M/S TRL KROSAKI REFRACTORIES LTD. vs. M/S SMS ASIA PRIVATE LIMITED

 REPORTABLE                        IN THE SUPREME COURT OF INDIA                       CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.  270 OF 2022        (Arising out of SLP (Crl.) No.3113 of 2018) M/s TRL Krosaki Refractories Ltd.             .… Appellant(s)    Versus M/s SMS Asia Private Limited & Anr.          …. Respondent(s) J U D G M E N T A.S. Bopanna,J. 1. Leave granted.  2. The   appellant   is   assailing   the   judgment   dated 14.12.2017 passed by the High Court of Orissa at Cuttack in CRLMC No.1210 of 2017. Through the said judgment, the High Court while disposing of the petition has quashed the order dated 05.11.2015 passed by the learned SDJM, Jharsuguda by Signature Not Verified which   cognizance   was   taken   and   summons   was   issued   in Digitally signed by Rajni Mukhi Date: 2022.02.23 18:35:32 IST Reason: I.C.C.   Case   No.422   of   2015.   The   appellant   who   is   the 1 complainant in I.C.C. Case No.422 of 2015 is therefore before this Court, claiming to be aggrieved by the said judgment. 3. The   brief   facts   are   that   the   respondent   herein   had issued seven cheques dated 13.03.2015, in all amounting to Rs.1,10,00,000/­ (Rupees one crore ten lakhs) in favour of the appellant company. On presentation, the said cheques were dishonoured by the Bank and returned with the endorsement, ‘account   closed’.   The   appellant   in   that   view   issued   notices dated 14.04.2015 through registered post, acknowledgement due. Though the notices were received on 16.04.2015 as per the postal acknowledgement, the respondent failed to comply with the demand or respond to the same. In that view, the appellant   filed   the   complaint   before   the   learned Sub­Divisional Judicial Magistrate, (‘SDJM’ for short) Panposh, Uditnagar Rourkela under Section 138 and 142 of Negotiable   Instruments Act, 1881 (for short ‘N.I. Act’). The said complaint was  registered   based   on  the  affidavit  filed  on  behalf   of   the complainant,   in   lieu   of   oral   sworn   statement.   The   learned SDJM on being satisfied that there is sufficient material and the   complaint   under   Section   138   of   N.I.   Act   against   the accused   is   in   accordance   with   law,   took   cognizance   of   the 2 complaint and directed summons to the respondent­accused, vide order dated 05.11.2015. 4. The   respondent   herein   however   filed   a   petition   in CRLMC No.1210 of 2017 under Section 482 of the Criminal Procedure   Code   (for   short   ‘Cr.P.C.)   before   the   High   Court claiming to be aggrieved by the order dated 05.11.2015. The respondent,   in   the   said   petition   had   contended   that   the complaint   filed   was   by   an   incompetent   person   without   the requisite   averments   in   the   complaint,   despite   which   the learned SDJM had taken cognizance and issued summons. In that regard, it was contended that Mr. Subhasis Kumar Das, General   Manager   (Accounting)   who   had   filed   the   complaint representing the complainant company, neither had knowledge about the alleged transaction, nor had he witnessed the same. In that  light,  the   respondent had  contended  that the   order taking cognizance and the summons issued to them, is liable to be quashed. The High Court, accepting the said contention and placing   reliance   on   the   judgment   of   this   Court   in   A.C. Narayanan vs. State of Maharashtra & Anr.  (2014) 11 SCC 790 has held that there is no mention in the complaint or affidavit as to when and in what manner the company had 3 authorized its General Manager (Accounting) to represent the company to file the complaint. It is further held that there is no averment in the complaint as to whether the General Manager (Accounting) had knowledge about the transaction or he was a witness   to   the   transaction.   It   was   also   held,   neither   any resolution   of   the   Board   of   Directors   of   the   complainant company nor any authorisation of the company in favour of the person representing it in the complaint was filed for perusal of the   Magistrate.   Only   an   authorisation   letter   issued   by   the Managing Director of the complainant company in favour of the General   Manager   (Accounting)   was   produced   and   the   said authorisation does not indicate whether the Board of Directors had   authorised   the   Managing   Director   to   sub­delegate   his powers   to   the   General   Manager   (Accounting)   to   file   the complaint on behalf of the company. 