High Court's Ruling on Power of Attorney in Cheque Dishonour Case

Background

In a significant ruling, the Supreme Court has overturned a decision by the Allahabad High Court regarding a cheque dishonour case involving M/s Naresh Properties and M/s Aarti Industries. The case arose when M/s Aarti Industries issued a cheque for ₹1,70,46,314 to M/s Naresh Properties , which was subsequently dishonoured due to insufficient funds. The appellant, M/s Naresh Properties , filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, but the High Court quashed the complaint, leading to the current appeal.

Arguments

The appellant, represented by Senior Counsel Mr. Navin Pahwa, argued that the High Court's decision was based on an incorrect interpretation of the law, specifically regarding the authority of the power-of-attorney holder, Neeraj Kumar . The appellant contended that Neeraj Kumar had personal knowledge of the transaction and was duly authorized to file the complaint. Conversely, the respondent, M/s Aarti Industries, claimed that the complaint was defective as it lacked specific averments regarding Kumar 's knowledge of the transaction.

Court's Analysis and Reasoning

The Supreme Court analyzed the legal requirements under Section 138 and Section 142 of the NI Act, emphasizing that a complaint must be filed by the payee or holder in due course of the cheque. The Court noted that the power-of-attorney holder could initiate legal proceedings on behalf of the principal, provided they possess personal knowledge of the facts. The Court found that the documents submitted, including the Letter of Authority and affidavits, clearly indicated that Neeraj Kumar was well-versed with the transaction and had the authority to act on behalf of M/s Naresh Properties .

Decision

The Supreme Court allowed the appeal, reinstating the complaint against M/s Aarti Industries. The Court emphasized that the High Court's quashing of the complaint was unwarranted and based on a misinterpretation of the law. The ruling underscores the importance of recognizing the authority of power-of-attorney holders in cheque dishonour cases, ensuring that legitimate claims are not dismissed on procedural grounds. The case has been remanded to the Additional Chief Judicial Magistrate for further proceedings.