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Sudesh Kumar Sharma v. K.S Selvamani And Others
Factual and Procedural Background
The accused in C.C. Nos. 9, 10, 11 of 1992 and C.C. No. 247 of 1991 filed petitions under section 482 of the Code of Criminal Procedure, 1973 seeking quashing of those complaints. The complaints (for offences under section 138 of the Negotiable Instruments Act, 1881, as amended, and section 420 of the Indian Penal Code) arose out of dishonour of cheques issued in part payment for the purchase of export fabrics.
The factual allegations in C.C. No. 9 of 1992 (representative of the set) are that the accused purchased goods on credit and, as part payment, handed over two cheques dated July 15, 1991 and August 15, 1991. The cheques were presented for collection in October 1991 and were returned dishonoured with memos indicating insufficient funds. A statutory notice was sent and allegedly refused; the notice was returned (allegedly with postman connivance), and the complainant treated the notice as served.
The named complainant in the pleadings is K.S. Selvamani, described as manager of G.D. International (and similarly styled for the other complaints). The trial court reportedly returned the complaints initially for production of authorization; the complaints were re-presented later with authorization letters or a power of attorney was produced subsequently. The petition challenges (a) the inclusion of the proprietor (first accused) as a party under section 138 when the cheques were said to be drawn by the second accused, and (b) the competency of the complainant (Selvamani) to institute complaints under section 138.
Legal Issues Presented
- Whether the first accused (the proprietor) can be proceeded against for an offence under section 138 of the Negotiable Instruments Act when the cheques are alleged to have been drawn by the second accused (his son and the authorised signatory).
- Whether the person who filed the complaints (K.S. Selvamani, described as manager) was a competent complainant under section 138 of the Negotiable Instruments Act — specifically, whether a manager or a person styled as manager, who is not the payee or holder in due course, can file a complaint.
- Whether a power of attorney or authorisation produced after the complaints were initially returned can be taken into account to cure any defect in the standing of the complainant when the complaint itself did not allege that he filed in a representative capacity as power of attorney.
Arguments of the Parties
Petitioners' Arguments (per Mr. V. Gopinath)
- The cheques were drawn only by the second accused; therefore only the drawer (second accused) can be proceeded against under section 138, and the first accused cannot be made liable under that provision.
- The complaints were filed by K.S. Selvamani, the manager, but the payee of the cheques was the respective concern (company). Since only the payee or holder in due course can be the complainant under section 138, Selvamani (as manager) is not a proper complainant and the complaints are liable to be quashed.
- At the time the complaints were filed no authorization was produced; complaints were returned and later re-presented with authorization letters. Because authorisation was not on record when the complaints were first presented, the complaints cannot be treated as filed by proper complainants.
Respondent's Arguments (per Mr. Munirathina Naidu)
- K.S. Selvamani is a power of attorney agent for the four companies and filed the complaints in his capacity as manager/agent; therefore the complaints are in order.
- The second accused is the authorised signatory for Pushpanchali while the first accused is the proprietor; by virtue of that relationship the first accused should be deemed liable (implicitly asserting that proprietorship or ultimate ownership makes the proprietor responsible).
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court addressed the issues in turn.
1. Liability of the first accused under section 138: The court examined the allegations in the complaint, which expressly stated that the cheques were drawn by the second accused and that the first accused was the proprietor while the second accused was the authorised signatory of Pushpanchali. The court quoted section 138 of the Negotiable Instruments Act, noting the statutory formulation that the offence is committed by the "person" who drew the cheque on his account. Given the complaint's averment that the second accused was the drawer, the court concluded that criminal liability under section 138 could not be fastened on the first accused merely because he was proprietor of the business for which his son signed; therefore the first accused cannot be proceeded against under section 138 in any of these complaints.
2. Competency of the complainant (Selvamani): The court considered the description of the complainant in the pleadings (K.S. Selvamani, manager of G.D. International) and the averment in paragraph 4 that the person signing and verifying the complaint was "duly authorised to file the complaint." The petitioner argued that Selvamani was not the payee or holder in due course and so lacked complainant-competency under section 142(a) of the Act, which provides that courts shall not take cognizance of an offence under section 138 except upon a written complaint made by the payee or holder in due course.
The respondent relied on a power of attorney and on the assertion that authorisation letters were filed after the complaints were returned by the trial court. The court refused to take the power of attorney into account for two stated reasons: (a) nowhere in the body of the complaint was it stated that Selvamani was bringing the complaint as a power of attorney for the companies, and (b) the power deed was produced only after the complaints had been returned by the trial court and therefore could not cure the omission in the original complaints. Because the court would not consider the power deed, it treated Selvamani only as the manager who had filed the complaints in his own name.
