M/S. SHANKAR FINANCE & INVESTMENTS Vs. STATE OF A.P. & ORS.
R.V. RAVEENDRAN, P. SATHASIVAM
Negotiable Instruments Act
Negotiable Instruments Act, 1881:
ss. 138 and 142(a) - Complaint u/s 138 signed by power of attorney-holder of a proprietary concern - Maintainability of - HELD: Power of Attorney Holder can initiate criminal proceedings on behalf of his principal - In a criminal complaint relating to an offence under s.138, it is permissible to lodge complaint in the name of proprietary concern itself - Code of Criminal Procedure, 1973 - ss. 190 and 200.
MMTC Ltd. vs. MEDCHL Chemicals & Pharma (P) Ltd. 2002(1) SCC 234; Associated Cement Co. Ltd. vs. Keshvanand 1998(1) SCC 687; and Ram Chander Prasad Sharma vs. State of Bihar and Anr. AIR 1967 SC 349 - relied on.
Code of Criminal Procedure, 1973:
ss. 190 and 200 - Complaint u/s 138 of Negotiable Instruments Act signed by Power of Attorney Holder on behalf of payee proprietary concern.
, 2008(10 )SCR905 , 2008(8 )SCC536 , 2008(10 )SCALE654 ,
HELD: Object of s.200 in providing for examination of complainant and his witnesses by Court is to satisfy itself about the existence of a prima facie case against the person accused of offence and to ensure that such person is not harassed by false and vexatious complaints by issue of process - Where proprietor of proprietary concern has personal knowledge of transaction and has singed the complaint, he has to be examined under s.200 of the Code - A Power of Attorney Holder of complainant who does not have personal knowledge, cannot be examined - Where Power of Attorney Holder of complainant is in charge of the business of payee-complainant and he alone is personally aware of transactions, and complaint is signed by him on behalf of the payee-complainant, he can be examined as the complainant - Negotiable Instruments Act, 1881 - ss. 138 and 142(a).
Nirmaljit Singh Hoon vs. State of West Bengal 1973(3) SCC 753; and Janki Vashdeo Bhojwani vs. Indusind Bank Ltd. 2005(2) SCC 217 - relied on.
Practice and Procedure:
Proprietary concern - Initiation of legal proceedings by - Procedure explained - Code of Criminal Procedure, 1973 - ss. 190 and 200 - Negotiable Instruments Act, 1881 - ss. 138 and 142 - Suit.
Case law reference
MMTC Ltd. vs. MEDCHL Chemicals & Pharma (P) Ltd. 2002(1) SCC 234- relied on. [para 6]
Associated Cement Co. Ltd. vs. Keshvanand 1998(1) SCC 687- relied on. [para 6]
Ram Chander Prasad Sharma vs. State of Bihar and Anr. AIR 1967 SC 349 - relied on. [para 10]
Nirmaljit Singh Hoon vs. State of West Bengal 1973(3) SCC 753- relied on. [para 12]
Janki Vashdeo Bhojwani vs. Indusind Bank Ltd. 2005(2) SCC 217 - relied on. [para 12]
L. Roshmani, (for M/s. P.S.N. & Co.) for the Appellant.
Prabhakar Rao Voruganti, D. Bharathi Reddy and M.K. Michael for the Respondents.
Judgment Made On 26/06/2008
R. V. Raveendran J.
The complainant in a proceedings under section 138 of the
Negotiable Instruments Act, 1881 (`Act' for short), challenges in this appeal
by special leave, the order dated 21.8.2002 passed by the Andhra Pradesh
High Court in Criminal Petition No.1737 of 2001 holding that the complaint
signed by a Power of Attorney holder was not maintainable.
2. The appellant - complainant filed a complaint dated 2.4.1996 against
respondents 2 to 4 herein (namely M/s Speciality Aqua Ventures Ltd, its
Managing Director and Chairman arrayed as accused 1, 2 and 3) alleging
that a cheque for Rs.12,40,000/- issued by the third respondent (on behalf of
respondents 2 to 4) was dishonoured. Respondents 2 and 4 filed an
application seeking discharge. The said petition was dismissed by the
learned Magistrate by order dated 17.12.1998. The Revision filed by them
against the order of the learned Magistrate was rejected by the Sessions
Court on 12.2.2001. Thereafter, the fourth respondent herein (third accused)
filed a petition under section 482 Cr.PC for quashing the proceedings. The
fourth respondent contended that he could not be arrayed as an accused as
the cheque was issued by the third respondent in his individual capacity.
