Authorised Representative Without Direct Knowledge Of Transaction Can't Sustain Cheque Bounce Case: Kerala High Court

The Kerala High Court recently held that a company that prefers a complaint for cheque dishonour can be represented by a power of attorney holder only if he/she witnessed the transaction or had direct knowledge of it.

Justice P.V. Balakrishnan observed:

“The company, being a juristic person, cannot act on its own and it must necessarily function through a human agency. A company is competent to initiate proceedings under Section 138 of NI Act and it can do so, through an authorised person. Even though, a power of attorney holder, being an authorised representative of the company, can file a complaint and give evidence, he must have either witnessed the transaction or must possess direct knowledge of the transaction.”

The Court was considering a revision petition challenging the concurrent finding of guilt under Section 138 of the Negotiable Instruments Act rendered by the trial court and the appellate court.

The petitioners/accused are a private limited company and its directors while the complainant is also a company. The accused company purchased cement from complainant company and issued a cheque of Rs. 8,71,695/- to discharge the liability. However, the cheque, on presentation, got dishonoured for insufficiency of funds. The complainant company then preferred a complaint under Section 138 NI Act.

The trial court convicted the accused and sentenced the accused company to pay of fine of Rs. 5000.-. It also sentenced the individuals arrayed as accused to undergo simple imprisonment for three months and to pay a sum of Rs. 8 lakhs each to the complainant as compensation. An appeal was filed but the same was dismissed. Then they came before the High Court in revision.

The petitioners/accused submitted that the complaint before the trial court was filed by a power of attorney holder of the company but the power of attorney was not submitted. It was also argued that neither the power of attorney holder nor any of the witnesses examined by the complainant had direct knowledge regarding the execution of the cheque or the transaction. Therefore, it was contended that even the initial onus cast regarding execution of cheque has not been discharged.

The Court noticed that the complainant company did not produce the power of attorney authorising its holder to represent the company to prosecute the case. Moreover, when the power of attorney holder was examined, he had deposed that he was not fully aware of the transactions in the case and he was giving evidence as per the documents gathered. He also told that he cannot identify the handwriting of the person who issued the cheque.

It was further noted that since neither of the witnesses examined by the complainant had direct knowledge of the transaction, the presumptions under Sections 118 and 139 in favour of holder that the cheque was in drawn for valid consideration would not arise.

“A person, who only became associated with the company after the transaction and who relies purely on records, cannot prove the execution of the cheque or the transaction. It is to be kept in mind that merely because the complainant is a juristic entity, it will not dilute the rigour of proof required for proving the execution of the cheque and the execution cannot be presumed merely on the production of a cheque…The presumptions under Sections 118 and 139 of the NI Act will arise only after the execution of the cheque is proved and if the complainant's witness has no direct knowledge or did not witness the execution, the prosecution will fail at the threshold itself and there will be no burden upon the accused to rebut anything,” the Court added.

The Court thus allowed the petition and set aside the conviction of the petitioners.

Case No: Crl.R.P. No. 541 of 2017

Case Title: Pattasseril Private Ltd. and Ors. v. State of Kerala and Anr.

Citation: 2026 LiveLaw (Ker) 72

Counsel for the petitioners: Varghese C. Kuriakose

Click to Read/Download Judgment