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Cheque Bounce Case Through POA Holder Maintainable: Supreme Court 2025
M/s Naresh Potteries v. M/s Aarti Industries and Another (2025 INSC 1)
In a significant judgment on cheque bounce cases, the Supreme Court has held that a complaint under Section 138 of the Negotiable Instruments Act can be filed through a duly authorised Power of Attorney holder, provided such person has personal knowledge of the transaction. The ruling strengthens the position of proprietorship firms, companies, and business entities that act through authorised representatives.
In an important judgment concerning cheque bounce litigation, the Supreme Court of India has clarified that a complaint under Section 138 of the Negotiable Instruments Act, 1881 can be filed through a duly authorised Power of Attorney (POA) holder, provided that such authorised representative has personal knowledge of the transaction.
The ruling came in the case of M/s Naresh Potteries v. M/s Aarti Industries & Another (2025 INSC 1), where the Supreme Court restored a cheque bounce complaint that had earlier been quashed by the High Court.
This judgment is particularly important for business entities, proprietorship firms, and companies that frequently initiate cheque dishonour proceedings through managers, accountants, or authorised representatives.
Background of the Case
The dispute arose from a commercial transaction between M/s Naresh Potteries and M/s Aarti Industries.
The appellant firm supplied polymer insulator scrap rejected material to the respondent for a total value of approximately ₹1,70,46,314.
After receiving the goods, the respondent issued a cheque towards payment of the outstanding liability. However, when the cheque was presented to the bank, it was dishonoured with the remark “Exceeds Arrangement.”
Dishonour of a cheque due to insufficient funds or exceeding arrangement constitutes an offence under Section 138 of the Negotiable Instruments Act, 1881, subject to compliance with statutory notice requirements.
Following the dishonour of the cheque, the appellant initiated legal proceedings under the NI Act.
Filing of Complaint Through Power of Attorney Holder
The complaint was filed by Neeraj Kumar, who was:
• Manager of the appellant firm
• Authorised Power of Attorney holder of the proprietor
The complaint was filed on behalf of the firm under Section 138 of the Negotiable Instruments Act, 1881, alleging dishonour of cheque issued towards legally enforceable liability.
However, the accused challenged the maintainability of the complaint before the High Court.
Allahabad High Court Decision
The High Court quashed the criminal proceedings by exercising its inherent powers under Section 482 of the Code of Criminal Procedure, 1973.
The High Court held that:
The complaint did not clearly state that the Power of Attorney holder had personal knowledge of the transaction.
The letter of authority and affidavit allegedly lacked specific pleadings showing such knowledge.
On this basis, the High Court concluded that the complaint was defective and not maintainable.
Issue Before the Supreme Court
The main legal question before the Court was:
Whether a cheque bounce complaint filed by a Power of Attorney holder on behalf of the payee is valid under Section 142 of the Negotiable Instruments Act.
Supreme Court’s Analysis
The Bench comprising Justice B. R. Gavai and Justice K. V. Viswanathan examined the statutory provisions and previous precedents.
The Court noted that Section 142 of the Negotiable Instruments Act, 1881 requires that:
The complaint must be filed by the payee, or
The holder in due course of the cheque.
However, the Court clarified that business entities and firms function through human agents, and therefore complaints can be filed through authorised representatives.
Role of Personal Knowledge
The Court emphasised that an authorised representative must have knowledge of the facts relating to the transaction.
Requirement of Personal Knowledge
The Supreme Court emphasised that when a complaint is filed through an authorised representative or Power of Attorney holder, such person must have knowledge of the transaction forming the basis of the complaint.
In the present case, the Court noted that:
• Neeraj Kumar was the manager of the firm
• He handled the day-to-day affairs of the business
• He was fully acquainted with the commercial dealings leading to issuance of the cheque
Accordingly, the Court held that the requirement of personal knowledge was satisfied.
Reliance on Previous Supreme Court Judgments
The Court relied on earlier precedents to clarify the legal position.
National Small Industries Corporation Ltd. v. State (NCT of Delhi) (2009)
In this case, the Court held that a company can file a complaint through an authorised employee who represents the company.
TRL Krosaki Refractories Ltd. v. SMS Asia Pvt. Ltd. (2022)
The Court reiterated that when a company is the payee of the cheque, the complaint must be in the name of the company but may be filed through an authorised representative having knowledge of the transaction.
Drafting Precautions for Filing Cheque Bounce Complaints Through POA Holder
In light of this judgment, the following precautions should be taken while filing a complaint under Section 138 NI Act through an authorised representative:
• The complaint should clearly state that the representative is duly authorised.
• The complaint should mention how the representative has knowledge of the transaction.
• Proper Power of Attorney or authority letter must be placed on record.
• The representative’s affidavit should confirm familiarity with the transaction and cheque issuance.
Proper drafting helps avoid unnecessary objections regarding maintainability.
Supreme Court’s Observations
The Court strongly criticised the High Court’s approach.
It observed that:
The High Court misread the documents on record.
The letter of authority and affidavits clearly indicated that the POA holder had knowledge of the transaction.
Quashing the complaint at such an early stage was unjustified.
The Court further emphasised that the inherent powers under Section 482 of the Code of Criminal Procedure, 1973 must be exercised sparingly and with great caution.
Conclusion
The Supreme Court has reaffirmed that technical objections should not defeat legitimate cheque bounce complaints.
Where a complaint is filed through a duly authorised Power of Attorney holder who has knowledge of the transaction, the complaint remains legally maintainable under the Negotiable Instruments Act, 1881.
This judgment strengthens the position of companies, proprietorship firms, and commercial entities pursuing cheque dishonour cases.
Final Judgment
The Supreme Court of India allowed the appeal and held that the complaint filed by the Power of Attorney holder was valid and maintainable.
The Court therefore:
Set aside the Allahabad High Court judgment, and
Restored the cheque bounce complaint filed by the appellant firm.
Key Legal Principles from the Judgment
This case establishes the following important principles:
1. A complaint under Section 138 NI Act can be filed through a Power of Attorney holder.
2. The POA holder must be duly authorised by the complainant.
3. The POA holder should have personal knowledge of the transaction.
4. Courts should avoid premature quashing of criminal proceedings in cheque bounce cases.
Practical Importance of the Judgment
This ruling is highly significant for businesses and commercial entities, because many firms conduct their affairs through authorised employees or managers.
The judgment clarifies that a cheque bounce complaint cannot be dismissed merely because it is filed through a Power of Attorney holder, provided the representative is properly authorised and has knowledge of the transaction.
Case Citation
Case:
M/s Naresh Potteries v. M/s Aarti Industries and Another (2025 INSC 1)
Court:
Supreme Court of India
Bench:
Justice B. R. Gavai and Justice K. V. Viswanathan
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