DISHONOR OF CHEQUE

Bhupesh Rathod (Appellant) vs. Dayashankar Prasad Chaurasia & Anr. (Respondents) (Supreme Court) (10^th November, 2021)

Legal Provision:

Section 138(b) state that the payee or the holder in due course of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.

Section 142(a) state that no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque.

Brief facts:

• Dayashankar Chaurasia, the respondent issued eight cheques of totalling to Rs.1,60,000/- in favour of M/s. Bell Marshall Telesystems Limited. All the cheques got dishonoured on account of “funds insufficient”.

• Legal notices were issued by the beneficiary under Section 138(b) of the Negotiable Instruments Act, 1881.

• The respondent took an objection that the complaint was filed in the personal capacity of Managing Director and not on behalf of the Company.

• The trial court dismissed the complaint, on appeal the HC also dismissed the complaint on the principal ground that it could not be said that the complaint had been filed by a payee or holder in due course as mandated under Section 142(a) of the Negotiable Instrument Act, 1881

Decision:

Managing director can file a suit in his name for the cheques dishonoured to the company.

Reason:

SC referred to a prior judgment of the Supreme Court in Associated Cement Co. Ltd. v. Keshavanand, If a complaint was made in the name of the Company, it is necessary that a natural person represents such juristic person in the court and the court looks upon the natural person for all practical purposes. It is in this context that observations were made that the body corporate is a de jure complainant while the human being is a de facto complainant to represent the former in the court proceedings. Not only that, even if there was initially no authority, the Company can at any stage rectify that defect by sending a competent person. The aforesaid judgment was also taken note of in a subsequent judgment of this Court in M.M.TC Ltd. & Anr. v. Medchl Chemicalsand Pharma (P) Ltd. & Anr.

Supreme Court was, thus, of the view that both the impugned orders of the trial court and the High Court are required to be set aside. The finding is, thus, reached that the complaint was properly instituted and the respondent failed to disclose why he did not meet the financial liability arising to a payee, who is a holder of a cheque in due course.