S.138 NI Act | Evidence Of Power Of Attorney Holder Not Credible Unless They Possess Due Knowledge Of The Transaction: Kerala High Court

The Kerala High Court on Thursday held that the evidence of a power of attorney holder is not credible unless they possess due knowledge of the transaction:

Justice A. Badharudeen observed that a complainant alleging offence under Section 138 should make a specific assertion regarding the knowledge of the power of attorney holder in such transactions. The Judge added that a power of attorney holder who had no knowledge regarding the transactions cannot be examined as a witness in the case.

"The law is settled on the point that a complaint alleging commission of offence under Section 138 of the Negotiable Instruments Act can be presented through the power of attorney holder and the power of attorney holder can depose and verify on oath before the court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee or holder in due course or possess due knowledge regarding the said transaction."

The respondent herein borrowed Rs.95 lakh from the appellant and issued a cheque with the assurance of encashment. However, when the appellant presented the cheque for collection, it was dishonoured for want of funds. Although notice of dishonour of the cheque was issued with a demand for repayment, the respondent allegedly failed to repay the same. Thus, the appellant lodged a complaint before the Judicial First Class Magistrate alleging commission of offence under Section 138 of the Negotiable Instruments Act.

The Magistrate convicted the respondent and sentenced him under Section 138. But the Sessions Court set aside the conviction on the ground that the power of attorney holder of the original complainant had no direct knowledge about the transaction and his evidence was only hearsay. Accordingly, the matter was remanded back for fresh disposal.

The Magistrate examined the power of attorney holder and found that his deposition given to the effect that the knowledge he had about the transaction was hearsay was true and genuine. Accordingly, the respondent was acquitted. 

Challenging this acquittal, the appellant moved the High Court. 

Advocate Gopakumar R. Thaliyal appearing for the appellant argued that in this matter issuance of a cheque and the signature therein were admitted fact and, therefore, the complainant could very well avail the benefit of pressumptions under Sections 118 and 139 of the Negotiable Instruments Act. Since nothing was extracted to rebut the presumption, the court below ought to have believed the version of the power of attorney holder and entered into conviction. 

The Court opined that undisputedly, an initial burden is cast upon the complainant to prove the transaction led to the execution of the cheque, to canvass the benefit of presumption under Sections 118 ad 139 of the Negotiable Instruments Act. The question that arose was how far the evidence of the power of attorney holder was reliable.

Going through precedents, the Judge concluded that while a complaint alleging commission of offence under Section 138 can be presented through the power of attorney holder, such PoA must have witnessed the transaction as an agent of the payee or holder in due course or possess due knowledge regarding the said transaction.

In this case, the complaint was originally filed by the appellant and there was no mention to the effect that the transaction was witnessed by the power of attorney holder. It was during evidence that the power of attorney holder filed a chief affidavit stating that he was aware of the facts of this case. However, during cross-examination, he said that he had only hearsay knowledge about the transaction between the accused and his son. This was repeated before the Magistrate as well. 

Thus, the power of attorney holder had repeatedly given evidence during cross-examination that he had no direct knowledge about the transaction. Therefore, no credence can be given to his evidence in the matter of transaction and execution of the cheque.

As such, finding that the appellant had miserably failed to adduce convincing evidence to prove the transaction, the appeal was dismissed and the acquittal was upheld.

Case Title: Shibu L.P v. Neelakantan & Anr.

Citation: 2022 LiveLaw (Ker) 366

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