A) ABSTRACT / HEADNOTE
The Supreme Court in M/s Naresh Potteries v. M/s Aarti Industries and Another addressed the issue of whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) could be validly filed by a power of attorney holder and manager of the complainant firm. The Court ruled that the requirement under Section 142 of the NI Act is satisfied if the complaint is filed in the name of the payee and that an authorized representative with personal knowledge of the transactions can validly file and pursue the complaint. The High Court had erroneously quashed the complaint, relying on the assumption that the power of attorney holder lacked personal knowledge, despite clear averments in the complaint, letter of authority, and affidavit. The Supreme Court held that quashing of the complaint at a preliminary stage was unwarranted and restored the complaint to the trial court for adjudication on merits.
Keywords:
- Cognizance of offence
- Power of attorney holder
- Summoning order
- Specific pleading in Letter of Authority
- Affidavit of power of attorney holder under Section 200 Cr.P.C.
- Personal knowledge of facts
- De jure complainant
- De facto complainant
- Payee or holder of cheque
- Affidavit of evidence under Section 200 Cr.P.C.
- Inherent powers under Section 482 Cr.P.C.
- Fair investigation or prosecution
B) CASE DETAILS
i) Judgement Cause Title
M/s Naresh Potteries v. M/s Aarti Industries and Another
ii) Case Number
Criminal Appeal No. 07 of 2025
iii) Judgement Date
02 January 2025
iv) Court
Supreme Court of India
v) Quorum
- Justice B.R. Gavai
- Justice K.V. Viswanathan
vi) Author
Justice B.R. Gavai
vii) Citation
[2025] 1 S.C.R. 40 : 2025 INSC 1
viii) Legal Provisions Involved
- Negotiable Instruments Act, 1881 – Sections 138, 142
- Code of Criminal Procedure, 1973 – Sections 190, 200, 482
- Indian Penal Code, 1860 – Sections 420, 467, 468, 471
ix) Judgments Overruled by the Case
None
x) Case is Related to Which Law Subjects
- Criminal Law
- Negotiable Instruments Act
- Cheque Dishonour Cases
C) INTRODUCTION AND BACKGROUND OF JUDGMENT
This case revolves around dishonour of a cheque and subsequent criminal proceedings under Section 138 of the NI Act. The core legal question was whether a complaint could be filed by a power of attorney holder of a company without explicit averments regarding his personal knowledge of the transaction. The High Court quashed the criminal proceedings, holding that the manager of the complainant firm lacked personal knowledge, thus rendering the complaint defective. The Supreme Court examined whether this interpretation was legally sound and reinstated the complaint.
D) FACTS OF THE CASE
Business Transaction and Dishonour of Cheque
M/s Naresh Potteries (Appellant) is engaged in the manufacture and sale of polymer insulators and crockeries. Respondent No.1, M/s Aarti Industries, represented by its sole proprietor Sunita Devi, purchased scrap polymer insulators worth ₹1,70,46,314/- from the appellant between June 18, 2021, and July 2, 2021.
To settle this amount, Sunita Devi issued Cheque No. 086295 dated July 10, 2021, drawn on Central Bank of India in favour of M/s Naresh Potteries. When the appellant presented the cheque for encashment on July 12, 2021, it was dishonoured due to “exceeds arrangement”, indicating insufficient funds.
Legal Notice and Counter Allegations
On July 15, 2021, M/s Naresh Potteries, through its sole proprietor Shakti Khanna, sent a legal notice to Respondent No.1 demanding payment. However, as a counter-blast, Sunita Devi’s son, Angad, filed an FIR against seven accused, including the appellant, alleging that the cheque was fraudulently obtained.
Complaint Under Section 138 NI Act
Subsequently, on August 31, 2021, Shakti Khanna executed a Letter of Authority in favour of Neeraj Kumar, the manager of M/s Naresh Potteries, authorizing him to file a criminal complaint under Section 138 NI Act. On September 8, 2021, Neeraj Kumar filed Complaint No. 701 of 2021 before the Additional Chief Judicial Magistrate, who, upon considering the supporting affidavit of evidence under Section 200 Cr.P.C., issued a summoning order against Sunita Devi on November 22, 2021.
E) LEGAL ISSUES RAISED
i) Whether a complaint under Section 138 of the NI Act, filed by a power of attorney holder without an explicit assertion of personal knowledge, is maintainable under Section 142 of the NI Act?
F) PETITIONER/APPELLANT’S ARGUMENTS
- The High Court quashed the complaint on an incorrect interpretation of A.C. Narayanan v. State of Maharashtra & Anr. (2015) 11 SCC 790.
- Neeraj Kumar was the manager of the complainant firm, handled daily transactions, and was fully conversant with the facts.
- The Letter of Authority, affidavits under Sections 200 Cr.P.C., and the complaint itself, sufficiently established his knowledge.
- The Magistrate’s discretion in taking cognizance based on affidavits under Section 145 NI Act was wrongly interfered with by the High Court.
- The issue of whether Neeraj Kumar had personal knowledge was a matter of trial, not a ground for quashing at the initial stage.
G) RESPONDENT’S ARGUMENTS
- Neeraj Kumar had no personal knowledge, and the complaint lacked explicit averments about his awareness.
- Section 142 NI Act requires a complaint by the payee, and mere authorization is not sufficient.
- The High Court correctly quashed the complaint, preventing misuse of criminal proceedings.
H) JUDGMENT
a. Ratio Decidendi
- A power of attorney holder can file a complaint under Section 138 NI Act if the complaint is in the name of the payee and the representative has personal knowledge.
- The Magistrate has discretion to determine prima facie evidence at the summoning stage, and the issue of personal knowledge should be decided at trial.
- The High Court wrongly applied A.C. Narayanan, ignoring the distinction between individual payees and companies.
b. Obiter Dicta
- Dismissing cheque dishonour complaints at a preliminary stage merely due to technical deficiencies in the complaint would defeat the purpose of the NI Act.
- Quashing orders should be issued sparingly under Section 482 Cr.P.C.
c. Guidelines Issued
- The requirement of personal knowledge must be determined based on circumstantial evidence, including supporting affidavits and letters of authority.
I) CONCLUSION & COMMENTS
The judgment strengthens the right of power of attorney holders to file Section 138 NI Act complaints, provided they demonstrate personal knowledge. The Supreme Court corrected the High Court’s erroneous quashing order, ensuring that technical objections do not frustrate legitimate cheque bounce complaints.
J) REFERENCES
a. Important Cases Referred
- TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd., (2022) 7 SCC 612
- A.C. Narayanan v. State of Maharashtra, (2015) 11 SCC 790
- National Small Industries Corp. Ltd. v. State (NCT of Delhi), (2009) 1 SCC 407
