2025 (9) TMI 925 - HC - Indian Laws

Revision dismissed; acquittal upheld in Section 138 NIA case where cheque not for legally enforceable debt

Kisan R. Gate Versus Prakash Tukaram Kakuhas

The HC dismissed the revision and upheld the acquittal of the accused in a Section 138 NIA case. The court found the Power-of-Attorney witness lacked ... Dishonour of Cheque - legal and enforceable debt due or not - Appellate Court has not considered that the cheque was issued against discharge of legal and enforceable debt - principles of natural justice - HELD THAT:- The applicant, who is Power of Attorney Holder, entered into the witness box and reiterated as to the transaction between complainant Vaishali Sanjay Jaiswal and vendors Prabhakar Ramchandra Bansod and ors. Admittedly, it is the case of the complainant that as the Agreement to Sell was cancelled by the parties, the vendors returned amount of Rs. 5,50,000/- through the accused by cheque bearing No.no. 231307 dated 8.12.2009 which was deposited and returned with endorsement “Funds Insufficient”. Therefore, legal notice was issued on 23.12.2009. On receipt of the notice also the amount was not paid. The Hon’ble Apex Court in the cases of M/s. MMTC Ltd. and anr vs. M/s. Medchl Chemicals and Pharma P. Ltd. and anr, [2001 (11) TMI 837 - SUPREME COURT] and Janki Vashdeo Bhojwani and anr vs. Indusind Bank Ltd. and ors, [2004 (12) TMI 646 - SUPREME COURT], while answering the reference, which was for consideration before the Hon’ble Apex Court, was the maintainability of the complaint under Section 138 of the NIA filed by the Power of Attorney Holder on behalf of the original complainant and necessity of specific averments as to the knowledge of the Power of Attorney Holder with respect to the facts and circumstances leading to dishonour of cheques and preference of criminal proceedings, held that filing of the complaint under Section 138 of the NIA through the Power of Attorney Holder is perfectly and legal competent. The 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 the Power of Attorney Holder must have witnessed the transaction as an agent of the payee holder in due course or possessed due knowledge regarding the said transaction. It is further held that it is required by the complainant to make specific assertion as to knowledge of the Power of Attorney Holder in the said transaction explicitly in the complaint and the Power of Attorney Holder who has no knowledge regarding the transactions cannot be examined as a witness in the case. There is no document to show that any transaction has taken place between Vaishali Jaiswal and vendors. His entire evidence nowhere nowhere reflects that he was having complete knowledge as to the transaction. Even, the Power of Attorney executed in favour of the applicant nowhere reflects that as he is aware about the entire facts of the case, he is authorized by said Vaishali Jaiswal to depose before the court. Thus, considering the nature of the evidence, admittedly, it nowhere fulfills the criteria that either he witnessed the transaction as an agent of payee/holder in due course or possesses due knowledge regarding the said transaction. Whether the cheque was issued against against discharge of legal and enforceable? - HELD THAT:- Section 138 of the NIA will not apply to cheque drawn in discharge of the debt from liability, which is not legally enforceable. There may be several categories of debts or other liability, which are not legally enforceable. A debt or liability is legally enforceable if the same can be lawfully recovered by adopting due process of law - As far as burden on the accused is concerned, admittedly, he has to discharge the burden on the basis of preponderance of probability. It is can be discharged through the cross examination also. The standard of proof required to prove the charge against the accused and standard of proof required for rebuttal of the presumption admittedly is different. On going through the entire evidence, as observed by the Hon’ble Apex Court in the case of Naresh Potteries [2025 (1) TMI 132 - SUPREME COURT], by referring various judgments that it is required by the complainant to make specific assertion as to the knowledge of the Power of Attorney in the said transaction explicitly in the complaint and the Power of Attorney Holder, who has no knowledge regarding the transaction, cannot be examined as witness, which is rightly appreciated by learned Additional Sessions Judge. Learned Additional Sessions Judge rightly held that 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. The revision being devoid of merits is liable to be dismissed and the same is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a Power of Attorney holder can file and verify a complaint under Section 138 of the Negotiable Instruments Act and the extent of the requirement that the Power of Attorney holder must have witnessed the transaction or possess specific knowledge of the facts leading to dishonour of the cheque. 2. Whether the cheque in question was issued for discharge of a 'legal and enforceable debt or other liability' within the meaning of Section 138 of the Negotiable Instruments Act. 3. The nature and quantum of burden on the accused to rebut statutory presumptions under Section 138 (i.e., standard of proof and means of discharge), and whether the accused met that burden. