2025 (6) TMI 837 - HC - Indian Laws

Managing Director with board authorization can represent company in Section 138 cheque dishonour cases

ABI ABRAHAM Versus KANHANGAD RUBBER LTD., STATE OF KERALA

Kerala HC dismissed criminal revision petitions challenging conviction under Section 138 of Negotiable Instruments Act for cheque dishonour. Court held ... Dishonour of Cheque - funds insufficient - complainant has not proved that the person representing the complainant company is a person duly authorized to represent it - witnesses who gave oral evidence had no direct knowledge regarding the transactions. Complainant has not proved that the person representing the complainant company is a person duly authorized to represent it - HELD THAT:- In the present case, the complainant is the company itself. The company is represented by its Managing Director. The complainant specifically pleaded that the Articles of Association of the complainant company authorize and empower the Managing Director to represent all legal matters and to initiate legal proceedings on behalf of the company. The company further pleaded that the Board of Directors of the company held on 12.8.2016 empowered the Managing Director of the company to initiate legal proceedings against the accused. PW1 gave evidence in support of these pleadings in the complaints. The payee is the company itself. In TRL Krosaki Refractories Ltd. [2022 (2) TMI 1112 - SUPREME COURT], the Supreme Court held that when a company is the payee of the cheque based on which a complaint is filed under Section 138 of the N.I. Act, the complainant necessarily should be the company, which would be represented by an employee who is authorized. In the present case, the complainant is the company itself. The company has been represented by the Managing Director, who is the authorized person. Therefore, the mandate of Section 142 of the N.I. Act has been satisfactorily complied with. Therefore, this challenge falls to the ground. Witnesses who gave oral evidence had no direct knowledge regarding the transactions - HELD THAT:- The learned counsel for the accused highlighted another discrepancy in the pleadings and the evidence regarding the number of cheques executed. In the complaint, the complainant pleaded that the accused executed 17 cheques. While giving evidence, PWs 2 and 3 stated that the accused executed only 13 cheques. This discrepancy will not affect the merit of the case of the complainant as the complainant has successfully proved the liability and execution of the cheques. The only question to be considered is whether the accused discharged his evidential burden to rebut the mandatory presumption. True that the standard of proof to discharge this evidential burden must meet only the standard of preponderance of probabilities, similar to a defendant in a civil proceeding. To rebut the presumption, the accused has to raise a probable defence - To discharge this evidential burden, the accused can rely on the evidence of the complainant and all other circumstances brought out in evidence. The evidence need not even be direct. It may comprise circumstantial evidence or presumption of law or fact. In the present case, the accused has not placed any material to the satisfaction of the court that on a preponderance of probabilities, there existed no debt or liability in the manner pleaded in the complaint, demand notice, affidavit, evidence, etc. Nothing has been elicited in the cross-examination of PWs 1 to 3 to raise any suspicion in the case set up by the complainant other than a minor inconsistency regarding the number of cheques issued. The case of the complainant company has been consistent throughout as is evident from the pleadings in the complaint, demand notice, affidavit and the evidence adduced - The accused miserably failed to discharge his evidential burden. Therefore, the fact that the cheques issued in discharge of a debt or liability will have to be taken to be proved with the aid of the presumption under Section 139 of the N.I. Act without requiring anything more from the complainant. The Revisional Court is not meant to act as an appellate court. The whole purpose of the revisional jurisdiction is to preserve the power of the court to do justice in accordance with the principles of criminal jurisprudence. The revisional power of the court under Sections 397 to 401 Cr.P.C is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction. Conclusion - The complainant company is duly represented; the execution of the cheques and existence of debt are proved; the accused failed to rebut the presumption under Section 139; the oral evidence is credible and sufficient; and the concurrent findings of conviction and sentence are legally sound and not liable to interference in revision. This Court is of the view that the judgments impugned are not affected by any patent error of jurisdiction. All the challenges in these revision petitions, therefore, fail. This Court fails to find that the impugned orders are untenable in law or grossly erroneous or unreasonable - Criminal Revision Petitions stand dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the complainant company was duly represented by an authorized person competent to initiate legal proceedings under Section 142 of the Negotiable Instruments Act (N.I. Act).- Whether the complainant established the execution of the cheque(s) by the accused and the existence of a legally enforceable debt or liability towards the complainant.- Whether the accused discharged the evidential burden to rebut the presumption under Section 139 of the N.I. Act that the cheque(s) were issued for the discharge of a debt or liability.- Whether the oral evidence adduced by the complainant's witnesses was sufficient and reliable, particularly regarding their knowledge of the transactions and execution of cheques.