[S.138 NI Act] Must Examine Those With Direct Knowledge Of Transaction To Prove Allegations Of Cheque Dishonour: Kerala High Court Sets Aside Conviction

The appellants approached the High Court with a criminal revision petition against the conviction in a cheque dishonor matter under Section 138 NI Act where the cheque was dishonoured for want of funds.

Justice A. Badharudeen observed that the examination of a witness who had no direct knowledge regarding the transaction or issuance of the cheque would be insufficient to discharge the initial burden cast upon the complainant to prove their case. He said:

“However, in order to prove the transaction led to execution of the a cheque, somebody who should have direct knowledge regarding the transaction, issuance and execution of the cheque must be examined. When the complainant limits the evidence as that of an officer of a company, who did not have any direct knowledge regarding the transaction and he did not witness the execution of the cheque, the evidence is insufficient to discharge the initial burden cast upon the complainant. So, it could not be held that the complainant succeeded in discharging his initial burden, to avail the benefit of presumptions under Sections 118 and 139 of the N.I.Act.”

The accused were convicted under Section 138 of the NI Act by the Judicial First Class Magistrate Court. Their conviction was upheld by the Additional Sessions Court. 

The Counsel for the appellants submitted that the transaction, issuance and execution of the cheque were not proved as mandated by law. It was argued that evidence of a power of attorney holder of the complainant company was taken who had no direct knowledge of the transaction, issuance or execution of the cheque. It was also argued that the complainant had failed to discharge the initial burden that led to the transaction for issuance of the alleged cheque by relying upon Sukumaran P.N v. K.N.Madhavan Nair & Ors. (2016) and Shibu L.P v. Neelakantan & another (2022).

The Court found that the evidence adduced, was by the power of attorney holder of the complainant company who had no direct knowledge and was insufficient to prove the transaction that led to the execution of the cheque. It added that the power of attorney holder had deposed that he had no direct knowledge of the transaction and got to know about it only after his appointment. It also found that the witness had deposed that he was not present at the time of execution of the cheque and does not know who wrote the cheque.

The Court found that it was bound to peruse the records to find out about the transaction and execution of the cheque. It found that even though the initial burden was not discharged by the prosecution, the account statements prove the balance outstanding as of the date of the cheque.

The Court thus observed that the complainant should be given more opportunity to prove the transaction, issuance and execution of the cheque.

Accordingly, the criminal revision petition was allowed, setting aside the conviction against the appellants and remanded the matter to the trial court permitting the complainant to adduce more evidence.

Counsel for Appellants: Advocate V A Johnson

Counsel for Respondents: Advocate Jacob Chacko, Senior Public Prosecutor K Denny Devassy

Citation: 2024 LiveLaw (Ker) 109

Case title: CRL.REV.PET NO. 741 OF 2016

Case number: Padma Conductors Pvt Ltd. v MIRC Electronics

Click Here To Read/Download The Order