The court then applied section 142(a) and held that a manager who is not the payee or holder in due course cannot, by virtue of being manager alone, file a complaint under section 138. The court observed that if the complainant had been the companies (e.g., G.D. International) represented by their manager, the requirement of the Act would have been satisfied; but in the present pleadings those companies were not the named complainants in the required statutory fashion.
On these bases — (i) absence of averment that the first accused drew the cheques and thus inability to fasten s.138 liability on him, and (ii) complainant's lack of statutory competence because he was not the payee/holder in due course and the power deed could not be taken into account — the court concluded that the complaints did not conform to the Act and could not be sustained.
Holding and Implications
Petitions allowed; proceedings in C.C. Nos. 9 to 11 of 1992 on the file of Judicial Magistrate-II, Salem, and C.C. No. 247 of 1991 on the file of Judicial Magistrate-I, Salem, are quashed.
Implications:
- The court held, in the particular factual matrix of these complaints, that the proprietor (first accused) could not be prosecuted under section 138 when the cheques were alleged to have been drawn by the second accused; criminal liability under section 138 was confined to the person who drew the cheque as pleaded in the complaint.
- The court held that a complainant must be the payee or the holder in due course to institute a complaint under section 138; a manager who sues in his own name, without clear pleading that he sues on behalf of the company or as a duly conceded representative (and without the representative authority properly invoked in the complaint itself), does not satisfy section 142(a) and thus lacks competence to file such a complaint.
- Direct effect: the specific criminal proceedings identified in the petitions were quashed. The opinion does not indicate the setting of any broad new legal precedent beyond applying the statutory text of sections 138 and 142(a) to the pleaded facts, nor does it discuss wider policy consequences beyond the direct effect on these proceedings.
Pratap Singh, J.:— The accused in C.C Nos. 9, 10, 11 of 1992 and 247 of 1991 have filed these petitions under section 482 of the Code of Criminal Procedure, 1973, praying to call for the records in the said cases and for quashing the same.
2. The short facts are: In C.C No. 9 of 1992, the respondent in Criminal 0. P. No. 6661 of 1993 has filed a private complaint against the petitioners herein for the offences under section 138 of the Negotiable Instruments Act, 1881, as amended (hereinafter referred to as “the Act”) and under section 420 of the Indian Penal Code. The allegations in the said complaint are briefly as follows:
The complainant is manufacturing a high class variety of export fabrics. The second accused is the son of the first accused. The accused purchased high class variety of export fabrics on credit basis and towards part payment of the amount due to the complainant, they handed over two cheques dated July 15, 1991, and August 15, 1991, on July 15, 1991, promising that the said cheques will be duly honoured on the respective dates. Subsequently, the accused requested the complainant to present the cheques in the month of October, 1991. The complainant presented the cheques for collection on October 16, 1991, and October 11, 1991, respectively. They were returned on October 29, 1991, with a memo stating, “funds not sufficient” on October 31, 1991, and the complainant issued a statutory notice calling upon the accused to make the payment within 15 days. The accused refused to receive the said notice. The notice was returned with the connivance of the postman, even though they were residing at the same address. So, the notice must be deemed to have been served on them.
3. The person who signed and verified the complaint has been duly authorised to file the complaint. Since the accused had not paid the amount, the complaint has been filed. The allegations in the complaints in C.C Nos. 10 and 11 of 1992 and 247 of 1991 are similar. They were also filed for the offences under section 138 of the Act and 420 of the Indian Penal Code, in respect of the cheques concerned in those complaints.
4. Mr. V. Gopinath, learned counsel for the petitioners, would submit that the drawer of the cheques is only the second accused and the first accused is not the drawer of the cheques, and that only the drawer of the cheques can be proceeded against for the offence under section 138 of the Act. Hence, the proceedings are liable to be quashed as against the first accused. The second submission of learned counsel is that the complaints are filed by Selvamani, the manager of the respective concerns in favour of which the cheques were given. The payee of the cheques is the respective concern. The payee alone can be the complainant under section 138 of the Act. In these cases, the complainant is Selvamani, manager of the concerns and hence, the complaints are liable to be quashed. Learned counsel would add that at the time of filing of the complaints, no authorisation, as has been stated in paragraph 4 of the complaint, was filed. Hence, the complaints were returned for production of authorisation. They were again presented without authorisation letters and they were again returned and only much later, they were re-presented with authorisation letters. In those circumstances, it cannot be stated that there were complaints by proper complainants and, hence, the complaints are liable to be quashed.