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Competence and evidentiary role of a Power of Attorney holder in complaints under Section 138 NIA Legal framework: Sections 138, 142 and 145 of the Negotiable Instruments Act read with Section 200 of the Code of Criminal Procedure govern who may complain, verification of complaints, and the procedure for issuance of process. The Power of Attorney holder acts as agent of the grantor and may initiate proceedings on behalf of the principal. Precedent treatment: The Court follows binding guidance from the Apex Court that (a) filing of a complaint under Section 138 through a Power of Attorney holder is legally competent; (b) the Power of Attorney holder may depose and verify on oath; and (c) the Power of Attorney holder must either have witnessed the transaction as agent of the payee/holder in due course or possess due knowledge of the transaction, and such knowledge should be specifically averred in the complaint. Interpretation and reasoning: The Court examined the complaint and the witness testimony of the Power of Attorney holder and found the complaint did not aver that the holder witnessed the transaction or possessed specific knowledge of the facts leading to dishonour. The witness admitted on cross-examination that at the time of issuance of notice no Power of Attorney was executed in his favour, that the transaction did not occur between him and the accused, and that he possessed no documentation evidencing the agreement or monetary transactions between the principal and vendors. The Power of Attorney document itself lacked attendant particulars (no numbering, no photographs of executants or attesting witnesses, incomplete addresses) and did not expressly authorize the holder to depose with knowledge of the transaction. Ratio vs. Obiter: Ratio - A Power of Attorney holder may only be permitted to depose if he witnessed the transaction or possesses specific knowledge of it, and such knowledge must be asserted in the complaint; absent these averments/evidence, the holder cannot be treated as competent witness for proving the transaction. Obiter - Procedural discretion of the Magistrate in calling complainant for oral examination when affidavit exists. Conclusions: The Court concluded that the complaint and the Power of Attorney holder's evidence failed to meet the required threshold of specific knowledge or contemporaneous witnessing. Therefore, the Power of Attorney holder could not properly prove the contents of the complaint on that basis. Issue 2 - Whether the cheque was issued for discharge of a legally enforceable debt or other liability Legal framework: The Explanation to Section 138 defines 'debt or other liability' as a legally enforceable debt or other liability. Liability must be capable of lawful recovery by due process; mere drawing of a cheque does not attract Section 138 unless the underlying debt is legally enforceable on the date of drawing. Precedent treatment: The Court applied established principles clarifying that Section 138 applies only where the cheque is drawn for discharge of a legally enforceable debt; there exist categories of liabilities that are not legally enforceable and such absence defeats the applicability of Section 138. Interpretation and reasoning: The Court scrutinised the record and observed absence of documentary proof of the alleged Agreement of Sale or its cancellation, absence of documents evidencing monetary transactions between the principal and vendors, and that the complainant admitted inability to produce documents showing existence/subsistence of the debt as on cheque date. The cheque was said to have been issued by vendors through the accused, but there was no independent proof that a legally enforceable obligation subsisted between principal and vendors on the date of drawal. Ratio vs. Obiter: Ratio - Proof of a legally enforceable debt at the relevant time is an essential ingredient for conviction under Section 138; absence of supporting documentary or direct evidentiary foundation negates applicability. Obiter - Observations on categories of non-enforceable liabilities are explanatory. Conclusions: The Court held the complainant's evidence insufficient to establish that the cheque discharged a legally enforceable debt; consequently the ingredient of legally enforceable liability required by Section 138 was not proved. Issue 3 - Burden on accused to rebut statutory presumptions and appellate appreciation of evidence Legal framework: Once statutory presumptions under Section 139 (and related presumptions) arise, the accused bears the burden to rebut them on the preponderance of probabilities; the standard for rebuttal is different from the standard to prove the charge beyond reasonable doubt. Rebuttal may be effected by cross-examination and other evidence. Precedent treatment: The Court acknowledged authority that the accused's burden is to rebut the presumption on the basis of preponderance of probability and that this can be discharged through cross-examination or other evidence. Interpretation and reasoning: The Court reviewed cross-examination admissions of the complainant and the documentary record. It found that the accused had legitimately raised substantial doubt about the existence of a legally enforceable debt and about the complainant's personal knowledge of the transaction; the appellate court's acceptance of those weaknesses and consequent acquittal was considered correct. The Court observed that the standard for rebuttal is less onerous than proof of guilt, and here the accused's defence and the lacunae in the prosecution evidence successfully controverted the presumption. Ratio vs. Obiter: Ratio - If the prosecution evidence lacks foundational proof of enforceable liability and the complainant/witness lacks requisite personal knowledge, the accused can successfully rebut statutory presumptions on a preponderance standard; appellate court's finding of acquittal in such circumstances is sustainable. Obiter - Remarks on relative standards of proof. Conclusions: The Court concluded that the Additional Sessions Judge correctly appreciated the evidence, held there was no legal and enforceable debt, and rightly acquitted the accused; the revision challenging that acquittal lacked merit and was dismissed. Cross-references and final point on appellate review Cross-reference: Issues 1-3 are interlinked: failure of the Power of Attorney holder to establish personal knowledge (Issue 1) undermined proof of a legally enforceable debt (Issue 2), which in turn enabled the accused to rebut presumptions on preponderance of probabilities (Issue 3), supporting the appellate court's acquittal. Final conclusion: The Court affirmed that the Appellate Court's reversal of trial conviction was legally sustainable given the evidentiary deficiencies, and dismissed the revision as devoid of merits.