A) ABSTRACT / HEADNOTE

The appeal examines whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) filed by a manager holding a power of attorney satisfies the statutory requirement of Section 142 that cognizance be taken only on a complaint “made by the payee, or as the case may be, the holder in due course.” The trial court had summoned the accused on the basis of an affidavit under Section 200 Cr.P.C. filed by Neeraj Kumar, manager and authority-letter holder of M/s Naresh Potteries (the payee). The High Court, relying on A.C. Narayanan, quashed the summoning order on the ground that the power-of-attorney holder had not specifically averred personal knowledge of the underlying transactions.

The Supreme Court reversed, holding that where a complaint is properly in the name of the payee (here the firm) and the representative (manager/power-of-attorney holder) is shown by documents (letter of authority, verifying affidavit, affidavit of evidence under Section 200 Cr.P.C.) to be in charge of day-to-day affairs and “well conversant with everyday affairs, financial transactions and sale-purchase of the firm”, the requirement of Section 142 is satisfied. The Court emphasised that explicit averment of knowledge must be gathered in context and need not follow a rigid formula; dismissal under inherent jurisdiction (Section 482 Cr.P.C.) is inappropriate where authorisation and prima facie knowledge appear on record and disputes on those aspects are matters for trial. 

Keywords: Section 138 NI Act, Section 142 NI Act, power of attorney, de jure complainant, Section 200 Cr.P.C.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeal arises from a threshold challenge to criminal proceedings under Section 138 NI Act where the payee firm’s manager (with a letter of authority) instituted the complaint and filed the verifying affidavits under Section 200 Cr.P.C. The High Court quashed the summoning order on the premise that the power-of-attorney holder did not expressly aver personal knowledge of the transactions, invoking the principle in A.C. Narayanan that specific averments of knowledge are necessary when a power-of-attorney prosecutes on behalf of an individual payee.

The Supreme Court was thus required to reconcile A.C. Narayanan with subsequent precedents (notably National Small Industries Corporation Ltd. and TRL Krosaki) which permit a more contextual assessment where the complainant is a firm or corporate entity and the representative is an authorised employee/manager. The decision explores the interplay between the statutory bar in Section 142 (that cognizance of Section 138 offences be only on complaint by payee/holder-in-due-course) and the procedural mechanisms in Section 200 Cr.P.C. that empower magistrates to rely on affidavit-verification and exercise discretion about oral oath-examination.

The Court emphasised that the requirement of asserting the representative’s knowledge must be read flexibly the pleading and supporting documents taken together can satisfy Section 142, and disputed issues of authorisation or knowledge are ordinarily matters for trial rather than for an exercise of inherent jurisdiction under Section 482 Cr.P.C.

D) FACTS OF THE CASE

Between 18 June 2021 and 2 July 2021, M/s Aarti Industries (sole proprietor: Sunita Devi) purchased polymer-insulator scrap from M/s Naresh Potteries amounting to Rs. 1,70,46,314/-. A cheque dated 10 July 2021 (No. 086295) drawn on A/c of M/s Aarti Industries was delivered to the payee and presented on 12 July 2021, but was returned dishonoured on 13 July 2021 with memo “exceeds arrangement.” Legal notice was issued on 15 July 2021. On 31 August 2021, the sole proprietor of the payee firm executed a Letter of Authority authorising Neeraj Kumar (manager) to file a complaint.

On 8 September 2021 Kumar filed Complaint No. 701/2021 under Section 138 NI Act in the name of M/s Naresh Potteries and filed a verifying affidavit and later an affidavit of evidence under Section 200 Cr.P.C. The Magistrate, on the basis of the Section 200 affidavit and documentary record, issued summons to Sunita Devi on 22 November 2021. Thereafter Respondent No.1 (Aarti Industries) filed a Criminal Miscellaneous Application under Section 482 Cr.P.C. contending that the power-of-attorney holder lacked personal knowledge and the pleadings did not contain specific averment of such knowledge. The High Court allowed the petition and quashed the summoning order. The Supreme Court granted leave, analysed statutory scheme and precedents, and restored the complaint to file.

