Supreme Court upheld the validity of complaints filed by authorized representatives under Section 138 of the NI Act, emphasizing that issues of authorization and personal knowledge must be determined during trial and cannot be grounds for premature dismissal.
The Supreme Court Bench of Justice B.R. Gavai and Justice K.V. Viswanathan addressed an appeal on Thursday and held that an authorized representative of a company may validly file a complaint under Section 138 of the NI Act, provided the complaint and supporting affidavits demonstrate the representative's authorization and personal knowledge of the transaction. Any deficiencies in such claims are matters for trial and cannot serve as grounds for quashing proceedings at the threshold.
The Supreme Court addressed an appeal challenging the judgment of the Allahabad High Court, which had quashed a summoning order and associated proceedings under Section 138 of the Negotiable Instruments Act, 1881. The appellant, M/s Naresh Potteries, alleged that M/s Aarti Industries, represented by Sunita Devi, had issued a dishonoured cheque for ₹1,70,46,314 for goods supplied. Despite a legal notice, the respondent failed to make payment, prompting the initiation of criminal proceedings by the appellant's manager and authorized representative, Neeraj Kumar. The trial court found sufficient grounds to summon Sunita Devi. However, the High Court quashed the summoning order, reasoning that the appellant’s authorized representative lacked personal knowledge of the case.
The appellant contended before the Supreme Court that the High Court had misinterpreted the law and facts. Referring to precedents, including Shankar Finance and Investments v. State of Andhra Pradesh and Others, REEDLAW 2008 SC 06001 and A.C. Narayanan v. State of Maharashtra and Another, REEDLAW 2013 SC 09001 the appellant argued that an authorized representative’s sworn statements were sufficient for prima facie satisfaction under Section 200 of the Code of Criminal Procedure, 1973. The Supreme Court considered the interplay between Sections 138 and 142 of the Negotiable Instruments Act, 1881, and Sections 200 and 145 of the Cr.P.C., emphasizing that the Magistrate has discretion in requiring the complainant’s personal presence for examination.
The Court clarified that complaints filed by the power of attorney holders or authorized representatives are permissible under Section 138 of the NI Act, provided the representative has personal knowledge of the transaction or adequately states such knowledge in supporting affidavits. In corporate contexts, complaints by authorized employees with requisite knowledge meet the requirements of Section 142, as reiterated in TRL Krosaki Refractories Limited v. SMS Asia Private Limited and Another, REEDLAW 2022 SC 02005. The Supreme Court underscored that the threshold for taking cognizance should not be conflated with issues of authorization or knowledge, which are matters to be examined during trial.
In this case, the Court found that the appellant had complied with procedural requirements, and the supporting documents sufficiently established Neeraj Kumar's authority and knowledge of the transaction. The High Court's decision to quash the proceedings at the threshold was deemed premature and erroneous. Consequently, the Supreme Court set aside the High Court’s order, reaffirming that questions of authorization and knowledge are trial matters and should not preclude the initiation of proceedings under the NI Act.
Mr. Navin Pahwa, Senior Advocate, represented the appellant.
Mr. Shailesh Sharma, Advocate, appeared for the Respondent No. 2.
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