Introduction
In a significant decision reaffirming evidentiary rigour under Section 138 of the Negotiable Instruments Act, 1881, the Kerala High Court held in Crl.R.P. No. 541 of 2017, decided on 28 January 2026 that the mere fact that the complainant is a juristic entity does not relax the burden of proving execution of the cheque. The Court categorically ruled that execution cannot be presumed merely on the production of a cheque, and unless execution is proved, statutory presumptions under the NI Act do not arise.
This judgment serves as a caution against mechanical reliance on presumptions in cheque dishonour prosecutions, especially where complaints are filed by companies through authorised representatives.
Factual Background
The complainant was a company engaged in manufacture and sale of cement. The first accused was a private limited company, and accused Nos. 2 and 3 were its directors. A cheque allegedly issued towards discharge of liability was dishonoured for insufficiency of funds, leading to prosecution under Section 138 NI Act.
The defence challenged the conviction primarily on the ground that:
The complaint was filed through a power-of-attorney holder.
The power of attorney was not produced.
None of the complainant’s witnesses had direct knowledge of the transaction or the execution of the cheque.
These objections formed the core of the High Court’s analysis.
Core Legal Issue
Whether execution of a cheque can be presumed merely because the complainant is a company and the cheque is produced before court?
The High Court answered this question in the negative.
Execution of Cheque: A Foundational Requirement Under Section 138
The Court reiterated that proof of execution of the cheque is a sine qua non for a prosecution under Section 138. Only after execution is proved does the law permit invocation of presumptions under Sections 118 and 139 of the NI Act.
The Court emphasised:
“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.”
Thus, production of the cheque and dishonour memo, by themselves, are insufficient.
Role of Power-of-Attorney Holder: Limits of Evidence
The judgment makes an important distinction between competence to file a complaint and competence to prove execution.
While the Court acknowledged that:
A company can act only through human agency; and
A power-of-attorney holder is competent to file a complaint and give evidence,
it firmly held that such a representative must:
Have either witnessed the transaction, or
Possess direct personal knowledge of the transaction and execution of the cheque.
A witness who merely relies on company records or information gathered later cannot prove execution.
Failure of Evidence in the Present Case
On facts, the Court found that:
PW1 (marketing manager and power-of-attorney holder) admitted lack of direct knowledge.
PW2 (accounts officer) also did not depose regarding execution of the cheque.
The alleged power of attorney was not produced.
No witness identified the handwriting or signing of the cheque.
As a result, the complainant failed to discharge even the initial burden of proving execution.
Consequently, the presumptions under Sections 118 and 139 never arose, and there was no burden on the accused to rebut anything.
Presumptions Under NI Act: Conditional, Not Automatic
The Court reaffirmed settled law that:
Presumptions under Sections 118 and 139 are conditional.
They arise only after execution of the cheque is proved or admitted.
Where the complainant’s witness has no direct knowledge, the prosecution fails at the threshold.
The judgment relied on earlier precedents, including Narayanan A.C. v. State of Maharashtra and Padma Conductors Pvt. Ltd. v. MIRC Electronics, to reinforce this position.
Decision and Outcome
The Kerala High Court held that both the trial court and appellate court had erred in law by overlooking the absence of proof of execution. Accordingly:
The conviction and sentence under Section 138 NI Act were set aside.
All accused were acquitted and set at liberty.
Key Takeaways
Execution of cheque is a foundational fact under Section 138.
Corporate complainants enjoy no evidentiary relaxation.
Production of cheque alone is not proof of execution.
Power-of-attorney holders must have direct knowledge or have witnessed execution.
Statutory presumptions arise only after execution is proved.
Conclusion
This judgment reinforces the principle that Section 138 prosecutions, though summary in nature, are still criminal proceedings requiring strict proof of foundational facts. The corporate character of a complainant does not dilute evidentiary standards. By insisting on proof of execution before invoking statutory presumptions, the Kerala High Court has upheld both commercial discipline and procedural fairness under the Negotiable Instruments Act.