insufficiency, etc., of funds in
the account. — Where any cheque drawn by a person on an
account maintained by him with a banker for payment of any
amount of money to another person from out of that account for
the discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank,
such person shall be deemed to have committed an offence and
shall, without prejudice to any other provision of this Act, be
punished with imprisonment for [a term which may be
extended to two years], or with fine which may extend to twice
the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply
unless–

(a) the cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the
period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said
amount of money by giving a notice; in writing, to the drawer
of the cheque, [within thirty days] of the receipt of information
by him from the bank regarding the return of the cheque as
unpaid; and

(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to
the holder in due course of the cheque, within fifteen days of
the receipt of the said notice.”
…. …. …. …. ….

“139. Presumption in favour of holder.— It shall be
presumed, unless the contrary is proved, that the holder of a

8
cheque received the cheque of the nature referred to in section
138
for the discharge, in whole or in part, of any debt or other
liability.”
…. …. …. …. ….

“118. Presumptions as to negotiable instruments.— Until the
contrary is proved, the following presumptions shall be made:

(g) that holder is a holder in due course:— that the holder of a
negotiable instrument is a holder in due course : provided that,
where the instrument has been obtained from its lawful owner,
or from any person in lawful custody thereof, by means of an
offence or fraud, or has been obtained from the maker or
acceptor thereof by means of an offence or fraud, or for
unlawful consideration, the burden of proving that the holder is
a holder in due course lies upon him.”
…. …. …. …. ….

“142. Cognizance of offences.— Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974),

(a) no court shall take cognizance of any offence punishable
under section 138 except upon a complaint, in writing, made by
the payee or, as the case may be, the holder in due course of the
cheque;

(b) such complaint is made within one month of the date on
which the cause of action arises under clause (c) of the proviso
to section 138:

[Provided that the cognizance of a complaint may be taken by
the Court after the prescribed period, if the complainant
satisfies the Court that he had sufficient cause for not making a
complaint within such period;]

(c) no court inferior to that of a Metropolitan Magistrate or a

9
Judicial Magistrate of the first class shall try any offence
punishable under section 138.”

17. We must say at the inception that the respondent not having

disputed his signatures on the cheques, it was for the respondent to show

in what circumstances the cheques had been issued, i.e., why was it not a

cheque issued in due course. The words of Section 139 of the NI Act are

quite clear that unless the contrary is proved, it shall be presumed that the

holder of the cheque received the cheque of the nature referred to in

Section 138 for the discharge, in whole or in part, of any debt or other

liability. The respondent has not set up a case that the nature of

transaction was of the nature which fell beyond the scope of Section 138.

Other than taking a technical objection, really nothing has been said on

the substantive aspect.

18. The only eligibility criteria prescribed under Section 142(1)(a) is

that the complaint must be by the payee or the holder in due course.

19. In the conspectus of the aforesaid principles we have to deal with

the plea of the respondent that the complaint was not filed by the

competent complainant as it is the case that the loan was advanced by the

Company. As to what would be the governing principles in respect of a

10
corporate entity which seeks to file the complaint, an elucidation can be

found in the judgment of this Court in Associated Cement Co. Ltd. v.

Keshavanand2. If a complaint was made in the name of the Company, it

is necessary that a natural person represents such juristic person in the

court and the court looks upon the natural person for all practical

purposes. It is in this context that observations were made that the body

corporate is a de jure complainant while the human being is a de facto

complainant to represent the former in the court proceedings. Thus, no

Magistrate could insist that the particular person whose statement was

taken on oath alone can continue to represent the Company till the end of

the proceedings. Not only that, even if there was initially no authority

the Company can at any stage rectify that defect by sending a competent

person.

20. The aforesaid judgment was also taken note of in a subsequent

judgment of this Court in M.M.TC Ltd. & Anr. v. Medchl Chemicals

and Pharma (P) Ltd. & Anr.3.

21. We find that the judicial precedents cited aforesaid have been

breached by the Courts below. The High Court also embarked on a

2
(1998) 1 SCC 687.

3

(2002) 1 SCC 234.

11

discussion as to the vagueness of the identity of the complainant

and its relation with the legality of a loan which may be granted by

the Company, something that was not required to be gone into.

22. If we look at the format of the complaint which we have extracted

aforesaid, it is quite apparent 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.

23. It is also relevant to note that a copy of the Board Resolution was

filed along with the complaint. An affidavit had been brought on record

in the trial court by the Company, affirming to the factum of

authorisation in favour of the Managing Director. A Manager or a

Managing Director ordinarily by the very nomenclature can be taken to

be the person in-charge of the affairs Company for its day-to-day

management and within the activity would certainly be calling the act of

approaching the court either under civil law or criminal law for setting

12
the trial in motion.4 It would be too technical a view to take to defeat the

complaint merely because the body of the complaint does not elaborate

upon the authorisation. The artificial person being the Company had to

act through a person/official, which logically would include the

Chairman or Managing Director. Only the existence of authorisation

could be verified.

24. While we turn to the authorisation in the present case, it was a

copy and, thus, does not have to be signed by the Board Members, as that

would form a part of the minutes of the Board meeting and not a true

copy of the authorisation. We also feel that it has been wrongly

concluded that the Managing Director was not authorised. If we peruse

the authorisation in the form of a certified copy of the Resolution, it

states that legal action has to be taken against the respondent for

dishonour of cheques issued by him to discharge his liabilities to the

Company. To this effect, Mr. Bhupesh Rathod/Sashikant Ganekar were

authorised to appoint advocates, issues notices through advocate, file

complaint, verifications on oath, appoint Constituent attorney to file

complaint in the court and attend all such affairs which may be needed in

the process of legal actions. What more could be said?
4
Credential Finance Ltd. v. State of Maharashtra 1998(3) Mh.L.J. 805.
13

25. The finding by the Courts below as to the lack of authorisation to

depose also, thus, stands nullified.

26. 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. There is no reason to otherwise annex a copy of the Board

Resolution if the complaint was not being filed by the appellant on behalf

of the Company.

27. In our view, one of the most material aspects is, as stated aforesaid,

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

14
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.

Conclusion:

28. We are, thus, of the view that both the impugned orders of the trial

court and 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.

29. We now turn to what would be the result of the aforesaid finding.

The complaint was instituted in July, 2006. Fifteen (15) years have

elapsed since then. The punishment prescribed for such an offence under

Section 138 of the NI Act is imprisonment for a term which may extend

to two years, or with fine which may extend to twice the amount of the

cheque, or with both. We are of the view that in the given scenario the

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/-.

15
However, in view of passage of time, we provide that if the respondent

pays a further sum of Rs.1,60,000/- to the appellant, then the sentence

would stand suspended. The needful be done by the respondent within

two (2) months from today. The appellant would also be entitled to costs.

30. The appeal accordingly stands allowed in the aforesaid terms.

………………………………J.

[Sanjay Kishan Kaul]

………………………………J.

[M.M. Sundresh]
New Delhi.

November 10, 2021.

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