Cheque dishonour liability upheld where company authorization was curable, notice proved, and security cheque defence failed.

The Delhi HC held that a company's complaint under the Negotiable Instruments Act was maintainable despite challenge to the complainant's authority, because the authorization defect was curable and had in any event been supported by later authority documents. Service of the statutory demand notice was proved through witness testimony, postal records, the accused's reply and part payment, and the objection of non-service was treated as an afterthought. The cheques were not shown to be mere security cheques; the presumption under Section 138 remained unrebutted for want of credible defence evidence. The revisional court was also within its power to award compensation under Section 357(4) CrPC, and the modified sentence was sustained.

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Issues: (i) whether the complaint was maintainable despite the challenge to the authority of the person who instituted it on behalf of the company; (ii) whether service of the statutory legal notice under the Negotiable Instruments Act was proved; (iii) whether the cheques in question were merely security cheques and whether the presumption under the Negotiable Instruments Act stood rebutted; and (iv) whether the revisional court could enhance the sentence by awarding compensation under the Code of Criminal Procedure.

Issue (i): Whether the complaint was maintainable despite the challenge to the authority of the person who instituted it on behalf of the company.

Analysis: The authorization letter dated 26.9.1995 and the subsequent power of attorney showed that the company had authorized the witness to file and pursue the complaint. The objection to authority had not been raised at the proper stage and, in any event, defects in authorization by a company are capable of rectification. A complaint filed in the name of a company does not fail merely because the individual representing it was later shown to have formal authorization documents executed subsequently or confirming the earlier authority.

Conclusion: The challenge to maintainability on the ground of want of authorization failed.

Issue (ii): Whether service of the statutory legal notice under the Negotiable Instruments Act was proved.

Analysis: The notice was proved through the testimony of the witness and the accompanying postal and acknowledgment material. The reply sent by the petitioners was treated as a response to that notice and even enclosed part payment, which supported receipt of the demand notice. The defence that no notice had been served was not put to the witness at the relevant stage and was found to be an afterthought. The discrepancy in the date of notice was treated as a typographical error.

Conclusion: Service of the statutory notice was proved.

Issue (iii): Whether the cheques in question were merely security cheques and whether the presumption under the Negotiable Instruments Act stood rebutted.

Analysis: The evidence showed that the cheques were issued in the context of commercial dealings and, upon non-payment for goods supplied, were treated as cheques towards liability. The documents relied upon by the petitioners did not establish that the goods had not been supplied or that no debt existed. The petitioners failed to lead proper defence evidence to rebut the statutory presumption. A cheque given as security does not fall outside the sweep of Section 138 if, on the facts, it represents payment towards a legally enforceable liability.

Conclusion: The cheques were not shown to be mere security cheques so as to avoid liability, and the presumption remained unrebutted.

Issue (iv): Whether the revisional court could enhance the sentence by awarding compensation under the Code of Criminal Procedure.

Analysis: The revisional court acted within its power under Section 357(4) of the Code of Criminal Procedure. Compensation may be ordered by a revisional court, and the distinction between fine and compensation did not bar such enhancement in the facts of the case. The award of compensation was considered consistent with the object of compensating the victim where the cheque amount was substantial and the original fine was nominal. Interference in revision was also unwarranted in the absence of patent illegality, perversity, or failure of justice.

Conclusion: The enhancement by way of compensation was upheld.

Final Conclusion: The concurrent findings of conviction and the sentence as modified by the revisional court were sustained, and the revision petitions failed.

Ratio Decidendi: In prosecutions under Section 138 of the Negotiable Instruments Act, a company's authorization defect is curable, a cheque issued as security remains enforceable if it is linked to a subsisting liability, the statutory presumption continues unless rebutted by credible evidence, and a revisional court may award compensation under Section 357(4) of the Code of Criminal Procedure.

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