2026 (2) TMI 173 - HC - Indian Laws

Proof of cheque issuance by a company and agent: lack of direct evidence negates statutory presumptions and overturns conviction

A juristic person can initiate proceedings for an alleged cheque offence through an authorised representative, but the authorised witness must have direct ... Proof of execution and issuance of cheque - Juristic person acting through agent - Presumptions u/s 118 and 139 of the Negotiable Instruments Act - Competence of a company to initiate proceedings through an authorised representative - Evidence by a power of attorney holder must be direct or eyewitness - Conviction u/s 138 - Whether the prosecution proved the execution and issuance of the cheque so as to attract the statutory presumptions under the Negotiable Instruments Act and sustain conviction u/s 138. - HELD THAT:- The company, being a juristic person, cannot act on its own and it must necessarily function through a human agency. A company is competent to initiate proceedings under Section 138 of NI Act and it can do so, through an authorised person. Even though, a power of attorney holder, being an authorised representative of the company, can file a complaint and give evidence, he must have either witnessed the transaction or must possess direct knowledge of the transaction. A person, who only became associated with the company after the transaction and who relies purely on records, cannot prove the execution of the cheque or the transaction. It is to be kept in mind that merely because the complainant is a juristic entity, it will not dilute the rigour of proof required for proving the execution of the cheque and the execution cannot be presumed merely on the production of a cheque. The presumptions under Sections 118 and 139 of the NI Act will arise only after the execution of the cheque is proved and if the complainant's witness has no direct knowledge or did not witness the execution, the prosecution will fail at the threshold itself and there will be no burden upon the accused to rebut anything. In the instant case, it can be seen that there is no substantive evidence at all to prove the issuance and execution of the cheque by the accused to the complainant. This in turn means that the complainant has even failed to discharge the initial burden cast upon it to prove the execution and issuance of the cheque. Both the trial court and the appellate court have erred in appreciating the materials and evidence on record in a proper perspective and has missed these relevant points, while arriving at a wrong conclusion of guilt against the revision petitioners. Hence, this revision petition is only liable to be allowed, thereby setting aside the conviction and sentence passed against the revision petitioners. In the result, this Criminal Revision Petition is allowed. Issues: (i) Whether conviction and sentence under Section 138 of the Negotiable Instruments Act can be sustained where the complainant's witnesses and the purported power of attorney holder lack direct knowledge of the issuance and execution of the cheque.Analysis: The complaint was filed and prosecuted through an alleged power of attorney holder who did not produce the power of attorney before the trial court and stated lack of direct knowledge of the transactions and of the handwriting on the cheque. The witnesses produced by the complainant gave evidence based on company records and information rather than personal knowledge of the issuance or execution of the cheque. For a juristic person to invoke presumptions under Sections 118 and 139 of the Negotiable Instruments Act, execution of the cheque must first be proved by direct evidence, admission, or a competent witness who witnessed execution; merely producing records or testimony based on information from records is insufficient to discharge the initial onus.Conclusion: The conviction and sentence under Section 138 of the Negotiable Instruments Act are set aside for lack of proof of issuance and execution of the cheque; decision is in favour of the appellant.