The High Court of Kerala has held that a criminal prosecution under Section 138 of the Negotiable Instruments Act (N.I. Act) cannot be overturned merely because the power of attorney holder who filed the complaint failed to explicitly state that she had direct personal knowledge of the transactions. The Court ruled that such an omission is a curable irregularity under Section 465 of the Code of Criminal Procedure (Cr.P.C.) if the original complainant subsequently deposes before the trial court and the accused is afforded an opportunity to cross-examine him, as no “failure of justice” is occasioned in such a scenario.
With this observation, Single Judge Justice G. Girish upheld the concurrent conviction of a defunct company’s Managing Director. However, the High Court modified the sentence of six months’ simple imprisonment to imprisonment till the rising of the Court, while keeping the compensation direction intact.
Background of the Case
The case arose from the dishonour of two cheques dated February 24, 2014, for Rs. 19,75,000/- and Rs. 10,00,000/- issued by the revision petitioner, Kannan, to the complainant, M/s. Adisiva Enterprises (represented by its proprietor, Prathapachandran R.K.). Kannan issued the cheques in his capacity as the Managing Director of the now-defunct AA Cashew Company.
The complaint was initially instituted before the Magistrate by the power of attorney holder of the complainant, who was the wife of the proprietor of the complainant firm. However, the complaint did not contain any specific pleading that the power of attorney holder possessed direct personal knowledge of the transactions that led to the dispute.
During the trial before the Chief Judicial Magistrate (CJM) Court, Kollam, the original complainant himself appeared as PW1 and adduced evidence regarding the transactions. The Trial Court relied on the complainant’s testimony, documents marked as Exts. P1 to P9, and a third-party document marked as Ext. X1, to hold the petitioner guilty of the offence under Section 138 of the N.I. Act.
On August 30, 2016, the CJM Court sentenced the petitioner to undergo six months of simple imprisonment and ordered him to pay Rs. 29,50,000/- as compensation to the complainant under Section 357(3) of the Cr.P.C., with a default clause of simple imprisonment for an additional four months. This decision was subsequently challenged, but the Additional District and Sessions Court-VI, Kollam, dismissed the appeal on February 28, 2018, confirming the conviction and sentence. Aggrieved by these concurrent findings, the petitioner approached the High Court in revision.
Arguments of the Parties
The counsel for the revision petitioner contended that the entire criminal prosecution was legally unsustainable from its inception. It was argued that since the power of attorney holder did not state in the complaint that she had direct personal knowledge of the underlying transactions, the Magistrate should not have taken cognizance of the offence or issued summons to the accused.
To support this contention, the petitioner’s counsel relied on the decisions of the Hon’ble Supreme Court in:
- M/s. Naresh Potteries v. M/s. Aarti Industries and Another [2025(1) SCR 40]
- Narayanan.A.C and Another v. State of Maharashtra and Others [(2015) 12 SCC 203]
The petitioner also raised contentions regarding the absence of any liability to pay the cheque amounts and argued that they were merely signed blank cheques.
The respondents and the Public Prosecutor representing the State of Kerala supported the concurrent findings of the lower courts, urging the High Court to dismiss the revision petition.
The Court’s Analysis
The High Court first addressed the factual findings concerning the lack of liability and the issuance of signed blank cheques, stating that the courts below had rightly repelled these arguments “after embarking upon a detailed ratiocination of the evidence on record.” Consequently, the Court found no scope for re-adjudication on those factual aspects in the revision proceedings.
Turning to the question of law regarding the power of attorney holder, Justice G. Girish distinguished the facts of the present case from the precedents cited by the petitioner. The Court observed:
“In Naresh Potteries and Narayanan A.C. (supra) the orders of the Magistrate issuing process against the accused were challenged shortly after the Magistrate took the complaint filed by the Power of Attorney holder to files and issued summons to the accused. There was no such prompt challenge in the case on hand. That apart, in the instant case, it is the original complainant himself who adduced evidence during the course trial of the case. Thus the ratio in Naresh Potteries and Narayanan A.C. (supra) have been laid at the initial stages of the respective cases, and not after the inaction of the accused paving the way for the original complainant to adduce evidence in the trial about the transactions which led to the offence.”
The High Court then analyzed Section 465 of the Cr.P.C., which bars the reversal or alteration of any finding, sentence, or order passed by a competent court on account of an error, omission, or irregularity in the complaint or proceedings, unless “a failure of justice has in fact been occasioned thereby.”
Under Section 465(2) Cr.P.C., the court must consider whether the objection could and should have been raised at an earlier stage. The High Court noted that the petitioner did not object to the Magistrate taking cognizance of the complaint before the trial commenced, nor did he challenge the order by taking recourse to appropriate procedures before the High Court at that stage.
To understand the parameters of “failure of justice,” the Court referred to the Supreme Court’s ruling in State of Karnataka Lok Ayukta Police v. Subbegowda [(2023) 17 SCC 699], which cited State of M.P. vs. Bhooraji and Others [2001 (7) SCC 679] and Shamnsaheb M. Multtani v. State of Karnataka [2001 (2) SCC 577]. The Apex Court had noted that:
“The expression ‘failure of justice’ would appear, sometimes, as an etymological chameleon… The criminal Court, particularly the superior Court should make a close examination to ascertain whether there was really a failure of justice or whether it is only a camouflage.”
Applying this legal standard, Justice G. Girish concluded:
“…it is not possible to say that the act of the learned Magistrate, taking cognizance of the offence on the basis of the complaint filed by the power of attorney holder of the complainant, had resulted in the failure of justice. This is especially so in view of the fact that the complainant himself had adduced evidence at the stage of trial, and the petitioner exercised his right to cross-examine the complainant on all aspects relating to the averments in the complaint.”
The Court, therefore, held that the procedural irregularity of omitting direct personal knowledge in the initial complaint filed by the power of attorney holder did not warrant overturning the conviction in revision.
Decision of the Court
The High Court disposed of the revision petition with the following directions:
- The concurrent verdicts convicting and sentencing the petitioner under Section 138 of the N.I. Act were upheld, except for the term of imprisonment.
- The sentence of six months’ simple imprisonment was modified, and the petitioner was sentenced to undergo imprisonment till the rising of the Court, having regard to the nature and gravity of the offence.
- The directions of the courts below regarding the payment of Rs. 29,50,000/- as compensation and the four-month simple imprisonment default clause for non-payment were retained.
Case Details:
- Case Title: Kannan v. M/s. Adisiva Enterprises and Another
- Case No.: Crl.Rev.Pet No. 1038 of 2018
- Bench: Justice G. Girish
- Date: May 18, 2026
