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Suits and Criminal Complaints By and Against a Company

Created: 07 Jul 2024 at 23:29

Saji Koduvath, Advocate, Kottayam

Key Takeaways

  • Company is a Juristic Person.
  • It can sue and be sued in its own name.
  • A natural person has to represent the Company.
  • Proper authorisation is essential for signing a plaint.
  •  A person may be authorised to sign pleadings by a resolution.
  • Procedural defects should not be permitted to defeat a just cause.
  • Secretary or any Director or other Principal Office can sign pleadings.
  • Any Authorised Person Can Continue the proceedings for the Company.
  • A person may be authorised to sign pleadings by a power of attorney also.
  • If pleadings were signed by officers, a Company can ratify it; impliedly also.
  • Even if there was initially no authority, the Company can rectify that defect ‘by sending a competent person’.

Suits by a Company

Company is a Juristic Person. Under Order 29 Rule 1 of the CPC, Secretary or any Director or other Principal Officer of a Company can sign pleadings by virtue of his office.

A Company can ratify the act of signing the pleading, also.

It is held by our Apex Court in United Bank of India Vs. Naresh Kumar, AIR 1997 SC 3 that a Court can, after taking all the circumstances of the case, come to the conclusion that the Company must have ratified the act of signing the pleading. It is pointed out that the courts below must have, in any case, directed the company to produce a proper power of attorney, or they must have allowed a competent person to be examined to prove the apparent ratification. The Court’s own words in United Bank of India Vs. Naresh Kumar, AIR 1997 SC 3, read as under:

  • “10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement or its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. ”

In a subsequent decision, in State Bank of Travancore Vs. Kingston Computers, 2011-11 SCC 524, it is held by our Apex Court as under:

  • “14. In our view, the judgment under challenge is liable to be set aside because the Respondent had not produced any evidence to prove that Shri Ashok K. Shukla was appointed as a Director of the company and a resolution was passed by the Board of Directors of the company to file suit against the Appellant and authorized Shri Ashok K. Shukla to do so. The letter of authority issued by Shri Raj K. Shukla, who described himself as the Chief Executive Officer of the company, was nothing but a scrap of paper because no resolution was passed by the Board of Directors delegating its powers to Shri Raj K. Shukla to authorise another person to file suit on behalf of the company.”

In this decision (of Kingston Computers) there had been no scope to ponder on the doctrines as to ‘technical or procedural defects’ (as done in the earlier decision in Naresh Kumar, AIR 1997 SC 3). The decision, in Kingston Computers may be distinguishable from Naresh Kumar on the ground that there was no evidence in Kingston Computers to show that the signatory was a Director of the Company, and no resolution of the Board of Directors was produced to prove that the signatory was authorised to file the suit.

See Blogs:

A De Facto Complainant to Represent the Company in Criminal Proceedings

Pointing out that a complaint can be filed in the name of a juristic person because it is also a person in the eye of law, it is observed in Associated Cement Co. Ltd. v. Keshavanand, 1998-1 SCC 687: AIR 1998 SC 596, as under:

  • “Section 200 (CrPC) as the starting provision of that chapter (Chapter XV) enjoins on the magistrate, who takes cognizance of an offence on complaint, to examine the complainant on oath. Such examination is mandatory as can be discerned from the words ‘shall examine on oath the complainant…’ The magistrate is further required to reduce the substance of such examination to writing and it ‘shall be signed by the Complaint’. ….. The above scheme of the new Code makes it clear that complainant must be a corporeal person who is capable of making physical presence in the court. Its corollary is that even if a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a natural person represents such juristic person in the court and it is that natural person who is looked upon, for all practical purposes to be the complainant in the case. In other words, when the component to a body corporate it is the de jure complainant, and it must necessarily associate a human being as de facto complainant to represent the former in court proceedings.”

Proper authorisation is essential for signing a plaint

Proper authorisation is essential for signing a plaint on behalf of a Company.  Though, the Secretary or any Director or other Principal officer can sign pleadings by virtue of their office, as per Order 29 Rule 1 of the CPC, the view taken in some decisions was that neither the directors nor the managing director would have the right to represent the Company, in a suit unless they were duly authorised by a resolution taken by the Board of Directors at a meeting duly constituted for the said purpose. B. Mookerjee Vs State Bank of India: AIR1992 Cal 250; Nibro Limited Vs National Insurance Co:  AIR 1991  Del 25.

The Delhi High Court, in Nibro Limited Vs. National Insurance Company Ltd., AIR 1991 Delhi 25 (Quoted in: United India Periodicals Pvt. Ltd.  Vs. CMYK Printech Ltd.: 2018-248 DLT 227), it is observed, with regard to the source of power of the Directors, as under:

  • “25. It is well-settled that under Section 291 of the Companies Act except where express provision is made that the powers of a company in respect of a particular matter are to be exercised by the company in general meeting-in all others cases the Board of Directors are entitled to exercise all its powers. Individual directors have such powers only as are vested in them by the Memorandum and Articles. It is true that ordinarily the court will not unsuit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far-reaching effects. It often affects policy and finances of the company. Thus, unless a power to institute a suit is specifically conferred on a particular director, he has no authority to institute a suit on behalf of the company. Needless to say that such a power can be conferred by the Board of Directors only by passing a resolution in that regard.”