5. Mr. Munirathina Naidu, learned counsel appearing for the respondent, would submit that K.S Selvamani is the power of attorney agent for the four companies on whose behalf he has filed the complaints as manager and as such, the complaints are in order. He would further submit that, according to the complaints, the second accused is the authorised signatory for Pushpanchali and the first accused is the proprietor of the company, while so, the first accused must be deemed to be the drawer of the cheques and hence he is also liable for an offence under section 138 of the Act.
6. I have carefully considered the submissions made by learned counsel on both the sides. I shall first consider the question as to whether the first accused can be proceeded against for the offence alleged. To consider this point, the relevant allegations in the complaint need be stated. In the first paragraph of the complaint, it is stated that the second accused, son of the first accused, and the first accused are running the business, that the first accused is the proprietor and the second accused is the authorised signatory of Pushpanchali. In paragraph 2 of the complaint, it is stated, under particulars of the cheques, that cheques were drawn by the second accused. I shall immediately refer to section 138 of the Act which states that 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, was dishonoured for insufficient funds or for exceeding the arrangement, the said person shall deemed to have committed an offence. In this case, the drawer of the cheque is the second accused. The first accused was the proprietor of the concerns for whose liability his son, the second accused had issued the cheque and so criminal liability cannot be fastened on the first accused. So, I am clear that the first accused cannot be made liable for an offence under section 138 of the Act in any one of these complaints. Regarding the liability of the second accused, the submission of learned counsel for the petitioners was that the complaints have not been laid by the payee or the holder in due course of the cheques and, hence, the complaints are not in order. In the complaint in C.C No. 9 of 1992, the complainant is described as follows:
“Mr. K.S Selvamani, s/o. K. Subramani, manager, G.D International, Narayana Nagar, Salem 16…”
7. In the first paragraph it is stated that the complainant herein is the manufacturer of high class variety of export fabrics, that the accused had purchased high class variety of export fabrics from the complainant and that towards part payment cheques were issued. Similar allegations were made in other complaints. In paragraph 4 of the complaint, it is stated that the person who has signed and verified the complaint is duly authorised to file the complaint and he has got personal knowledge about the entire transaction.
8. Mr. Gopinath, learned counsel for the petitioners, would submit that in this case, the complainant is one Selvamani, the manager of G.D International, Narayana Nagar, and that Selvamani is not the payee or holder in due course of the cheques. He would further submit that even assuming that he is the manager, no authorisation was filed at the time of presentation of the complaints. Learned counsel for the respondent would submit that the complaints were returned since authorisation was not shown and that later, it was re-presented along with an authorisation letter. Learned counsel would submit that Selvamani is the power agent of all the companies and so, he is authorised to file the complaints. For two reasons, I am not prepared to take into account the power of attorney deed, said to have been executed by the proprietor of the said four companies, on whose behalf these complaints were lodged by Selvamani styling himself as “manager”. The first reason is that nowhere in the complaint it is stated that he is the power of attorney of the four companies and in that capacity he is filing these complaints. In paragraph 4, it is stated that he is duly authorised to file the complaints. Learned counsel submitted that while the complaints were returned by the trial court, authorisation letters were filed and the complaints were again re-presented. Because the power deed was not referred to in the complaints and because only authorisation letters were filed while the complaints were represented, after return by the court, the power deed cannot be taken into account. When the power deed is not taken into account, the resultant position is that Selvamani had filed these complaints as manager of the four companies as a person duly authorised to file the complaints. Inasmuch as he is not the payee of the cheques, he cannot file these complaints in respect of the cheques, and he cannot file these complaints as per the provisions of the Act. If the complainant is G.D International or other companies, represented by the manager, then it will satisfy the requirements of the Act. Section 142(a) of the Act reads as follows:
“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;”
9. Thus, a person, who is competent to file a complaint under section 138 of the Act, must be a payee or holder in due course. By no stretch of imagination, can it be stated that Selvamani, who is the manager of the company, is the payee or holder in due course. Hence, I accept the submission made by learned counsel for the petitioners that the complaints are not in order and not in conformity with the provisions of the Act. Hence, they cannot be sustained and are liable to be quashed.
10. In the result, the petitions are allowed and all further proceedings in C.C Nos. 9 to 11 of 1992 on the file of the Judicial Magistrate-II, Salem, and C.C No. 247 of 1991 on the file of the Judicial Magistrate-I, Salem, shall stand quashed.
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