5. Mr. Ashok K. Parija, learned senior counsel appearing on behalf of the appellant while assailing the judgment passed by the High Court, would contend that the High Court has utterly   misconstrued   the   principle   enunciated   in   A.C. Narayanan  (supra) to non­suit the appellant. It is contended that in the said decision, while considering the nature of the 4 complaint filed based on the power of attorney executed by one individual in favour of another individual to conduct the case, the requirement therein has been stated. Even in that context the High Court has not properly appreciated the facts involved in   the   instant   case   since   the   complaint   was   as   per   the observations made in  A.C. Narayanan  (supra). It is contended that the order passed by the learned SDJM dated 05.11.2015 taking cognizance would indicate that the learned Magistrate having   perused   the   complaint   and   the   entire   record,   was satisfied   that   there   is   sufficient   material   for   issuance   of summons. In that background, the list of documents and the documents are referred to.  The agreement dated 18.07.2014, entered   into   between   the   appellant   and   respondent   would disclose   that   Mr.   Subhasis   Kumar   Das,   General   Manager (Accounting)   who   had   represented   the   company   in   the complaint, was a witness to the said agreement. He had also signed the reconciliation statement and has despatched the notice to the respondent when the cheques were dishonoured. In that view, the company was represented by a competent person who had knowledge of the transaction. The verifying affidavit enclosed with the complaint also specified that he had 5 knowledge and that the complaint was based on the relevant documents. In addition, the said Mr. Subhasis Kumar Das, General Manager (Accounting) in the affidavit filed as his sworn statement,   had   explicitly   stated   that   he   is   the   authorized representative of the complainant company and has filed the complaint against the accused persons. Learned senior counsel would also point out that in addition to the fact that he was a Senior   Managerial   Officer   of   the   appellant   company,   Mr. Subhasis Kumar Das was also authorized by the Managing Director on 23.05.2015, to initiate the legal proceedings. The Managing Director on the other hand, was authorized by the Chairman based on the approval of the Board of Directors. In that   view,   it   is   contended   that   the   complaint   was   filed   in accordance with law and the learned Magistrate having applied his mind, had taken cognizance which was quashed by the High Court without appropriately applying its mind. 6. Mr. Santosh Kumar, learned counsel for the respondent would however, seek to sustain the judgment passed by the High Court. It is contended that the High Court having noted the   judgment   in   A.C.   Narayanan   (supra)   and   also   the judgments   of   the   Orissa   High   Court   had   arrived   at   the 6 conclusion   that   the   complaint   filed   did   not   satisfy   the requirement of Section 142 of N.I. Act as the complaint was not filed by a person who was authorized by the company. It is further contended that in  (supra) this Court A.C. Narayanan  has held that there should be explicit averment to the effect that   the   person   filing   the   complaint   is   authorized   by   the complainant and has knowledge of the transaction in question so as to maintain the complaint. It is contended that since the High   Court   has   arrived   at   its   conclusion   by   relying   on   a decision rendered by this Court, such a decision would not call for interference in this appeal. 7.       Having   noted   the   sequence   of   events   and   the   rival contentions put forth by the learned counsel for the parties, the solitary issue for consideration herein is as to whether the complaint filed by the appellant herein under Section 138 of N.I. Act is in accordance with the requirement under Section 142 of the N.I. Act. The relevant provision reads as hereunder: ­ “142.  Cognizance of offences .—[(1)] 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,  7 as the case may be, the holder in due course of the cheque; (b)  xxxxxxxxxx (c)  xxxxxxxxxx” 8. In   that   background,   a   perusal   of   the   complaint (Annexure P­14) would disclose that the complainant named therein is M/s. TRL Krosaki Refractories Limited through its General Manager (Accounting) Subhasis Kumar Das. A perusal of the cheques (Annexures P­3 to P­9) which are the subject matter of the said complaint under Section 138 of NI Act would disclose that the “payee” named in the said cheques is M/s. TRL Krosaki Refractories Limited. If that be the position, the requirement as contemplated under Section 142 (1) (a) of NI Act that the complaint ought to be in writing and that it should be   filed   by   the   payee   or   the   holder   in   due   course,   stands satisfied. The issue raised is that the complaint filed by Mr. Subhasis Kumar Das, General Manager (Accounting) on behalf of the company is not competent for want of authorisation and that there is no averment with regard to his knowledge about the transaction. On this aspect, strong reliance is placed by the learned   counsel   for   the   respondents   on   A.C.   Narayanan (supra). Further, the judgment passed by the High Court is 8 also entirely based on the guidelines laid down in the said decision. 