It was observed by in Nibro Limited that a director or a secretary of a Company could certainly give the authority to institute a suit to another person, as provided under Order III Rule 1 CPC, if the director or secretary was authorised by law to file a suit on behalf of the company.

Order III Rule 1 provides that ‘any appearance, application or act in or to any Court, required or authorised by law to be made or done by a party in such Court, may, except where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his recognised agent, or by a pleader appearing, applying or acting, as the case may be, on his behalf. Provided, that any such appearance shall, if the Court so directs, be made by the party in person’. 

If an authority is given to a pleader or a recognised agent, under Order III Rule 1, that recognised agent or pleader can, certainly, file an appearance as authorised.

The Bombay High Court, in Alcon Electronics Pvt. Ltd Vs. Celem (2015), 2015-1MhL852, observed, with respect to the source of power of the Directors, as under:

  • “The essential requirement of this provision is that the Company which is a juristic person must itself decide to sue. Once that is done, it would authorise one of its Directors who is the agent of the Company or its principal officers the Secretary of the Company or the Managing Director to file the Suit. The suing in each case is a separate act. The Company acts only through its meetings. Hence the Board of Directors in the day to day management of the company must decide and resolve to sue or not to sue. A blanket authority cannot be given to a particular Managing Director or Director to sign the papers and document/s, including the power to sue. The power to sue requires application of mind upon the particular cause of action. It requires the Company to pay the requisite Court fee. It requires the Company to be represented by a legal officer being an Advocate of the Court. It is an act which, therefore, is not a part of the day to day management of the Company. A Company would decide in a given case upon legal advice or otherwise whether or not it would sue upon a given cause of action. Such exercise is imperatively required to be performed if the intention of the Company, which is only a juristic person, is to be deciphered. That act, of course, may be undertaken even after the filing of the Suit and ratified by the Board as all other acts of management. However, the seminal requirement is to see the act of the Company though its Board or members (dependent upon whether the resolution is passed in the Board meeting or a general meeting) or is given by the Company itself (under its Articles of Association).”

The Delhi High Court pointed out in Radico Khaitan Limited Vs. JD Wines (2020), 2020-2 AD(Del)  421, that the impropriety, if any, in signing the pleadings by the officers of a Company can be ratified.

Even if Initially No Authority, the Company can Rectify the Defect

A Company being a juristic entity, Board of Directors can authorise any person to sign pleadings, by passing a resolution or giving a power of attorney, by virtue of Order 6 Rule 14 read with Order 29 Rule 1 CPC. If pleadings have been signed by one of its officers, the Company can ratify it. Such ratification can be express or implied.

In Parmeshwari Prasad Gupta Versus Union of India AIR 1973 SC 2389 (See also: Punjab University Vs. VN Tripathi: AIR 2001 SC 3672), it is held by Our Apex Court that the ratification would relate back to the date of the act ratified.

It is held in United Bank of India Vs. Naresh Kumar, AIR 1997 SC 3, as under:

  • “In absence thereof and in cases where pleadings have been signed by one of its officers, a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer.”

In Bhupesh Rathod v. Dayashankar Prasad Chaurasiya, (2022) 2 SCC 355, held as under:

  • “Not only that, even if there was initially no authority, the Company can at any stage rectify that defect by sending a competent person.”

Effect of Complaint in the name of MD followed by the post (MD)

In Bhupesh Rathod v. Dayashankar Prasad Chaurasiya, (2022) 2 SCC 355, in a Criminal Complaint under Sec. 138 of the NI Act, name of the Managing Director was stated first followed by the post (Managing Director) he held in the Company. An affidavit was filed by the Managing Director stating that the Company had authorised him to file the complaint. A copy of the Board Resolution was also presented. In the body of the complaint it was not stated that he was the MD. The respondent contended that the complaint was filed in the personal capacity not on behalf of the Company. It is pointed out in Bhupesh Rathod v. Dayashankar Prasad Chaurasia that there cannot be a fundamental defect merely because the name of the Managing Director was stated first; and that the format itself cannot be said to be defective though it may not be perfect (The Apex Court followed: Associated Cement Co. Ltd. v. Keshavanand, (1998-1 SCC 687: AIR 1998 SC 596).

The Supreme Court held as under:

  • “The body of the complaint need not be required to contain anything more in view of what has been set out at the inception coupled with the copy of the Board Resolution.”
  • “It would be too technical a view to take to defeat the complaint merely because the body of the complaint does not elaborate upon the authorisation. The artificial person being the Company had to act through a person/official, which logically would include the Chairman or Managing Director. Only the existence of authorisation could be verified.”

Our Apex Court explained that a Manager or a Managing Director ordinarily by the very nomenclature can be taken to be the person in-charge of the affairs Company for its day-to-day management and within the activity would certainly be calling the act of approaching the court either under civil law or criminal law for setting the trial in motion.