E) LEGAL ISSUES RAISED

i. Whether a complaint under Section 138 NI Act filed by a power-of-attorney holder/manager on behalf of a proprietary payee satisfies Section 142 where the pleading and supporting affidavits indicate authorisation and knowledge?
ii. Whether absence of a rigid formulaic specific averment of personal knowledge in the Letter of Authority or affidavit warrants quashing under Section 482 Cr.P.C.?
iii. What is the scope of the Magistrate’s discretion under Section 200 Cr.P.C. to rely on affidavit-verification and dispense with oral examination in complaints under Section 138?

F) PETITIONER / APPELLANT’S ARGUMENTS

The appellants contended that the High Court erred in applying A.C. Narayanan rigidly and in ignoring the composite record (Letter of Authority, affidavit in support, affidavit of evidence) which clearly displayed authorisation and that the manager was “well conversant with everyday affairs, financial transactions and sale-purchase of the firm.” Reliance was placed on National Small Industries Corporation Ltd., A.C. Narayanan (distinguished on facts), TRL Krosaki and related pronouncements that permit contextual construction of “explicit averment” and that a manager/authorised employee may act as de facto complainant where the firm is the de jure complainant. It was submitted that Section 200 Cr.P.C. enables the Magistrate to rely on verifying affidavits and call the complainant only if necessary and therefore immediate quashing via Section 482 was improper.

G) RESPONDENT’S ARGUMENTS

Respondent argued that a power-of-attorney holder filing criminal proceedings must expressly aver personal knowledge of the specific transactions and that absence of such explicit averment renders the complaint incompetent. Reliance was placed on A.C. Narayanan to assert that when the complainant is an individual (or where delegation is critical), the power exercised must be clearly and specifically pleaded. Hence, the High Court’s quashing of the summoning order on authenticity of authorisation and lack of personal knowledge was justified to prevent harassment and frivolous criminal prosecution.

H) RELATED LEGAL PROVISIONS

i. Section 138, Negotiable Instruments Act, 1881.
ii. Section 142(1)(a), Negotiable Instruments Act, 1881.
iii. Section 145, Negotiable Instruments Act, 1881 (amendment implications).
iv. Section 190 & Section 200, Code of Criminal Procedure, 1973.
v. Section 482, Code of Criminal Procedure, 1973 (inherent jurisdiction).

I) JUDGEMENT

The Supreme Court allowed the appeal. The Court held that Section 142’s bar is satisfied if the complaint is in the name of the payee; when a firm is complainant, it may be represented by an authorised employee or power-of-attorney holder.

The Court emphasised precedents notably National Small Industries Corporation Ltd. and the three-Judge decision in A.C. Narayanan to distil principles:

(1) a power-of-attorney holder can file and verify a complaint on behalf of the payee;

(2) the power-of-attorney holder must possess personal knowledge or be an authorised person in charge of the business;

(3) specific averment of knowledge must be present in some form but need not follow a rigid textual formula; context and totality of documents determine sufficiency;

(4) magistrates may rely on affidavit-verification under Section 200 Cr.P.C. and call the complainant only if necessary.

On the facts, the Letter of Authority expressly stated that Neeraj Kumar was the manager responsible for day-to-day affairs and was “well aware of this case and is given necessary instructions also.” The verifying affidavit and Section 200 affidavit stated he was “well conversant with the facts and circumstances.” Taken together these averments and documents satisfied statutory requirement and gave sufficient prima facie basis for issuance of summons. The High Court’s quashing under Section 482 Cr.P.C. was therefore held to be perfunctory and erroneous because issues of authorisation and knowledge were triable facts, not matters for curtailing prosecution at threshold.

a. RATIO DECIDENDI

The core ratio is that where the payee is a firm and the complaint is in its name, the representative who prosecutes the complaint need only be shown, from the complaint and supporting affidavits/documents, to be duly authorised and to have knowledge of the transactions; an express, formulaic recital of “I personally witnessed” is unnecessary if the context and averments demonstrate that the power-of-attorney holder was in charge and had requisite knowledge. Accordingly, the Magistrate is entitled to take cognizance relying on affidavit-verification under Section 200 Cr.P.C. and to summon accused where prima facie material exists; disputes on authorisation/knowledge are ordinarily matters to be litigated at trial.