9.To place the matter in perspective, it would be necessary for us   to   take   note   of   the   circumstances   under   which   the consideration arose in  (supra). In that regard, A.C. Narayanan  it is noticed that this Court while considering the scope of Section 142 (1)(a) of N.I. Act in the case of  M/s. M.M.T.C. Ltd. vs. Medchi Chemicals and Pharma (P} Ltd.,   (2002) 1 SCC 234, had taken note of an earlier decision of this Court in , (1983) 4 SCC 701 wherein it Vishwa Mitter vs. O.P. Poddar was held that anyone can set the criminal law in motion by filing   a   complaint   of   facts   constituting   an   offence,   before   a Magistrate entitled to take cognizance. It was further held in Vishwa Mitter   (supra) that if any special statute prescribes offences and makes any special provision for taking cognizance of   such   offences   under   the   statute,   then   the   complaint requesting   the   Magistrate   to   take   cognizance   of   the   offence must satisfy the eligibility criterion prescribed by such statute. In   that   circumstance,   it   was   held   that   the   only   eligibility criteria   prescribed   by   Section   142   of   N.I.   Act   is   that   the 9 complainant must be by the payee or the holder in due course. However,   in   a   subsequent   decision   in   Janaki   Vashdeo   (2005) 2 Bhojwani & Anr. vs. Indusind Bank Ltd. & Ors. SCC 217, while considering the right of a power of attorney holder to act on behalf of the principal in a civil proceeding, the provision contained in Order III Rule 1 and 2 of CPC was kept in view and it was held that if the power of attorney holder has rendered some acts in pursuance of the power of attorney, he may depose for the principal in respect of such acts, but he cannot   depose   for   the   principal   for   the   acts   done   by   the principal and not by him. Similarly, he cannot depose for the principal in respect of the matter of which only the principal is entitled to be cross­examined. The said two decisions which were   rendered   by   Division  Benches   were   assumed   to   be  in conflict   with   each   other   by   another   Division   Bench   while considering   A.C. Narayanan   (supra) and therefore it desired clarification. 10. In that view, the matter in  (supra) was A.C. Narayanan  referred to a Bench of three Hon’ble Judges. The said Bench after holding that the said two judgments of this Court are not 10 in   conflict   with   each   other   has   considered   the   scope   and requirement of Section 142 (1)(a) of N.I. Act and formulated the questions   for   consideration   as   contained   in   para   21   of   the judgment which read as hereunder: ­

11 “29. From a conjoint reading of Sections 138, 142 and 145 of the NI Act as well as Section 200 of the Code,  it is clear that it is open to the Magistrate to issue process   on   the   basis   of   the   contents   of   the complaint, documents in support thereof and the affidavit submitted by the complainant in support of   the   complaint.   Once   the   complainant   files   an affidavit in support of the complaint before issuance of the   process   under   Section   200   of   the   Code,   it   is thereafter open to the Magistrate, if he thinks fit, to call upon the complainant to remain present and to examine him as to the facts contained in the affidavit submitted   by   the   complainant   in   support   of   his complaint. However, it is a matter of discretion and the Magistrate is not bound to call upon the complainant to remain present before the court and to examine him upon oath for taking decision whether or not to issue process on the complaint under Section 138 of the NI Act. For the purpose of issuing process under Section 200 of the Code, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the  complainant  in  support   of  the  complaint   under Section 138 of the NI Act.  It is only if and where the Magistrate, after considering the complaint under Section 138 of the NI Act, documents produced in support thereof and the verification in the form of affidavit of the complainant, is of the view that examination of the complainant or his witness(s) is required,   the   Magistrate   may   call   upon   the complainant   to   remain   present   before   the   court and examine the complainant and/or his witness upon oath for taking a decision whether or not to issue process on the complaint under Section 138 of the NI Act. 30. In the light of the discussion, we are of the view that the power­of­attorney holder may be allowed to file, appear  and depose for  the purpose of issue of process for the offence punishable under Section 138 of the NI Act. An exception to the above is when the power­of­attorney holder of the complainant does not have   a   personal   knowledge   about   the   transactions then   he   cannot   be   examined.   However,   where   the attorney holder of the complainant is in charge of the   business   of   the   complainant   payee   and   the 12 attorney holder alone  is  personally aware  of  the transactions, there is no reason why the attorney holder cannot depose as a witness. Nevertheless, an explicit assertion as to the knowledge of the power­of­attorney holder about the transaction in question must be specified in the complaint. On this   count,   the   fourth   question   becomes infructuous.” The   answer   to   the   question   raised   for   consideration   is contained in para 33 which read as hereunder: ­

