Section 138 NI Act | Complaint By Power Of Attorney Holder Without Specific Assertion Of 'Direct Knowledge' Of Transaction Is Not Maintainable: Kerala High Court

"It is required by the complainant to make specific assertion as to the knowledge of the Power of Attorney Holder in the said transaction explicitly in the complaint, and the Power of Attorney Holder, who had no knowledge regarding the transactions, cannot be examined as a witness in the case." Kerala High Court, in a significant ruling, held that a criminal complaint under Section 138 of the Negotiable Instruments Act (NI Act) initiated by a Power of Attorney (PoA) holder on behalf of a company is not maintainable if it lacks a specific averment regarding the PoA holder's direct knowledge of the underlying transaction.

Setting aside the conviction of the petitioner, a bench led by Justice G. Girish observed that the failure to disclose the witness's personal knowledge of the execution of the cheque is a "fatal legal anomaly."

The petitioner had challenged the concurrent verdicts of the trial and appellate courts, which had found him guilty of dishonour of a cheque for Rs. 8,75,000 issued in favour of a chitty company. The petitioner had consistently disputed the execution of the cheque, alleging that the company had misused signed blank cheques previously obtained as security.

The primary legal issue before the Court was whether a complaint filed by a PoA holder, absent explicit pleadings regarding their direct knowledge of the transaction, satisfies the statutory requirements for launching a prosecution under the NI Act.

Court Explains Legal Requirement For PoA Holders

The Court emphasized that when a company delegates the authority to file a complaint to a PoA holder, the law imposes a strict threshold of disclosure. It is not sufficient for the PoA holder to merely state they are authorized to sign and file the complaint. The complainant must explicitly assert in the complaint itself that the authorized representative possesses direct knowledge of the facts and the transaction that led to the offence.

"The basic requirement to be fulfilled for the institution of a complaint by a Power of Attorney Holder, is conspicuously absent in the complaint lodged before the learned Magistrate."

No Scope For Superficial Statements

The Court further clarified that an omnibus statement made during cross-examination regarding the PoA holder's "general knowledge" of the facts does not cure the defect of lacking such averments in the original complaint or the proof-affidavit. The bench noted that unless the PoA holder was present to witness the execution of the cheque or the handing over of the instrument, their testimony as a witness remains legally insufficient to sustain a conviction.

"The aforesaid isolated superficial statement given by PW1 is not sufficient to fulfill the legal requirements for the institution of a complaint like the present one by the Power of Attorney Holder representing a company."

Reliance On Apex Court Precedent

The High Court placed strong reliance on the Supreme Court judgment in A.C. Narayanan v. State of Maharashtra, which established that a PoA holder must have witnessed the transaction as an agent of the payee or possess due knowledge of the transaction. By failing to note this fatal infirmity, both the trial court and the appellate court had erred in law. Consequently, the High Court allowed the revision petition, set aside the conviction, and acquitted the petitioner of the offence.

Date of Decision: 08 September 2026