BHUPESH RATHOD  versus DAYASHANKAR PRASAD CHAURASIA & ANR.
[2021] 7 S.C.R. 319, Supreme Court of India, 2021
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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BHUPESH RATHOD
v.
DAYASHANKAR PRASAD CHAURASIA & ANR.
(Criminal Appeal No. 1105 of 2021)
NOVEMBER 10, 2021
[SANJAY KISHAN KAUL AND M. M. SUNDRESH, JJ.]
Negotiable Instruments Act, 1881: ss.138, 142 – Complaint
filed u/s.138 by the Managing Director of the appellant-company –
Board Resolution authorising the Managing Director to file
complaint for dishonour of cheque annexed with the complaint –
Defence of respondent that the complaint was not in proper form as
the complaint and the Board Resolution annexed did not lead to
conclusion that it was filed on behalf of the Company – Held: It is
quite apparent from the format of the complaint that the Managing
Director had 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 – 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 –  Respondent not having disputed
his signatures on the cheques, it was for him to show in what
circumstances the cheques had been issued, i.e., why was it
not a
cheque issued in due course – There was no plea of any fraud or
misrepresentation – 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 – Complaint was instituted in July, 2006 – 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/- –  However, in view of passage of time, the
sentence would stand suspended if he pays a further sum of
Rs.1,60,000/- to the appellant.
[2021] 7 S.C.R. 319
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SUPREME COURT REPORTS
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Allowing the appeal, the Court
HELD: 1. The respondent not having disputed his
signatures on the cheques, it was for him 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 was said on the substantive
aspect. [Para 17][327-H; 328-A-B]
2. 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. It is quite apparent from the format of the complaint
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. [Paras 18, 22][328-B-C; 329-A-B]
Triyambak S. Hegde v. Sripad Crl. Appeal Nos.
849-850/2011  decided on 23.09.2021; Associated
Cement Co. Ltd. v. Keshavanand
(1998) 1 SCC 687 :
[1997] 6 Suppl. SCR 500; M.M.TC Ltd. & Anr. v. Medchl
Chemicals and Pharma (P) Ltd. & Anr. (2002) 1 SCC
234 : [2001] 5 Suppl. SCR 265; Credential Finance
Ltd. v. State of Maharashtra (1998) 3 Mh.L.J. 805 –
referred to.
3. 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 of the Company for its day-to-
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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 the trial in motion. 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. [Para
23][329-B-E]
4. The authorisation in the present case, 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. 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,
the appellant was 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.
The finding by the Courts below as to the lack of authorisation to
depose also, thus, stands nullified. [Para 24, 25][329-E-H]
5. 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. The
complaint was instituted in July, 2006. Fifteen 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. 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/-. However, in view of passage of time, if the
respondent pays a further sum of Rs.1,60,000/- to the appellant,
then the sentence would stand suspended. [Paras 28, 29][330-E-
H; 331-A]
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR.
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Case Law Reference
[1997] 6 Suppl. SCR 500
referred to
Para 19
[2001] 5 Suppl. SCR 265
referred to
Para 20
(1998) 3 Mh.L.J. 805
referred to
Para 23
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1105 of 2021.
From the Judgment and Order dated 03.08.2015 of the High Court
of Judicature at Bombay in Criminal Appeal No.805 of 2009.
Pratap Singh Parmar, Kuldeep Singh Kuchaliya, Mohd. Aarif, Ajay
Pal, Advs. for the Appellant.
V. K. Sidharthan, Samrat Krishnarao Shinde, Rahul Chitnis, Sachin
Patil, Aaditya A. Pande, Jeo Joseph, Advs. for the Respondents.
The Judgment of the Court was delivered by
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 being dishonoured, legal notices were issued by the
beneficiary under 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.
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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.”
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
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR. [SANJAY KISHAN KAUL, J.]
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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 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 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.
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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, 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
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
1 Crl. Appeal Nos. 849-850/2011 decided on 23.09.2021.
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR. [SANJAY KISHAN KAUL, J.]
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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 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.”
....                     ....                     ....                ....              ....
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“139. Presumption in favour of holder.— It shall be presumed,
unless the contrary is proved, that the holder of a 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
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
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR. [SANJAY KISHAN KAUL, J.]
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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 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
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.
2 (1998) 1 SCC 687.
3 (2002) 1 SCC 234.
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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
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?
25. The finding by the Courts below as to the lack of authorisation
to depose also, thus, stands nullified.
4 Credential Finance Ltd. v. State of Maharashtra 1998(3) Mh.L.J. 805.
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR. [SANJAY KISHAN KAUL, J.]
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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 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/-.
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

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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.
Devika Gujral
Appeal allowed.
BHUPESH RATHOD v. DAYASHANKAR PRASAD
CHAURASIA & ANR. [SANJAY KISHAN KAUL, J.]