Authorised Representative Without Personal Knowledge Cannot Sustain Cheque Bounce Prosecution: Kerala High Court

Posted On - 2 April, 2026 • By - K. Vidya

Introduction

Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) criminalises the dishonour of cheques issued in discharge of a legally enforceable debt or liability. Over time, courts have clarified that strict compliance with procedural and evidentiary requirements is essential, particularly where the complainant is a juristic entity acting through authorised representatives.

In Pattasseril Private Ltd. & Ors. v. State of Kerala & Anr. (2026)1, the Kerala High Court, in a criminal revision petition2, set aside the conviction of a company and its directors under Section 138 NI Act. The Court held that a complaint filed through a power-of-attorney holder is sustainable only where such representative has personal knowledge of the transaction or has witnessed the relevant facts.

Statutory Framework

Ingredients of an Offence under Section 138 NI Act

Section 1383 is attracted where:

  • A cheque is issued in discharge of a legally enforceable debt or liability;
  • The cheque is presented within its period of validity;
  • The cheque is returned unpaid (e.g., for insufficiency of funds or exceeding arrangement); and
  • The drawer fails to make payment within 15 days of receipt of statutory notice.

Further, under Section 142 NI Act, cognisance can be taken only upon a written complaint by the payee or holder in due course.

Factual Background

  • Associated Cement Companies Ltd. (complainant) supplied cement to Pattasseril Private Ltd.
  • To discharge outstanding liability, the accused company issued a cheque dated 21 August 2001 for ₹8,71,695 drawn on Canara Bank, Kadavanthra branch.
  • Upon presentation, the cheque was dishonoured due to insufficiency of funds.
  • A statutory demand notice was issued, but payment was not made.

The complaint was filed before the Judicial First Class Magistrate-II, Ernakulam, through a Senior Manager acting as power-of-attorney holder.

  • The Trial Court convicted the company and its directors under Section 138;
  • The Appellate Court upheld the conviction (2017);
  • The accused filed a criminal revision before the High Court.

Issues

The High Court considered:

  • Whether the complaint was validly instituted through an authorised representative;
  • Whether the authorised representative possessed personal knowledge of the transaction;
  • Whether execution of the cheque was proved so as to trigger presumptions under Sections 118 and 139 NI Act.

Court’s Reasoning

1. Defective Authorisation and Lack of Personal Knowledge

The Court noted two critical deficiencies:

  • The complainant failed to produce the power of attorney authorising the representative to institute and prosecute the complaint; and
  • The authorised representative, in cross-examination, admitted lack of personal knowledge of the transaction, inability to identify handwriting/signature on the cheque and reliance solely on company records.

A supporting witness (Deputy Manager – Accounts) also lacked direct knowledge of the transaction.

The Court held:

  • A company must necessarily act through natural persons;
  • However, a power-of-attorney holder can depose only in respect of matters within his personal knowledge;
  • A representative who has no direct or first-hand knowledge cannot prove execution of the cheque merely on the basis of records.

2. Presumptions under Sections 118 and 139 NI Act

The Court reiterated a settled principle that presumptions under Sections 118 and 139 arise only after execution of the cheque is proved.

Where the complainant fails to establish foundational facts particularly execution, the statutory presumptions do not arise. The Court clarified that:

  • Execution cannot be proved through hearsay evidence;
  • Documentary records alone, without a competent witness, are insufficient.

3. Reliance on Precedents

The Court relied on established jurisprudence, including:

  • A.C. Narayanan v. State of Maharashtra4 –  permitting complaints through power-of-attorney holders, subject to knowledge requirements;
  • TRK Kuppuswami v. Padmavathy (and similar rulings) – emphasising that deposition must be based on personal knowledge;

4. Failure to Prove Execution

Applying the above principles, the Court held:

  • There was no legally admissible evidence to prove execution or issuance of the cheque;
  • The Trial Court and Appellate Court erred in overlooking this foundational defect.

Accordingly, the conviction could not be sustained.

Operative Directions

The High Court:

  • Allowed the revision petition;
  • Set aside the conviction and sentence imposed on the company and its directors;
  • Acquitted the accused of offences under Section 138 NI Act.

Practical Implications for Corporate Complainants

The verdict acts as a warning to those companies that convict on bouncing cheques. The company must:

  1. Do adequate authorisation: Sign a distinct power of attorney to a representative that has participated in or at least familiarised himself with the underlying transaction. The tool must demonstrate the right to complain and overthrow.
  2. Find the competent witnesses: Determine that the authorised representative or any other witness is competent to testify to the transaction, the handing over of the cheque and the conditions of the dishonour. It will not be enough to relay information obtained by records.
  3. Preservation of documentary trail: Although statements of oral evidence by persons who have personal knowledge are required to support the account statements and board resolutions, it is also required. The companies might be required to keep the employees or agents who were involved in the negotiations or transactions as evidence.

Conclusion

The Kerala High Court’s ruling reinforces that prosecution under Section 138 NI Act cannot rest on hearsay evidence or formal authorisation alone. While companies may act through power-of-attorney holders, such representatives must possess personal knowledge of the transaction or be capable of proving its execution.

The decision highlights a critical evidentiary principle: statutory presumptions arise only after foundational facts are established. By setting aside the conviction in the absence of competent evidence, the Court reaffirms the importance of procedural rigour and evidentiary integrity in cheque dishonour prosecutions.

  1. Pattasseril Private Ltd. v. State of Kerala, Crl. R.P. No. 541 of 2017 (Ker. HC, Jan. 2026). ↩︎
  2. (Crl. R.P. No. 541 of 2017) ↩︎
  3. Negotiable Instruments Act, No. 26 of 1881, § 138 (India). ↩︎
  4. A.C. Narayanan v. State of Maharashtra, (2014) 11 SCC 790. ↩︎