Negotiable Instruments Act – Complaint by Authorized Manager Valid; Quashing by High Court Set Aside
Case Name: M/s Naresh Potteries v. M/s Aarti Industries & Another
Citation: Criminal Appeal (arising out of SLP (Crl.) No. 8659 of 2023); 2025 INSC 1
Date of Judgment: 2 January 2025
Bench: Justice B.R. Gavai and Justice K.V. Viswanathan
Held: The Supreme Court held that a complaint under Section 138 of the Negotiable Instruments Act, 1881, filed in the name of the payee company through its duly authorized manager, satisfies the requirements of Section 142 of the Act. It ruled that the High Court erred in quashing the summoning order on the ground that the power-of-attorney holder did not have personal knowledge of the transaction. Once the complaint is filed in the name of the payee and supported by proper authorization and averments of knowledge, the Magistrate is competent to take cognizance.
Summary: The appellant supplied polymer insulator scrap material worth ₹1.70 crore to the respondent, which issued a cheque dated 10 July 2021 that was dishonoured for “exceeds arrangement.” A statutory notice under Section 138 NI Act was served, but the amount remained unpaid. The appellant’s manager, Neeraj Kumar, authorized by a letter of authority from the proprietor, filed Complaint No. 701 of 2021 before the Additional Chief Judicial Magistrate, Khurja, who on 22 November 2021 summoned the respondent to face trial. The Allahabad High Court, however, quashed the summoning order, holding that the manager lacked personal knowledge of the transaction, relying on A.C. Narayanan v. State of Maharashtra (2014).
The Supreme Court referred to National Small Industries Corporation Ltd. v. State (NCT of Delhi) (2009), A.C. Narayanan (2014), and TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd. (2022), to clarify that when the complainant is a company or proprietary concern, it can act through an authorized representative who has knowledge of the transaction. It emphasized that explicit averments of authorization and knowledge in supporting documents are sufficient at the summoning stage, and disputes about authorization or knowledge can be tested at trial. The Court criticized the High Court for adopting a perfunctory approach and misapplying the law, thereby stifling a legitimate prosecution.
Decision: The Supreme Court allowed the appeal, set aside the Allahabad High Court’s judgment dated 12 April 2023 in Criminal Misc. Application No. 29906 of 2022, and restored Complaint Case No. 701 of 2021 before the trial court for adjudication on merits. It reaffirmed that complaints filed by authorized representatives of companies or firms under Section 138 NI Act are valid, and threshold quashing under Section 482 CrPC is unwarranted in such cases.