Sc Sets Terms For Complaints Against Invalid Cheque
The Supreme Court ruled today that any person competent to represent a company can file a complaint against the drawer of an invalid cheque.
It need not be the company itself nor its executive director, as held by the Madras High Court.
The bench headed by Justice S N Variava clarified this question regarding dishonoured cheques under the Negotiable Instruments Act, while setting aside the high court judgment in an appeal moved by MMTC Ltd.
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The high court had quashed the complaints of MMTC holding that only an executive director of the company had the authority to institute legal proceedings.
It further maintained that in this case the board of directors had not authorised the senior manager or the deputy general manager to file the complaint on behalf of the company.
The Supreme Court stated that the high court was wrong. Section 142 provided that a complaint could be made by the payee or the holder in due course of the cheque.
Though a company is a person, it has to be represented by a human being. It could be any competent person, and such person can also be changed with the permission of the court.
On some other counts also, the Supreme Court found the high court wrong. The high court had quashed the complaint at the threshold itself. The apex court said that the high court should not have done so by going into the merits of the case at the preliminary stage itself. "The inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim and caprice," the judgment emphasised.
The high court, at the preliminary stage, cannot decide whether the cheque was issued in discharge of debt or liability. It should also not decide whether the payment was made because of 'stop payment' instruction or due to insufficiency of funds. Therefore, the Supreme Court directed the Chennai magistrate to proceed with the complaints moved by MMTC against the drawer of the cheque, a pharmaceutical company.