2000 (10) TMI 968 - HC - Indian Laws

Unauthorized Representation in Section 138 Complaints: Importance of Proper Authorization

The court held that the complaints filed by Mr. Vijaya Bhaskar Reddy on behalf of the bank were not maintainable due to lack of evidence showing his ... Authority to institute criminal proceedings on behalf of a company - maintainability of complaint under Section 138 of the Negotiable Instruments Act - requirement under Section 142 of the Negotiable Instruments Act - board of directors' power to confer authority - consequence of lack of authorization (non-maintainability and quashing) - precedent on unauthorized manager filing complaintAuthority to institute criminal proceedings on behalf of a company - maintainability of complaint under Section 138 of the Negotiable Instruments Act - requirement under Section 142 of the Negotiable Instruments Act - consequence of lack of authorization (non-maintainability and quashing) - Whether the complaints under Section 138 of the Negotiable Instruments Act filed by Mr. Vijaya Bhaskar Reddy on behalf of Standard Chartered Bank were maintainable in the absence of material showing his proper authorization by the bank. - HELD THAT: - The Court held that a complaint under Section 138 can be taken cognizance of only on a written complaint by the payee or holder in due course as required by Section 142 of the Negotiable Instruments Act, and where the payee is a company the person filing must be properly authorized by the company to institute criminal proceedings. The power to authorize such prosecution ordinarily flows from the Board of Directors or from express provisions in the company's rules or articles; a delegation by an officer (here Mr. F.D. Irani) to another (here Mr. Vijaya Bhaskar Reddy) must itself be shown to have originated from a proper source. The material placed on record consisted only of a photocopy of a power of attorney executed by Mr. Irani, without any evidence of Mr. Irani's authority to confer prosecutorial power. Despite opportunities and adjournments, no material was produced to establish the source of Irani's authority or to show that Vijaya Bhaskar Reddy was properly empowered to file the complaints. Reliance was placed on a prior decision holding that complaints filed by an unauthorized manager are not maintainable. Applying these principles to the facts, the Court concluded there was no material to show proper authorization and that the complaints were therefore not maintainable and required quashing. [Paras 6, 9, 11, 13, 14]The complaints filed by Mr. Vijaya Bhaskar Reddy on behalf of Standard Chartered Bank were not maintainable for want of proof of proper authorization and the criminal proceedings were quashed.Final Conclusion: The petitions under Section 482 CrPC are allowed; the proceedings in CC Nos. 1552 and 1298 of 1998 before the X Metropolitan Magistrate, Hyderabad, are quashed for want of material showing that the person who instituted the complaints was properly authorized by the company. Issues:Challenge to authority of complainant to file complaint under Section 138 of Negotiable Instruments Act.Analysis:The judgment deals with petitions seeking the quashing of proceedings in criminal cases where the petitioners are facing charges under Section 138 of the Negotiable Instruments Act. The main contention raised was regarding the authority of the complainant, Mr. Vijaya Bhaskar Reddy, to file the complaint on behalf of the company. It was argued that the complainant lacked proper authorization from the company to initiate the criminal proceedings.The complaints were filed on behalf of a bank by Mr. Vijaya Bhaskar Reddy, described as an Assistant Manager, Collections. The complainant was a multinational bank with its principal office in London and a service center in Secunderabad. The complainant relied on a power of attorney as the source of authority for filing the complaints.The crux of the issue was whether Mr. Vijaya Bhaskar Reddy had the proper authority to file the complaints on behalf of the bank. The petitioners argued that there was no evidence to show that Mr. Reddy was authorized by the company to initiate criminal proceedings. The power of attorney submitted did not establish Mr. Reddy's authorization adequately.The judgment highlighted the importance of proper authorization when a person files a complaint on behalf of a company. Lack of proper authority could have significant consequences, including the company refusing to comply with court directions or facing liability for malicious prosecution. The authority to institute criminal proceedings should typically come from the company's Board of Directors or relevant governing documents.The court emphasized that under Section 142 of the Negotiable Instruments Act, only the payee or holder in due course of the cheque can file a complaint for an offense under Section 138. In this case, the bank was the payee, and therefore, only the bank could initiate criminal proceedings. The court referred to a previous decision to support the requirement for the complainant to be an authorized representative of the company.Based on the lack of evidence showing Mr. Vijaya Bhaskar Reddy's proper authorization to file the complaints, the court held that the complaints were not maintainable. Consequently, the petitions were allowed, and the proceedings against the petitioners were quashed.In conclusion, the judgment focused on the necessity of proper authorization for individuals representing companies in criminal proceedings, emphasizing the legal requirements for initiating complaints under the Negotiable Instruments Act.