13 the   Court,   nor   to   examine   the   complainant   of   his witness upon oath for taking the decision whether or not to issue process on the complaint under Section 138 of the NI Act. 33.5. The   functions   under   the   general   power   of attorney   cannot   be   delegated   to   another   person without   specific   clause   permitting   the   same   in   the power of attorney. Nevertheless, the general power of attorney   itself   can   be   cancelled   and   be   given   to another person.”                   ( Emphasis supplied ) 11. A cumulative perusal of the facts of the instant case would   indicate   that   the   requirement   as   indicated   in   A.C. ,   (supra)   are   in   fact   satisfied.   Firstly,   as   noted Narayanan above, the complaint was filed in the name of the company i.e., “the   payee”,   through   Mr.   Subhasis   Kumar   Das,   General Manager (Accounting). The authorisation dated 23.05.2015 by the Managing Director in his favour (Annexure P­17) discloses that Mr. Priyabrata Panda, Managing Director of the appellant company had authorised Mr. Subhasis Kumar Das, General Manager   (Accounting)   to   institute   criminal   proceedings, including proceedings under the provisions of the N.I. Act and civil proceedings on behalf of the company against M/s. SMS Asia Private Limited (respondent), to represent the company and take all necessary actions in the matter in learned SDJM’s 14 Court. The specimen signature of Mr. Subhasis Kumar Das has also been attested by the Managing Director. The Managing Director apart from himself being the key managerial personnel of the appellant company, has also been delegated the power by   the   Board   of   Directors   through   the   document   dated 06.04.1998 (Annexure P­16). Through the said document the Managing Director has been delegated, in general, all powers necessary for the management and operation of the company and it has been specified among others, to exercise the power relating to important issues affecting the company’s land and property. Through the said document, the Managing Director is also empowered to delegate where necessary and to the extent required,   any   of   the   powers   delegated   to   him,   to   his subordinate   officers.   The   above   noted   documents   would disclose that the complaint under Section 138 NI Act was filed on behalf of the “payee” company with due authorisation. 12. The next aspect on which the High Court has interfered is on accepting the contention that there is no averment in the complaint as to whether the General Manager (Accounting) had any knowledge about the transaction or he was a witness to the   transaction.   On   the   said   aspect   it   is   noted   that   the 15 transaction   between   the   parties   is   based   on   the   agreement dated 18.07.2014 (Annexure P­1). The said document depicts, below   the   signature   of   the   executives   representing   the appellant and the respondent company, a witness each from either side have  appended  their signatures. The witness on behalf   of   the   appellant   company   is   none   other   than   Mr. Subhasis Kumar Das who was at that point in time, designated as General Manager (Commercial). Further, the document for reconciliation of account spanning the period from 01.04.2011 to 30.09.2014, as carried out on 28.10.2014, depicts that the same   was   attested   by   the   representatives   of   both   the companies.   The   appellant   company   is   represented   by   Mr. Subhasis   Kumar   Das.   That   apart,   when   the   cheques   were dishonoured,   it   was   Mr.   Subhasis   Kumar   Das,   General Manager (Accounting) who had issued the notices (Annexure P­ 11,   12­13)   on   behalf   of   the   appellant   company,   to   the respondent company. The said documents would indicate that the person  who  had  knowledge   of  the   transaction and  was witness   to   it,   has   been   authorized   and   has   instituted   the complaint on behalf of the company. 16 13. Apart   from   the   factual   aspects   as   stated   in   the complaint, relating to the transaction, the complaint as also the   affidavit   supporting   the   complaint   contain   averments regarding authorization in favour of and knowledge on the part of Mr. Subhasis Kumar Das, which read as hereunder: ­