The High Court allowed the said petition on a different ground, by order
dated 21.8.2002, and quashed the complaint as against the fourth
respondent. It held that the complaint was not signed by the payee, that is,
the sole proprietor of the payee concern, but was signed by his Power of
Attorney Holder and that was not permissible.
3. The said order of the High Court is challenged in this appeal by
special leave. By interim orders dated 28.11.2003 and 2.4.2004, this Court
stayed the operation of the order of the learned Single Judge and directed
that the case should be proceeded with.
4. The question that arises for our consideration is whether the
complaint under section 138 of the Act signed by a Attorney holder is not
5. Section 190 of Code of Criminal Procedure (`Code' for short) enables
a Magistrate to take cognizance of an offence upon receiving a complaint of
facts which constitutes such offence. Section 200 of the Code requires the
Magistrate taking cognizance of an offence on complaint, to examine upon
oath the complainant and the witness present, if any. Section 142 of the Act
provides that notwithstanding anything contained in the Code, no Court
shall take cognizance of any offence punishable under section 138 of the
Act except upon a complaint, in writing, made by the payee or, as the case
may be, the holder in due course of the cheque.
6. In MMTC Ltd. vs. MEDCHL Chemicals & Pharma (P) Ltd. - 2002
(1) SCC 234, a complaint was filed by MMTC Ltd. through the Manager of
its Regional Office. Subsequently, the Manager was substituted by Dy.
General Manager who was duly authorized. The High Court held that the
complaint was not maintainable as it was signed and presented by a person,
who was neither an authorized agent nor a person empowered under the
articles of association or by any resolution of the Board to do so. It held that
only the Executive Director of MMTC Ltd had the authority to institute
legal proceedings. Reversing the said decision, this Court held :
"In our view the reasoning given above cannot be sustained. Section 142
of the Negotiable Instruments Act provides that a complaint under section
138 can be made by the payee or the holder in due course of the said
cheque. The two complaints, in question, are by the appellant company
who is the payee of the two cheques.
This Court has as far back as in the case of Vishwa Mitter v. O.P. Poddar -
(1983) 4 SCC 701, held that it is clear that anyone can set the criminal law
in motion by filing a complaint of facts constituting an offence before a
Magistrate entitled to take cognizance. It has been held that no court can
decline to take cognizance on the sole ground that the complainant was not
competent to file the complaint. It has been held that if any special statute
prescribes offences and makes any special provision for taking cognizance
of such offences under the statute, then the complainant requesting the
Magistrate to take cognizance of the offence must satisfy the eligibility
criterion prescribed by the Statute. In the present case, the only eligibility
criteria prescribed by Section 142 is that the complaint must be by the
payee or the holder in due course. This criteria is satisfied as the
complaint is in the name and on behalf of the appellant company."
Referring to the decision in Associated Cement Co. Ltd. v.
Keshvanand [1998 (1) SCC 687], this Court held :
"It has further been held that no Magistrate shall insist that the particular
person, whose statement was taken on oath at the first instance, alone can
continue to represent the company till the end of the proceedings. It has
been held that there may be occasions when different persons can
represent the company. It has been held that it is open to the de jure
complainant company to seek permission of the court for sending any
other person to represent the company in the court. Thus, even presuming
that initially there was no authority, still the company can, at any stage,
rectify that defect. At a subsequent stage the company can send a person
who is competent to represent the company. The complaints could thus not
have been quashed on this ground."
7. The payee of the cheque is M/s Shankar Finance & Investments. The
complaint is filed by "M/s Shankar Finance & Investments, a proprietary
concern of Sri Atmakuri Sankara Rao, represented by its power of Attorney
Holder Sri Thamada Satyanarayana". It is therefore evident that the
complaint is in the name of and on behalf of the payee. Section 142(a) of the
Act requires that no Court shall take cognizance of any offence punishable
under section 138 except upon a complaint made in writing by the payee.
