Court’s Decision
The Bombay High Court quashed the criminal complaint and consequent proceedings under Section 138 of the Negotiable Instruments Act, 1881 filed against the petitioners. The Court held that the complaint was not maintainable as it was filed by a person not duly authorised by the complainant company. The Court observed that the foundational requirement of a valid complaint was lacking: “The complainant company had neither filed the complaint through a duly authorised officer nor produced any board resolution or authorisation to support such filing.” As a result, the Magistrate’s order issuing process was also quashed.
Facts
The dispute originated from the dishonour of a cheque allegedly issued by the petitioners in favour of the complainant company. A complaint under Section 138 of the Negotiable Instruments Act was filed before the Magistrate, which resulted in issuance of process against the accused petitioners.
The petitioners challenged the maintainability of the complaint on the ground that it had been filed by an unauthorised person. The complainant company was represented by an individual who claimed to be a “Manager” of the company. However, no board resolution or formal authorisation was placed on record to demonstrate that this individual had been empowered to initiate criminal proceedings on behalf of the company.
Issues
- Whether the complaint filed under Section 138 of the Negotiable Instruments Act was maintainable when instituted by a person lacking legal authority from the company?
- Whether the Magistrate’s order issuing process on such a complaint was liable to be quashed?
Petitioner’s Arguments
The petitioners contended that the complaint filed under Section 138 of the Act was fundamentally flawed as it was initiated by a person not authorised by the complainant company. They argued that the absence of a board resolution or any official authorisation vitiated the proceedings. The petitioners relied upon multiple decisions of the Supreme Court and High Courts which emphasized the necessity of strict compliance with procedural requirements in complaints initiated by corporate entities.
It was also submitted that the Magistrate had issued process mechanically without applying judicial mind to whether the complaint was validly instituted in the first place.
Respondent’s Arguments
The respondent complainant attempted to justify the initiation of proceedings by claiming that the person who filed the complaint was a Manager who had knowledge of the transaction. It was argued that since the complaint contained the necessary factual allegations and was supported by documents, the proceedings ought not to be quashed merely on a technicality. The respondent contended that the trial court was right in taking cognizance based on the material on record.
Analysis of the Law
The Court emphasised that when a corporate entity seeks to initiate criminal proceedings, the person filing the complaint must be explicitly authorised by the company through a resolution or other official document. In the absence of such authorisation, the complaint is a nullity in the eyes of law.
Referring to the requirements under Section 200 of the Code of Criminal Procedure and the principles laid down under Section 138 of the Negotiable Instruments Act, the Court noted that due diligence is necessary at the pre-cognizance stage to ensure that a valid complaint has been instituted. The Magistrate’s obligation is not merely procedural; it requires the application of mind to the form and authority of the complainant.
Precedent Analysis
The High Court relied upon the following precedents:
- Associated Cement Company Ltd. v. Keshavanand, (1998) 1 SCC 687: It was held that a complaint on behalf of a company can be filed only by a person authorised by it.
- Janki Vashdeo Bhojwani v. Indusind Bank Ltd., (2005) 2 SCC 217: Emphasised that a power of attorney holder can only depose to the facts within their personal knowledge.
- National Small Industries Corp. Ltd. v. State (NCT of Delhi), (2009) 1 SCC 407: The Supreme Court underlined the importance of showing authorisation while initiating complaints by corporate entities.
These judgments were cited to support the argument that the procedural irregularity in filing the complaint vitiated the entire proceedings.
Court’s Reasoning
The Court found that there was no document on record indicating that the person who filed the complaint on behalf of the company had been authorised by the board of directors or any other competent authority. The Court held:
“A complaint under Section 138 of the Negotiable Instruments Act by a company is maintainable only if it is instituted by an authorised officer… The absence of such authorisation renders the complaint incompetent.”
Furthermore, the Court observed that the Magistrate had failed to ascertain whether the complaint was legally instituted. The issuance of process in such circumstances amounted to an abuse of process of law.
Conclusion
The Bombay High Court concluded that the criminal complaint filed against the petitioners was legally untenable, and the process issued by the Magistrate was vitiated for lack of legal authority on part of the complainant. The complaint and all proceedings emanating therefrom were accordingly quashed.
Implications
This judgment reinforces the strict compliance required in initiating complaints under Section 138 by corporate entities. It puts a duty on trial courts to ensure that complaints are not mechanically entertained and that procedural preconditions such as authorisation are satisfied before cognizance is taken.
It also gives clarity on the mandatory requirement of a board resolution or valid authorisation for instituting complaints on behalf of companies. This decision would have a ripple effect on cheque bounce litigation involving corporations and helps curb frivolous complaints.
Referred Judgments and Their Relevance
- Associated Cement Company Ltd. v. Keshavanand – Established that a complaint filed by a company must be by a duly authorised representative.
- Janki Vashdeo Bhojwani v. Indusind Bank Ltd. – Clarified the scope of testimony by power of attorney holders.
- National Small Industries Corp. Ltd. v. State (NCT of Delhi) – Reiterated the need for proof of authorisation in corporate complaints.
FAQs
Q1. Can a company file a cheque bounce complaint through any employee or agent?
No. The complaint must be filed by a person who is specifically authorised by the company, preferably through a board resolution or equivalent document.
Q2. What happens if a complaint is filed without such authorisation?
The complaint is treated as non-maintainable, and the proceedings may be quashed on that ground alone, as reaffirmed by this judgment.
Q3. Is the Magistrate required to check authorisation at the time of issuing process?
Yes. The Court has clarified that the Magistrate has a duty to verify whether the complainant has the legal authority to file the complaint before issuing process.