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18 authorized   person,   being   a   witness   to   the   transaction   and having knowledge of the case had instituted the complaint on behalf of the “payee” company and therefore, the requirement of Section 142 of N.I. Act was satisfied. In  Vinita S. Rao vs. Essen Corporate Services (P) Ltd.  (2015) 1 SCC 527, to which one   of   us   (Hon’ble   CJI)   was   a   member   of   the   Bench   has accepted the pleading of such a nature to indicate the power to prosecute the complaint and knowledge of the transaction as sufficient to maintain the complaint. 15. Despite our conclusion that the documents available on record   would   on   facts   satisfy   the   requirement   relating   to delegation of power and also knowledge of the transaction by the person representing the Company in the instant case, it is also necessary for us to keep in perspective that though the case in  A.C. Narayanan  (supra) has taken the center stage of consideration,   the   facts   involved   therein   were   in   the background of the complainant being an individual and the complaint filed was based on the power of attorney issued by the “payee” who was also an individual. In such an event, the manner in which the power was being exercised was to be 19

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21 and empowered to represent the company either by a resolution or by a power of attorney. 16. Section 142 only requires that the complaint should   be   in  the   name   of  the   payee.   Where  the complainant is a company, who will represent the company and how the company will be represented in such proceedings, is not governed by the Code but   by   the   relevant   law   relating   to   companies. Section 200 of the Code mandatorily requires an examination   of   the   complainant;   and   where   the complainant is an incorporeal body, evidently only an employee or representative can be examined on its behalf, As a result, the company becomes a  de jure   complainant   and   its   employee   or   other representative,   representing   it   in   the   criminal proceedings,   becomes   the   de   facto   complainant. Thus in every complaint, where the complainant is an incorporeal body, there is a complainant – de jure, and a complainant­de facto.   Clause (a) of the proviso   to   Section   200   provides   that   where   the complainant   is   a   public   servant,   it   will   not   be necessary   to   examine   the   complainant   and   his witnesses. Where the complainant is an incorporeal body   represented   by   one   of   its   employees,   the employee   who   is   a   public   servant   is   the   de   facto complainant   and   in   signing   and   presenting   the complaint,   he   acts   in   the   discharge   of   his   official duties. Therefore, it follows that in such cases, the exemption   under   clause   (a)   of   the   first   proviso   to Section 200 of the Code will be available. 19.   Resultantly, when in a complaint in regard to dishonour of a cheque issued in favor of a company or corporation, for the purpose of Section 142 of the NI Act, the company will be the complainant, and for purposes of Section 200 of the Code, its employee   who   represents   the   company   or corporation, will be the   de facto   complainant. In such   a   complaint,   the   de   jure   complainant, namely, the company or  corporation  will  remain the same but the de facto complainant (employee) representing such de jure complainant can change, from time to time.  And if the  de facto  complainant is a public servant, the benefit of exemption under clause 22

23 payee, the authorisation therefor and that the contents of the complaint   are   within   his   knowledge.   When,   the complainant/payee is a company, an authorized employee can represent   the   company.   Such   averment   and   prima   facie material   is   sufficient   for   the   learned   Magistrate   to   take cognizance and issue process. If at all, there is any serious dispute with regard to the person prosecuting the complaint not being authorized or if it is to be demonstrated that the person   who   filed   the   complaint   has   no   knowledge   of   the transaction and, as such that person could not have instituted and prosecuted the complaint, it would be open for the accused to   dispute   the   position   and   establish   the   same   during   the course of the trial. As noted in  Samrat Shipping Co. Pvt. Ltd. (supra),   dismissal   of   a   complaint   at   the   threshold   by   the Magistrate   on   the   question   of   authorisation,   would   not   be justified.   Similarly,   we   are   of   the   view   that   in   such circumstances   entertaining   a   petition   under   Section   482   to quash the order taking cognizance by the Magistrate would be unjustified   when   the   issue   of   proper   authorisation   and knowledge can only be an issue for trial.  24

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..…………....................CJI.        (N.V. RAMANA) …..…………....................J. (A. S. BOPANNA)  .…..………......................J.        (HIMA KOHLI) New Delhi; February 22, 2022 26