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M/s TRL Krosaki Refractories Ltd. vs. M/s SMS Asia Private Limited & Anr.

Criminal Appeal · 2022 INSC 214Decided 22 Feb 2022
Criminal Appeal No. 270 of 2022
N.V. Ramana · A.S. Bopanna · Hima Kohli

Background

SMS Asia Private Limited had issued seven cheques worth about Rs. 1.10 crore to TRL Krosaki Refractories Ltd., which were dishonoured for "account closed." TRL Krosaki filed a criminal complaint for cheque bounce under Section 138 of the Negotiable Instruments Act through its General Manager (Accounting), and a magistrate took cognizance and issued summons. SMS Asia approached the Orissa High Court, arguing the complaint was invalid because the company's representative was not properly shown to be authorized or to have personal knowledge of the transaction, and the High Court quashed the criminal proceedings on that basis, relying on an earlier Supreme Court judgment (A.C. Narayanan). TRL Krosaki appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that Section 142 of the NI Act only requires that the complaint be filed in the name of the payee: here, the company itself was the payee, so the requirement was met. It clarified that a company, being an artificial legal entity, can only act through a human representative, and it is sufficient if the complaint and sworn statement show that the person representing the company is authorized and has relevant knowledge of the transaction; the strict standard from A.C. Narayanan (which concerned individuals acting through a power of attorney) does not apply in the same way to corporate complainants. On the facts, the Court found the General Manager was a witness to the underlying agreement, had signed the reconciliation statement, sent the dishonour notice, and held written authorization from the Managing Director: more than sufficient to proceed. It held that any genuine dispute about authorization or knowledge should be tested during trial, not used to quash the complaint at the threshold, and restored the original criminal proceedings with a direction for expeditious trial, also awarding costs of Rs. 1,00,000 against the respondent.

Lesson Learnt

When a company is the victim of a bounced cheque, a criminal complaint filed on its behalf by an authorized employee with genuine knowledge of the transaction is valid, and courts should not quash such cases at a preliminary stage over technical authorization objections: those disputes belong at trial.

Official source (sci.gov.in)View Judgment (PDF)

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