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KEY TAKEAWAYS

  • The Supreme Court has ruled that a complaint submitted on behalf of a company under Section 138 of the Negotiable Instruments Act cannot be rejected just because the Managing Director's name appears first, followed by the company's name.
  • Justices Sanjay Kishan Kaul and MM Sundersh ruled that while the format isn't ideal, it can't be said to be defective.

BACKGROUND

  • The subject cheques were written in the name of M/s. Bell Marshall Telesystems Limited in this case.
  • The complainant was identified as "Mr. Bhupesh M. Rathod, Managing Director of M/s. Bell Marshall Telesystems Ltd......" in the complaint.
  • A copy of the board resolution authorising the Managing Director to file the complaint was attached to the complaint.
  • The accused opposed the complaint on the grounds that it was made in Bhupesh Rathod's personal capacity rather than on behalf of the corporation.
  • The accused was acquitted by the trial court because no paperwork proving the loan was given and the board resolution was not signed.
  • The complainant took his case to the High Court. The appeal was denied by the High Court because the complaint was not submitted on behalf of the corporation and the complainant was not the check's payee.

SUPREME COURT’S OBSERVATION

  • The respondent, having admitted the signatures on the cheque, had to discharge the burden of proving that the transaction was not covered by Section 138 of the NI Act, the Court stated at the outset.
  • Nothing had been addressed about the substantive aspect other than a technical complaint.
  • The bench cited the precedent in Associated Cement Co. Ltd. v. Keshavanand (2002) 1 SCC 234, which dealt with the principles governing the filing of a suit by a corporate organisation.
  • The de jure complaint will be the body corporate, while the de facto complainant will be the human agent representing it.
  • The Court stated that the complaint's format indicated that it was filed on behalf of the corporation by the Managing Director.
  • The Court observed that to technically dismiss a case just because the authorisation is not detailed in the body of the complaint is not justified.
  • A copy of the Board Resolution was also filed with the case, according to the Court. The Supreme Court overturned the High Court and Magistrates’ decisions.
  • According to the facts, the respondent was liable to be convicted of the offence under Section 138 of the Negotiable Instruments Act.
  • The respondent should be sentenced to a year in prison and a fine equal to twice the value of the cheque, i.e. Rs.3,20,000/-, according to the Court.

QUESTIONS

  • What are your opinions on the Supreme Court’s observation?
  • Section 138 of the NI Act deals with which concept?

Let us know your views in the comment section below!

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