b. OBITER DICTA

The Court reiterated that inherent jurisdiction under Section 482 Cr.P.C. must be exercised sparingly and not to scuttle fair prosecution; dismissal at threshold on authorisation ground is not warranted where prima facie record supports complaint. The Court also observed that the function and drafting skill of pleadings vary and technical formalism should not defeat substantive rights; what constitutes “explicit averment” must be gathered from circumstances and manner of pleading.

c. GUIDELINES 

1. Complaint under Section 138 must be in the name of the payee/holder-in-due-course to satisfy Section 142.

2. When payee is a firm/corporate entity, an authorised employee or power-of-attorney holder may represent it; authorisation can be demonstrated by letter of authority, resolution or other record.

3. Power-of-attorney holder must possess personal knowledge of the transactions or be the person in charge of business affairs; this knowledge may be shown contextually through averments and documents.

4. Magistrate may rely on affidavit verification under Section 200 Cr.P.C. and exercise discretion whether to call oral oath-examination.

5. 482 Cr.P.C. should not be used to quash complaints at threshold where prima facie material of authorisation and knowledge exists; such disputes should be left for trial.

J) CONCLUSION & COMMENTS

The decision restores pragmatic balance between preventing abuse of criminal process and ensuring access to statutory remedy for cheque dishonour. By treating the sufficiency of authorisation and knowledge as a contextual, evidence-driven inquiry rather than a rigid technicality, the Court curbs hyper-technical dismissals while preserving accused’s right to contest legitimacy at trial. The judgment aligns with earlier precedents (notably TR L Krosaki, National Small Industries Corporation and contextual reading of A.C. Narayanan) and reinforces that magistrates should ordinarily accept affidavit-verification when prima facie material exists.

For practitioners, the judgment underlines the importance of attaching clear documentary authorisation and concise averments of knowledge when a representative files a complaint; but it also warns respondents against seeking summary quashing under Section 482 where the record prima facie supports cognizance. The ruling thereby strengthens substantive enforcement of negotiable-instrument liabilities while guarding against frivolous criminalization, by reserving contested credibility and authorisation issues for full trial.

K) REFERENCES

a. Important Cases Referred

1. M/s Naresh Potteries v. M/s Aarti Industries and Another, [2025] 1 S.C.R. 40 : 2025 INSC 1.

2. TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd. & Anr., 2022 INSC 214 : [2022] 2 SCR 268 : (2022) 7 SCC 612.

3. A.C. Narayanan v. State of Maharashtra & Anr., 2015 INSC 69 : [2015] 11 SCR 1016 : (2014) 11 SCC 790.

4. National Small Industries Corporation Ltd. v. State (NCT of Delhi) & Ors., 2008 INSC 1308 : [2008] 16 SCR 83 : (2009) 1 SCC 407.

5. M.M.T.C. Ltd. & Anr. v. Medchl Chemicals & Pharma P. Ltd. & Anr., 2001 INSC 572 : [2001] Supp. 5 SCR 265 : (2002) 1 SCC 234.

6. Janki Vashdeo Bhojwani & Anr. v. IndusInd Bank Ltd. & Ors., 2004 INSC 695 : [2004] Supp. 6 SCR 681 : (2005) 2 SCC 217.

7. Praveen v. Mohd. Tajuddin, (2009) 12 SCC 706.

8. Shankar Finance & Investments v. State of Andhra Pradesh & Ors., 2008 INSC 763 : [2008] 10 SCR 905 : (2008) 8 SCC 536.

9. Vinita S. Rao v. Essen Corporate Services Pvt. Ltd. & Anr., 2014 INSC 643 : (2015) 1 SCC 527.

10. Samrat Shipping Co. (P) Ltd. v. Dolly George, (2002) 9 SCC 455.

b. Important Statutes Referred

1. Negotiable Instruments Act, 1881 (Sections 138, 142, 145).

2. Code of Criminal Procedure, 1973 (Sections 190, 200, 482).

3. Indian Penal Code, 1860 (sections forming background FIR allegations).