Thus the two requirements are that (a) the complaint should be made in
writing (in contradistinction from an oral complaint); and (b) the
complainant should be the payee (or the holder in due course, where the
payee has endorsed the cheque in favour of someone else). The payee, as
noticed above, is M/s Shankar Finance & Investments. Once the complaint
is in the name of the `payee' and is in writing, the requirements of section
142 are fulfilled. Who should represent the payee where the payee is a
company, or how the payee should be represented where payee is a sole
proprietary concern, is not a matter that is governed by section 142, but by
the general law.
8. As contrasted from a company incorporated under the Companies
Act, 1956 which is a legal entity distinct from its shareholders, a proprietary
concern is not a legal entity distinct from its proprietor. A proprietary
concern is nothing but an individual trading under a trade name. In civil law
where an individual carries on business in a name or style other than his
own name, he cannot sue in the trading name but must sue in his own name,
though others can sue him in the trading name. Therefore, if the appellant in
this case had to file a civil suit, the proper description of plaintiff should be
"Atmakuri Sankara Rao carrying on business under the name and style of
M/s Shankar Finance & Investments, a sole proprietary concern". But we
are not dealing with a civil suit. We are dealing with a criminal complaint to
which the special requirements of section 142 of the Act apply. Section 142
requires that the complainant should be payee. The payee is M/s Shankar
Finance & Investments. Therefore in a criminal complaint relating to an
offence under section 138 of the Act, it is permissible to lodge the
complaint in the name of the proprietary concern itself.
9. The next question is where a proprietary concern carries on business
through an attorney holder, whether the attorney holder can lodge the
complaint? The attorney holder is the agent of the grantor. When the grantor
authorizes the Attorney Holder to initiate legal proceedings and the
attorney holder accordingly initiates legal proceedings, he does so as the
agent of the grantor and the initiation is by the grantor represented by his
attorney holder, and not by the attorney holder in his personal capacity.
Therefore where the payee is a proprietary concern, the complaint can be
filed : (i) by the proprietor of the proprietary concern, describing himself as
the sole proprietor of the `payee'; (ii) The proprietary concern, describing
itself as a sole proprietary concern, represented by its sole proprietor; and
(iii) the proprietor or the proprietary concern represented by the attorney-
holder under a power of attorney executed by the sole proprietor. It follows
that in this case the complaint could have been validly filed by describing
the complainant in any one of the following four methods :
"Atmakuri Shankara Rao, sole proprietor of M/s. Shankar
Finance & Investments"
"M/s. Shankar Finance & Investments a sole proprietary
concern represented by its proprietor Atmakuri Shankara Rao"
"Atmakuri Shankara Rao, sole proprietor of M/s. Shankar
Finance & Investments, represented by his Attorney Holder
"M/s. Shankar Finance & Investments, a proprietary concern of
Atmakuri Shankara Rao, represented by his Attorney Holder
What would have been improper is for the Attorney holder Thamada
Satyanarayana to file the complaint in his own name as if he was the
10. This Court has always recognized that the power of attorney holder
can initiate criminal proceedings on behalf of his Principal. In Ram
Chander Prasad Sharma v. State of Bihar and Anr. [AIR 1967 SC 349], the
prosecution was commenced in regard to tampering of electric meter seals,
with a charge sheet submitted by the police after investigation on a first
information report by one Bhattacharya, Mains Superintendent of Patna
Electric Supply Co. (`PES Co.' for short). An objection was raised by the
accused that the prosecution was incompetent as it was not launched by a
person competent to do so. The said objection was based on section 50 of
the Indian Electricity Act, 1910, which provided that no prosecution shall
be instituted against any person for any offence against that Act or any rule,
licence or order thereunder, except at the instance of the Government or an
Electric Inspector, or of a person aggrieved by the same. This Court held :
"... The P.E.S. Co., however, is a body corporate and must act only
through its directors or officers. Here we have the evidence of
Ramaswami to the effect that he held a general power of attorney from
the P.E.S. Co., and that he was specifically empowered thereunder to
act on behalf of P.E.S. Co., in all legal proceedings. The evidence shows
that it was at his instance that Bhattacharya launched that first
information report and, therefore, it would follow that the law was set in
motion by the "person aggrieved". The objection based on Section 50
must, therefore, be held to be untenable."
