Supreme Court Upholds Company's Right to File Cheque Bounce Case Through Representative.

Ms Naresh Potteries, a company that manufactures and sells ceramics and hardware fittings, supplied Ms Aarti Industries with polymer insulator scrap material worth over Rs. 1.7 crore. When a cheque issued by Ms Aarti Industries to Naresh Potteries bounced, Naresh Potteries filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

Ms Aarti Industries responded by filing a police report alleging that the chequebook used to issue the cheque to Naresh Potteries had been fraudulently obtained.

Aarti Industries then filed a petition with the Allahabad High Court to have the summoning order issued by the trial court quashed. The High Court ruled in favor of Aarti Industries and quashed the summoning order, leading Naresh Potteries to appeal to the Supreme Court.

While setting aside the impugned order of Allahabad High Court the Supreme Court restored the complaint filed by Naresh Potteries, the Supreme Court answered the following question: "whether the complaint filed by the manager of Naresh Potteries on power of attorney meets the ingredients of Section 142 of the NI Act, which requires that the complaint should be filed by the payee or holder of the cheque in due course.".

The Supreme Court, after examining a series of its prior judgments, held the following:

A company may file a complaint under Section 138 of the NI Act through a representative, such as an employee or a person holding a power of attorney.

The power of attorney holder does not need to have personal knowledge of the transaction in cases where the payee is a company.

It is sufficient for the representative filing the complaint to state that they are authorized and have knowledge of the complaint's contents. The opposing party can challenge this authorization during the trial.

In Naresh Potterie's case, the court found that the complaint and supporting documents adequately conveyed that the manager had been authorized by the company and possessed the necessary knowledge of the transactions. The High Court, according to the Supreme Court, erred in dismissing the complaint based solely on the absence of a specific statement regarding the manager's personal knowledge.

The Supreme Court emphasized that the High Court's power to quash proceedings under Section 482 of the Criminal Procedure Code should be exercised sparingly, and not to obstruct a fair investigation or trial.

Coram: Justice B.R. Gavai and Justice K. V. Viswanathan
Between: Ms Naresh Potteries vs Ms Aarti Industries
Date of Judgment: 02-01-2025