S.138 NI Act | Authorized Representative Prosecuting On Behalf Of Company Must Have Knowledge Of Contents Of Complaint: Kerala High Court

The Kerala High Court has reiterated that in a complaint filed under Section 138 of the Negotiable Instruments Act (NI Act), by a company/firm, a power of attorney holder or authorized representative can depose on behalf of the complainant, and that it would be sufficient to demonstrate before the Magistrate that the complaint has been filed in the name of the 'payee'/'complainant', and the authorization as well as the contents of the complaint, are within the knowledge of such power of attorney holder/authorized representative. 

Justice C.S. Dias arrived at the above finding when faced with the question as to whether the directions issued in Narayanan. A.C v. State of Maharashtra (2013) would be strictly applicable in a complaint filed under Section 138 of the NI Act by a power of attorney of a company/firm in view of the subsequent decision in M/S TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd. & Ors. (2022).

Noting that a 'subtle distinction' has been carved out in M/S TRL Krosaki Refractories Ltd. (Supra), by clarifying that in a complaint filed by a company/firm, a specific assertion regarding the knowledge of the power of attorney holder as laid down in Narayanan A.C. (Supra) cannot be understood to mean that the assertion should be in the same particular manner, much less only in the manner understood by the accused, Justice Dias proceeded to observe:

"In cases where the complainant/payee is a company, an authorised employee can represent the company. Therefore, the ratio decidendi in Narayanan.A.C. (Supra) broadly applies to complaints filed by individual complainants and not companies/firms". 

The appellant (complainant firm), Popular Motor Corporation represented by its Branch Manager, had filed a complaint against the accused, alleging that he had issued two cheques in its favour for Rs.1,60,000/- and Rs.20,000/- respectively, in discharge of a legally enforceable liability, but that the same were dishonoured due to 'insufficiency of funds' in the accused's bank account. It was averred that the accused failed to pay the amount, despite the petitioner having issued a statutory notice demanding the same. 

The Magistrate found the accused not guilty, predominantly on the finding that there was no averment in the complaint regarding the status of the complainant, and that the Branch Manager was not competent to file and prosecute the complaint.

The counsel for the appellant averred that the Magistrate had erroneously observed that there was no averment in the complaint regarding the status of the complainant, and that it had been specifically stated in paragraph 1 of the complaint that the complainant is a firm. It was added that a resolution had authorized the Branch Manager to represent the complainant. It was also averred that the Accountant of the firm, who had also been examined during trial, had testified he was aware of the transaction between the complainant and the accused, and that the cheque had been executed in his presence. 

The Public Prosecutor countered that as per the dictum in Narayanan A.C. (Supra), which was followed in Shibu.L.P v. Neelakantan (2021), it had been laid down that there ought to be a specific assertion in the complaint that the power of attorney holder has the knowledge of the cheque, and that otherwise, the power of attorney holder cannot be examined as a witness. 

Relying upon the decision in M/S Shankar Finance & Investments v. State of Andhra Pradesh & Ors. (2008), the Court found that the Magistrate had erred in holding that the Branch Manager was incompetent to file the complaint. 

The Court perused the decision in TRL Krosaki Refractories Ltd. (Supra), which had distinguished the position in Narayanan A.C. (Supra), and laid down that, 

"...when a company is the payee of the cheque based on which a complaint is filed under Section 138 of the NI Act, the complainant necessarily should be the Company which would be represented by an employee who is authorized. Prima facie, in such a situation, the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the complainant (Company) is represented by an authorized person who has knowledge, would be sufficient. The employment of the terms, "specific assertion as to the knowledge of the power of attorney holder" and such assertion about knowledge should be "said explicitly" as stated in A.C. Narayanan (Supra) cannot be understood to mean that the assertion should be in any particular manner, much less only in the manner understood by the Accused in the case. All that is necessary is to demonstrate before the learned Magistrate that the complaint filed is in the name of the "payee" and if the person who is prosecuting the complaint is different from the payee, the authorization therefore, and that the contents of the complaint are within his knowledge...such averment and prima facie material is sufficient for the learned Magistrate to take cognizance and issue process". 

It also perused the decision in Basheer K. v. C.K.Usman Koya & Anr. which laid down the five ingredients that the factual allegations in a complaint under Section 138 of the Act ought to stipulate. 

On consideration of the same, the Court was of the considered view that the complainant had discharged its initial onus of proof by satisfying the concomitants constituting the ingredients under Section 138 of the Act and thereby shifted the reverse onus of proof to the accused, which it discerned that the latter had failed to discharge. 

It thus held the accused liable to be convicted for the offence under Section 138 of the N.I. Act, and sentenced him to undergo imprisonment for one day and pay a compensation of Rs. 2 Lakhs to the complainant, within two months, with a default sentence prescribed therein. 

Counsel for the Appellant: Advocates Lal K. Joseph, P. Muraleedharan Thuravoor, and V.S. Shiraz Bava

Counsel for the Respondents: Senior Public Prosecutor Pushpalatha M.K., and Advocates P. Krishna Kumar, and Sunil J. Chakkalackal

Citation: 2023 LiveLaw (Ker) 611

Case Title: Popular Motor Corporation v. State of Kerala & Anr. 

Case Number: CRL.A NO. 1412 OF 2011

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