- Whether the concurrent findings of conviction by the trial court and Sessions Court suffer from any perversity, illegality, or material non-consideration warranting interference under revisional jurisdiction.2. ISSUE-WISE DETAILED ANALYSISAuthorization of Representation of the Complainant CompanyThe legal framework requires that a company as complainant in a Section 138 N.I. Act case must be represented by a duly authorized person, typically an employee or officer empowered by a board resolution or power of attorney, as mandated under Section 142 of the N.I. Act. The Supreme Court in TRL Krosaki Refractories Ltd. v. SMS Asia Private Limited emphasized the necessity of such authorization.In the present case, the complainant company was represented by its Managing Director, who was specifically authorized by the Articles of Association to represent the company in all legal matters. Additionally, a Board of Directors' resolution dated 12.08.2016 empowered the Managing Director to initiate legal proceedings against the accused. PW1, the Managing Director, gave evidence corroborating these pleadings.The Court interpreted this compliance as satisfactory fulfillment of the statutory mandate. The accused's contention that the complainant was not properly represented was rejected, holding that the complainant company itself was the party and the Managing Director was duly authorized. This reasoning aligns with the principle that a company must sue through an authorized representative, and such authorization was duly established here.Proof of Execution of Cheques and Existence of DebtThe complainant produced evidence including the agreement dated 01.08.2014, ledger extracts, confirmation letters, and the cheques themselves (Exts.P4 and others). The agreement established a contractual relationship for the purchase of ammoniated filled latex, with a liability of Rs.1.37 crores owed by the accused.PWs 1 to 3, all officers or employees of the complainant company during the relevant period, gave consistent oral evidence regarding the execution of the cheques by the accused and the outstanding debt. PW2 specifically testified that the accused executed the cheques in his presence. The accused did not dispute the signatures or the execution of the agreement but contended that the cheques were given as security and misused by the complainant.The Court found the complainant had satisfactorily established the execution of the cheques and the existence of a legally enforceable debt. The minor discrepancy regarding the number of cheques (pleaded as 17, but PWs testified to 13) was held immaterial to the core issue of liability and cheque execution.Rebuttal of Presumption under Section 139 of the N.I. ActSection 139 of the N.I. Act creates a mandatory presumption that the cheque was issued for the discharge of a debt or liability once the complainant proves the cheque's execution. The burden then shifts to the accused to rebut this presumption by adducing evidence to the contrary on a preponderance of probabilities.The accused's only defence was that the cheques were issued as security and misused, but no defence evidence was adduced. The Court held that to discharge the evidential burden, the accused must produce material showing that no debt or liability existed or that the cheque was not issued in discharge thereof. Mere denial or assertion without evidence is insufficient.Since the accused failed to produce any evidence or raise a probable defence, the presumption under Section 139 remained unrebutted. The Court applied the principle that the accused's failure to discharge this burden mandates acceptance of the complainant's case on this point.Reliability and Sufficiency of Oral EvidenceThe accused challenged the witnesses' competence and direct knowledge of the transactions. However, PWs 2 and 3 were company employees and officers during the relevant period and had direct involvement in the transactions and cheque executions. PW2's evidence that the accused executed the cheques in his presence was particularly significant.The Court rejected the accused's reliance on precedents distinguishing cases where witnesses lacked direct knowledge, holding that the present witnesses had sufficient knowledge and involvement. The consistency of the complainant's case across pleadings, notices, affidavits, and oral evidence further strengthened the credibility of the witnesses.Concurrent Findings and Revisional JurisdictionThe trial court convicted the accused under Section 138 of the N.I. Act and sentenced him to simple imprisonment and compensation. The Sessions Court confirmed the conviction and sentence. The accused challenged these concurrent findings in revision.The Court reiterated the settled principle that revisional jurisdiction under Sections 397 to 401 Cr.P.C is not appellate in nature and interference is warranted only if the order is perverse, wholly unreasonable, based on no material, or if there is a palpable misreading or non-consideration of relevant facts.After careful scrutiny, the Court found no such error or illegality in the concurrent findings. The evidence was properly considered, the legal principles correctly applied, and the accused's challenges were insufficient to overturn the findings. The revisional court declined to interfere, emphasizing the need to respect the trial and appellate courts' factual and legal conclusions unless manifestly erroneous.3. SIGNIFICANT HOLDINGS'Once the complainant has established the execution of the cheque, a presumption is drawn in favour of the complainant that the cheque was issued by the accused in the discharge of a debt by virtue of the presumptive device under Section 139 of the Act. Now, the burden shifts on the accused to rebut the mandatory presumption by showing that the cheque was not issued towards the discharge of any liability.''The complainant is the company itself. The company is represented by its Managing Director, who is the authorized person. Therefore, the mandate of Section 142 of the N.I. Act has been satisfactorily complied with.''The revisional power of the court under Sections 397 to 401 Cr.P.C is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction.'The core principles established include the strict adherence to the statutory presumption under Section 139 of the N.I. Act, the necessity of authorized representation of a company complainant under Section 142, and the limited scope of revisional jurisdiction in criminal matters.Final determinations were that the complainant company was duly represented; the execution of the cheques and existence of debt were proved; the accused failed to rebut the presumption under Section 139; the oral evidence was credible and sufficient; and the concurrent findings of conviction and sentence were legally sound and not liable to interference in revision.