Person Who Becomes Associated With Company After Transaction & Relies Purely On Records Can’t Prove Cheque’s Execution: Kerala High Court Set Aside NI Act Conviction

The High Court was considering a revision petition challenging the conviction and sentence rendered against the revision petitioners under Section 138 of the Negotiable Instruments Act (NI Act).

The Single Bench of Justice P.V. Balakrishnan held, “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. 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.”

Advocate Varghese C. Kuriakose represented the Revision Petitioners.

Factual Background

The first accused, a private limited company, purchased cement from the complainant company and, in discharge of the said liability, issued a cheque for Rs.8,71,695. When the cheque was presented for collection, it got dishonored for the reason that funds were insufficient. The statutory notice issued also did not evoke any response. Hence, the complainant approached the Trial Court by filing a complaint. The Trial Court found the accused guilty and convicted them under Section 138 of the NI Act. It sentenced the Directors of the accused company to undergo simple imprisonment for a period of three months under Section 138 of the NI Act. It also ordered them to pay a sum of Rs 8 lakh each to the complainant as compensation under Section 357(3) Cr.P.C., with a default clause. The accused carried the matter in appeal, but the same came to be dismissed. Aggrieved thereby, the appellant accused approahced the High Court.

Reasoning

On a perusal of the facts of the case, the Bench noticed that the complaint had been filed on behalf of the complainant by a person named Jayanthi Vijaya Bhaskara Sasthri, claiming to be the attorney holder of the complainant but there was no specific averment in the complaint that he had witnessed the transactions as an agent of the company or that he had knowledge regarding the transactions and the execution of the cheque.

The Bench noted that the complainant had not produced the power of attorney authorising Jayanthi Vijaya Bhaskara Sasthri to file the complaint and prosecute it before the Trial Court. The said Attorney Holder had categorically stated that he was not fully aware of the transactions in the case and he couldnot identify the handwriting of the person who had executed the cheque. The Bench took note of his statement that he was giving evidence as per the information gathered from the documents.

The Bench also noticed that the evidence of the Marketing Manager showed that he did not have direct knowledge regarding the transactions relating to the issuance of the cheque. His proof affidavit showed that he became conversant with the facts of the case only by going through the documents and records kept in the custody of the company, and nothing more.

The Bench stated, “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. It must be proved either by the admission of the accused or the evidence of a competent witness, who had seen the execution. A witness, who is totally unaware as to how, when and why the cheque was issued cannot prove the execution by merely producing records or by giving evidence through information gathered from the records available.”

The Bench affirmed that 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. Finding that there was no substantive evidence at all to prove the issuance and execution of the cheque by the accused to the complainant, the Bench stated, “This in turn means that the complainant has even failed to discharge the initial burden cast upon it to prove the execution and issuance of the cheque.”

Holding that both the Trial Court and the Appellate Court erred in appreciating the materials and evidence on record in a proper perspective, the Bench allowed the Petition, thereby setting aside the conviction and sentence passed against the revision petitioners.

Cause Title: Pattasseril Private Ltd v. State of Kerala (Case No.: CRL.REV.PET NO. 541 OF 2017)

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