Judicial Dictionary

Payee – proprietary concern[NI Act]

Advocatetanmoy Judicial Dictionary

Section 142 provides for taking cognizance of the offence notwithstanding anything contained in Code of Criminal Procedure which reads as under:

(a) 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.

Negotiable Instruments Act, 1881—Sections 138 and 142—Criminal Procedure Code, 1973—Order 3 Rule 1, Order 3 Rule 2 and Sections 190, 200.

Supreme Court in Shankar Finance and Investments v. State of Andhra Pradesh and Ors., (2008) 8 SCC 536, dealt with the issue involved herein elaborately and held that where the “payee” is a proprietary concern the complaint can be filed (i) by the proprietor of the proprietary concern describing himself as the sole proprietor of the “payee”; (ii) the proprietary concern describing itself as the sole proprietary concern represented by its proprietor; and (iii) the proprietor or the proprietary concern represented by the Attorney Holder under the power of attorney executed by the sole proprietor. However, it shall not be permissible for an Attorney Holder to file the complaint in his own name as if he was the complainant. He can initiate criminal proceedings on behalf of the principal.

In a case of this nature, where the “payee” is a company or a sole proprietary concern, such issue cannot be adjudicated upon taking any guidance from Section 142 of the Act 1881 but the case shall be governed by the general law i.e. the Companies Act 1956 or by civil law where an individual carries on business in the name or style other than his own name. In such a situation, he can sue in his own name and not in trading name, though others can sue him in the trading name. So far as Section 142 is concerned, a complaint shall be maintainable in the name of the “payee”, proprietary concern itself or in the name of the proprietor of the said concern.

The Court placing reliance on earlier judgments, particularly, in Janki Vashdeo Bhojwani v. Indusind Bank Ltd., (2005) 2 SCC 217, held that the general principles of company law or civil law would apply for maintaining the complaint under Section 138 of the Act 1881.

In National small Industries Corporation Ltd. v. State (NCT of Delhi) and Ors., (2009) 1 SCC 407, this Court held as under:

The term “complainant” is not defined under the Code. Section 142 of the NI Act requires a complaint under Section 138 of that Act to be made by the payee (or by the holder in due course)….

Thus, in view of the above, the law stands crystallised to the effect that a person can maintain a complaint provided he is either a “payee” or “holder in due course” of the cheque.

In MMTC Ltd. vs. MEDCHL Chemicals and Pharma (P) Ltd., (2002) 1 SCC 234, a complaint was filed by MMTC Ltd. through the Manager of its Regional Office. Subsequently, the Manager was substituted by Dy. General Manager who was duly authorized. The High Court held that the complaint was not maintainable as it was signed and presented by a person, who was neither an authorized agent nor a person empowered under the articles of association or by any resolution of the Board to do so. It held that only the Executive Director of MMTC Ltd. had the authority to institute legal proceedings. Reversing the said decision, this Court held :

“In our view the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that a complaint under section 138 can be made by the payee or the holder in due course of the said cheque. The two complaints, in question, are by the appellant-company who is the payee of the two cheques. This Court has as far back as in the case of Vishwa Mitter v. O.P. Poddar, (1983) 4 SCC 701, held that it is clear 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 has been held that no court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the complainant requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the Statute. In the present case, the only eligibility criteria prescribed by Section 142 is that the complaint must be by the payee or the holder in due course. This criteria is satisfied as the complaint is in the name and on behalf of the appellant-company.”

(Emphasis supplied)

Referring to the decision in Associated Cement Co. Ltd. v. Keshvanand (1998) 1 SCC 687), this Court held :

“It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission of the court for sending any other person to represent the company in the court. Thus, even presuming that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground.”

[Milind Shripad Chandurkar- AIR 2011 SC 1588 : (2011) CriLJ SC 1912 : JT 2011 (3) SC 138 : (2011) 3 SCALE 285 : (2011) 4 SCC 275 : (2011) 2 SCC (Cri) 208]

Bouncing of Cheque under Negotiable Instrument Act, 1881