Section 142 NI Act | Improper to Dismiss or Quash Cheque Dishonour Complaint of Company at Threshold on Question of Authorisation: Supreme Court

Understanding Section 142 NI Act in Corporate Complaints

On January 2nd The Supreme Court recently underscored the critical role of Section 142 of the NI Act in cheque dishonor cases involving companies. This section ensures that complaints are filed only by individuals with proper authorisation and knowledge of the transaction, safeguarding legal processes against procedural lapses.

Main Issue : Whether the complaint filed by the appellant under Section 138 of the NI Act was in accordance with the requirement under Section 142 of the NI Act.

Supreme Court Clarifies Section 142 NI Act: Cheque Dishonour Complaints of Companies Cannot Be Dismissed at Threshold Over Authorisation Issues

Key Observations:

The Bench of Honourable Justice B.R. Gavai and Honourable Justice K.V. Viswanathan further highlighted that the accused could raise a dispute regarding the authorisation of the complainant and knowledge of the relevant transaction during the course of the trial. However, dismissal or quashing of the complaint at the threshold would not be justified. Reliance was placed on several cases including A.C. Narayanan v. State of Maharashtra and Another.

The Appellant Firm issued a Letter of Authority appointing Neeraj Kumar, manager and caretaker, to file the complaint and handle the case. Neeraj Kumar, in his affidavit under Section 200 of the CrPC, stated that he was familiar with the facts and circumstances of the case. Based on this, the trial court issued a summons to the respondent firm. The respondent, however, challenged the summons in the High Court, arguing that Kumar lacked knowledge of the transaction. The High Court agreed and quashed the summons, prompting the case to move to the Supreme Court.

Relevant Precedents :

The Court also referred to M.M.T.C. Ltd. v. Medchl Chemicals & Pharma P. Ltd. and Janki Vashdeo Bhojwani v. IndusInd Bank Ltd., where the Apex Court clarified that a power of attorney holder, if personally aware of the transactions, can file the complaint and testify as a witness.

It was also emphasized that filing a complaint under Section 138 through a power of attorney holder is legal, provided the holder is aware of the transaction or was an agent of the payee/holder in due course.

Conclusion :

In this case, the Court concluded that the complaint complied with the requirements of Section 142, as the power of attorney holder, Kumar, had personal knowledge of the matter. The Court rejected the High Court's decision to quash the case, stating that the reasoning was flawed and lacked careful consideration.

The Court set aside the impugned judgment and directed the case to be heard on its merits.

Case Title:

M/S Naresh Potteries v. M/S Aarti Industries and Another

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