11. The assumption of the High Court that where the payee is a
proprietary concern, the complaint can be signed only by the proprietor of
the proprietary concern and not by a Power of Attorney holder of the
proprietor, is not sound. It is not in dispute that in this case a power of
attorney has been granted by Atmakuri Shankara Rao, as Proprietor of M/s
Shankar Finance & Investments in favour of Thamada Satyanarayana and
the same was produced along with the complaint. The description of the
complainant is as under :
"M/s Shankar Finance and Investments, (a proprietary concern of Sri
Atmakuri Sankara Rao S/o Late Sri A. B. Rama Murthy, Hindu, aged
about 65 years), having its office at Flat No.3B, Third Floor, Maharaja
Towers. Vishakhapatnam - 3 represented by its Power of Attorney Holder
Sri Thamada Satyanarayana, S/o Late Adinarayana, Hindu, aged 50 years,
Service, residing at MIG-B-230, Sagarnagar, VUDA Layout,
Vishakhapatnam - 43."
The said description is proper and therefore, the complaint has been duly
filed by the payee.
12. The High Court has referred to the fact that the sworn statement
before the learned Magistrate was of the attorney holder of the payee and
not by the payee in person. According to the tenor of the order of the High
Court, this was also irregular. But we find nothing irregular in such a
procedure. It is now well settled that the object of section 200 of the Code in
providing for examination of the complainant and his witnesses by the court
is to satisfy itself about the existence of a prima facie case against the
person accused of the offence and to ensure that such person is not harassed
by false and vexatious complaints by issue of process; (See Nirmaljit Singh
Hoon v. State of West Bengal - 1973 (3) SCC 753). Where the proprietor of
the proprietary concern has personal knowledge of the transaction and the
proprietor has signed the complaint, he has to be examined under section
200 of the Code. A power of attorney holder of the complainant who does
not have personal knowledge, cannot be examined. But where the attorney
holder of the complainant is in charge of the business of the payee-
complainant and the Attorney holder alone is personally aware of the
transactions, and the complaint is signed by the attorney holder on behalf of
the payee-complainant, there is no reason why the attorney holder cannot
be examined as the complainant. We may, in this connection, refer to the
decision of this Court in Janki Vashdeo Bhojwani v. Indusind Bank Ltd.
[2005 (2) SCC 217], where the scope of an attorney holder `acting' on
behalf of the principal in a civil suit governed by Code of Civil Procedure
was examined. This Court observed:
"Order 3 Rules 1 and 2 CPC empower the holder of power of attorney to
"act" on behalf of the principal. In our view the word "acts" employed in
Order 3 Rules 1 and 2 CPC confines only to in respect of "acts" done by
them power-of-attorney holder in exercise of power granted by the
instrument. The term "acts" would not include deposing in place and
instead of the principal. In other words, if the power-of-attorney holder
has rendered some "acts" in pursuance of power of attorney, he may
depose for the principal in respect of such acts, but he cannot depose for
the principal for the acts done by the principal and not by him. Similarly,
he cannot depose for the principal in respect of the matter of which only
the principal can have a personal knowledge and in respect of which the
principal is entitled to be cross-examined."
The principle underlying the said observations will apply to cases
under section 138 of the Act. In regard to business transactions of
companies, partnerships or proprietary concerns, many a time the authorized
agent or attorney holder may be the only person having personal knowledge
of the particular transaction; and if the authorized agent or attorney-holder
has signed the complaint, it will be absurd to say that he should not be
examined under section 200 of the Code, and only the Secretary of the
company or the partner of the firm or the proprietor of a concern, who did
not have personal knowledge of the transaction, should be examined. Of
course, where the cheque is drawn in the name of the proprietor of a
proprietary concern, but an employee of such concern (who is not an
attorney holder) has knowledge of the transaction, the payee as complainant
and the employee who has knowledge of the transaction, may both have to
be examined. Be that as it may. In this case we find no infirmity.
13. We, accordingly, allow this appeal, set aside the impugned order
dated 21.8.2002 and direct the learned Magistrate to proceed with the
complaint as already directed by the interim order.
[R. V. Raveendran]
June 26, 2008.