Power-of-Attorney Holder Must Know the Transaction to Sustain Complaint Under Section 138 NI Act: Bombay High Court Upholds Acquittal

“Filing of Complaint is Valid, But Only If Attorney Has Witnessed or Has Due Knowledge of the Transaction” – Bombay High Court (Nagpur Bench) delivered a significant judgment reiterating that a Power-of-Attorney Holder cannot maintain a complaint under Section 138 of the Negotiable Instruments Act, 1881, without proving knowledge of the underlying transaction. Justice Urmila Joshi-Phalke dismissed the complainant's revision and upheld the accused’s acquittal, affirming the ruling of the Additional Sessions Judge, Nagpur.

The Court observed, “The Power of Attorney Holder who has no knowledge regarding the transaction cannot be examined as a witness in the case.” The verdict reiterates the need for a legally enforceable debt and evidentiary foundation, not mere assumption based on cheque issuance.

"Presumption Under Section 139 is Rebuttable; It Does Not Shift the Burden of Proving Enforceable Debt": Court Rejects Complaint for Lack of Foundational Evidence

The case revolved around a dishonoured cheque issued in the backdrop of a cancelled property deal. Vaishali Sanjay Jaiswal had entered into an Agreement of Sale for a plot in Ambazari, Nagpur, valued at ₹2.7 crore. ₹20 lakhs were allegedly paid via the accused, Prakash Kakuhas, who acted as a broker. After the agreement was cancelled, a cheque for ₹5.5 lakhs, allegedly returned by the vendors via the accused, was dishonoured upon deposit. The cheque was drawn on Shamrao Vitthal Cooperative Bank and was returned marked "Funds Insufficient".

Kisan R. Gate, claiming to be the Power-of-Attorney Holder of Vaishali Jaiswal, issued a legal notice and filed a complaint under Section 138 of the NI Act. The Judicial Magistrate First Class convicted the accused, awarding compensation and a sentence. However, the appellate court reversed the conviction, and the complainant sought revision before the High Court.

The High Court found no reason to interfere. It emphasized that the Power-of-Attorney Holder, Kisan R. Gate, neither witnessed the transaction nor possessed sufficient knowledge about it, which is mandatory under law.

Quoting the Supreme Court’s decision in MMTC Ltd. v. Medchl Chemicals and Pharma P. Ltd. and Janki Vashdeo Bhojwani v. IndusInd Bank Ltd., the High Court held, “Filing of complaint under Section 138 of the NI Act through Power of Attorney is perfectly legal and competent. However, the Power-of-Attorney Holder must have witnessed the transaction as an agent or possess due knowledge regarding the same.”

The Court found that the complainant failed this legal test. It noted, “In the complaint, neither it is stated that the transaction took place in his presence nor is there any averment that he has knowledge of it.” Moreover, during cross-examination, the complainant admitted that no Power-of-Attorney existed when the notice was issued, and the document eventually produced lacked formal validity — it bore no number, photograph, attesting witness, or proper address.

The Court also held that there was no material on record showing any agreement or its cancellation between the original buyer and vendors, nor any evidence to show the accused's liability. As such, the issuance of the cheque, even if admitted, was not linked to a legally enforceable debt.

Referring to Section 138 Explanation, the Court reminded that, “Debt or other liability means a legally enforceable debt or liability. A cheque drawn in discharge of a debt which is not legally enforceable does not attract Section 138.”

"Legal Enforceability Cannot Be Assumed From Mere Cheque Issuance": Court Emphasizes Substantive Proof of Debt

The judgment delves into the critical requirement that a debt must be lawfully recoverable to invoke penal provisions of the NI Act. The complainant's claim that the cheque was for refund of the advance fell flat due to absence of any documentation showing such an obligation. The High Court found, “The evidence of the complainant is not sufficient to establish that the cheque was issued against legal and enforceable debt.”

The accused’s burden to rebut the presumption under Section 139 of the NI Act was satisfied, according to the Court, through effective cross-examination and the absence of foundational documents from the complainant. The standard for rebuttal is preponderance of probabilities, not proof beyond reasonable doubt, a distinction well settled in criminal jurisprudence.

The Court ultimately affirmed, “There was no legal and enforceable debt between the complainant and the accused and acquitted the accused, which is legal one and no illegality is committed.”

In conclusion, the High Court dismissed the revision petition and upheld the acquittal, reinforcing the jurisprudential principle that Section 138 is not a tool of coercion, but a penal provision to be strictly applied only where legal obligations are clear and enforceable.

Date of Decision: 12.09.2025