Lack of Substantive Evidence Leads to Acquittal in Section 138 NI Act Case
In a significant judgment, the Kerala High Court has overturned the conviction of Pattasseril Private Ltd and its directors under Section 138 of the Negotiable Instruments Act, 1881, citing a lack of substantive evidence to prove the execution and issuance of the cheque in question. The judgment was delivered by Justice P.V. Balakrishnan on January 28, 2026.
The case revolved around a cheque issued by Pattasseril Private Ltd to a cement manufacturing company to settle a liability amounting to Rs. 8,71,695. Upon presentation, the cheque was dishonored due to insufficient funds, prompting the complainant to pursue legal action. The trial court initially found the accused guilty, sentencing the company to a fine and its directors to imprisonment and compensation.
Upon appeal, the Additional Sessions Court upheld the trial court's decision, leading the accused to file a revision petition with the Kerala High Court. The counsel for the petitioners argued that the trial and appellate courts failed to properly appreciate the evidence, particularly noting that the complaint was filed by a power of attorney holder without direct knowledge of the transaction.
Justice Balakrishnan emphasized the necessity of proving the execution and issuance of a cheque through substantive evidence. The judgment highlighted that presumptions under Sections 118 and 139 of the NI Act only arise after execution is established. The witnesses presented by the complainant lacked direct knowledge of the transaction, relying solely on records, which the court deemed insufficient to meet the burden of proof.
The court noted that the complainant, being a juristic entity, must act through a human agency, and while an authorized representative can file a complaint, they must possess direct knowledge or witness the transaction. The failure to produce a power of attorney and the lack of direct evidence led the court to conclude that the complainant did not meet the initial burden of proof, resulting in the acquittal of the accused.
This judgment underscores the importance of substantive evidence in cheque bounce cases under the NI Act and sets a precedent for future cases involving juristic entities and their representatives.
Bottom Line:
Under Section 138 of the Negotiable Instruments Act, prosecution cannot succeed if the complainant fails to provide substantive evidence to prove the execution and issuance of the cheque by the accused.
Statutory provision(s): Section 138 of the Negotiable Instruments Act, 1881; Section 357(3) Cr.P.C.; Sections 118 and 139 of the NI Act
Pattasseril Private Ltd v. State of Kerala, (Kerala) : Law Finder Doc id # 2849600