Any Authorised Person Can Continue the proceedings for the Company

It is observed in Associated Cement Co. Ltd. v. Keshavanand, 1998-1 SCC 687: AIR 1998 SC 596, as under:

  • “Be that so, we suggest as a pragmatic proposition 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. There may be occasions when a different person can represent the company e.g. the particular person who represents the company at the first instance may either retire for, the company’s service or may otherwise cease to associate therewith or he would be transferred to a distant place. In such cases it would be practically difficult for the company to continue to make the same person represent the company in the court. In any such eventuality 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.” (Referrd to in Bhupesh Rathod v. Dayashankar Prasad Chaurasiya, 2022-2 SCC 355)

Procedural Defects Should Not Defeat a Just Cause

It is trite law that one should not be non-suited for technical reasons, and that the procedural defects or procedural irregularities which are curable, or which do not go to the root of the matter, should not be permitted to defeat a just cause. (United Bank of India Vs. Naresh Kumar: AIR 1997 SC 3; Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh: AIR  2006 SC 269; VarunPahwa Vs. Mrs. RenuChaudhary: AIR  2019 SC 1186: 2019-3 JT 109.) 

It is pointed out in United Bank of India Vs. Naresh Kumar, AIR 1997 SC 3, by our Apex Court that there is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case.

Cheque Dishonour Case against a Company, Firm or Society

Sec. 141 of the NI Act is the relevant provision. It reads as under:

  • 141 Offences by companies — (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
  • Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:
  • Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
  • (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
  • Explanation.— For the purposes of this section,—
  • (a) “company” means any body corporate and includes a firm or other association of individuals; and
  • (b) “director”, in relation to a firm, means a partner in the firm.

Following are clear from Sec. 141 of the NI Act-

  • Company, Firm and Society are treated alike (under Sec. 141).
  • A partner in a firm or Governing Body member in a Society is treated like a director in a Company.
  • Every person (director, partner or Governing Body member) who, at the time the offence was committed, was in charge of, and was responsible (to the company, firm or society for the conduct of its business), shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
  • Apart from the director, partner or Governing Body member, the company, firm or society shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
  • The company, firm or society shall be a necessary party.
  • If the director, partner or Governing Body member proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence, such person will not be liable to punishment.
  • The nominated Director of a Government  company or a financial corporation shall not be liable for prosecution.
  • If the offence has been committed by a company, firm or society and it is proved that the offence has been committed with the consent or connivance of any any director, manager, secretary or other officer, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished.

Relevant Decisions

  • Pawan Kumar Goel v. State of U.P., (2022) SCC OnLine SC 1598,
  • Sunita Palita v. Panchami Stone Quarry, 2022 SC OnLine SCC 945,
  • Secretary to Govt of Kerala v. james Varghese, (2022) 9 SCC 593,
  • S.P. Mani v. Dr. Snehalatha Elangovan, (2022) SCC Online SC 1238,
  • Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152
  • P. Saravana Kumar v. S.P. Vijaya Kumar, (2022) SCC Online Mad 1387,
  • P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC 258,
  • Dr. Shah Faesal v. Union of India, (2020) 4 SCC 1,
  • Peerless General Finance v. Commissioner of IT, (2020) 18 SCC 625,
  • Surinder Singh Deswal v. Virender Gandhi (2020) 2 SCC 514,
  • G.J. Raja v. Tejraj Surana (2019) 19 SCC 469,
  • Surinder Singh Deswal v. Virender Gandhi (2019) 11 SCC 341,
  • Nandkishor Prallhad Vyvhare v. Mangala, (2018) 3 MhLJ 913,
  • Rodger Shashoua v. Mukesh Sharma, (2017) 14 SCC 1,
  • Eerra Through Dr. Manjula v. State (NCT of Delhi), (2017) 15 SCC 133,
  • South Central Railway Employees Coop. Credit Society v. B. Yashodabai (2015) 2 SCC 727,
  • Rathod v. State of Maharashtra, (2014) 9 SCC 129,
  • Pooja Ravinder Devidsani v. State of Maharashtra, (2014) 16 SCC 1,
  • Sundeep Kumar Bafna v. State of Maharashtra, (2014) 16 SCC 623,
  • Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., (2012) 5 SCC 661,
  • Hada v. Godfather Travels & Tours, 2012-5 SCC 661,
  • National Small-Scale Industries v. Harmeet Singh, (2010) 3 SCC 330,
  • K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48,
  • N. Harihara v. J Thomas, (2008) 13 SCC 663,
  • Maruti Udyog Ltd. v. Ram Lal, (2005) 2 SCC 638,
  • S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) SCC 89,
  • S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 4 SCC 70,
  • Oriental Insurance Co. Ltd v. Meena Variyal, (2007) 5 SCC 428,
  • Steel Authority of India v. National Union Waterfront, (2001) 7 SCC 1,
  • Special Officer , Urban Land Ceilings v. P.S. Rao, (2000) 2 SCC 451,
  • Nedungadi Bank Ltd. v. K.P. Madhavankutty, (2000) 2 SCC 455.

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