In a crucial ruling on the evidentiary standards governing cheque bounce prosecutions, the Kerala High Court stepped in to examine whether a company can secure a conviction under the Negotiable Instruments Act solely through internal records and witnesses lacking first-hand knowledge, raising serious questions about how far statutory presumptions can stretch in criminal liability.
The controversy began when a cement manufacturing company initiated criminal proceedings under Section 138 of the NI Act against a private company and its two directors over a dishonoured cheque of Rs.8.71 lakh issued in 2001. The trial court convicted all accused, sentencing the directors to imprisonment and directing substantial compensation, a verdict later affirmed in appeal.
Challenging these findings, the accused approached the High Court, arguing that the complaint itself was fundamentally flawed as it was filed through an alleged power of attorney holder whose authority was never proved and whose testimony revealed no personal knowledge of the transaction or the cheque’s execution. Counsel contended that none of the company witnesses had actually seen the cheque being issued or executed.
After a close scrutiny of the evidence, the High Court found the prosecution’s case fatally deficient at its very foundation. The Court underscored that while a company may prosecute cheque bounce cases through authorised representatives, such a witness must either have witnessed the transaction or possess direct knowledge of it.
In a sharp observation, the Court held that “the execution cannot be presumed merely on the production of a cheque,” adding that presumptions under Sections 118 and 139 of the NI Act arise only after execution is first proved. It noted that the complainant’s witnesses admittedly relied only on office records and hearsay, and even the purported attorney holder conceded his lack of awareness about the cheque’s execution.
Holding that both the trial and appellate courts had overlooked these crucial lapses, the High Court consequently set aside the conviction and sentence, ordering the immediate release of all accused.
Case Title: Pattasseril Private Ltd And Ors, Vs. State Of Kerala And Ors.
Case No.: Crl.Rev.Pet No. 541 Of 2017
Coram: Hon’ble Mr.Justice P. V. Balakrishnan
Advocate for the Petitioner: Adv.Varghese C.Kuriakose
Advocate for the Respondent: None
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