Can Holder File Section 138 Complaint? Key Rules
In the fast-paced world of business, cheque transactions are commonplace, but dishonours under () can lead to serious legal battles. A frequent scenario involves cheques drawn by companies and signed by their directors. This raises a critical question: When a Cheque Drawn by a Company has been Dishonoured, will the Directors of the Company in Person be Held Liable if the Cheque is Signed by them? While directors may face liability if they are responsible signatories and in charge of the company's affairs, successfully prosecuting such cases often depends on the complaint being properly filed and verified—frequently by a Power of Attorney () holder acting for the complainant.
This post delves into the legal nuances of whether a holder can file and verify complaints under Section 138 , emphasizing the indispensable requirement of . Drawing from key judgments and precedents, we'll explore validity, exceptions, and practical recommendations. Note: This is general information based on judicial trends; it is not legal advice. Consult a qualified lawyer for your specific situation.
Main Legal Finding
The law generally permits a Power of Attorney () holder to file and verify a complaint under Section 138 , provided the holder has of the transaction and explicitly asserts such knowledge in the complaint2022 3 Supreme 147
. If the complainant's has already been marked during proceedings and the holder becomes unavailable or laid up, their ability to continue depends on demonstrating prior supported by affidavits or evidence on record
.
This principle ensures that evidence is reliable and not based on , which is particularly vital in company cheque cases where details like who signed the cheque (often directors) must be known to establish liability.
Key Points
- A holder can file and verify a Section 138 complaint if they have of the transaction2022 3 Supreme 147
.
- If the complainant's is already marked and the holder is unavailable, proceedings remain valid only if is established via prior or evidence
.
- Evidence must stem from ; or lack of direct knowledge invalidates proceedings2022 3 Supreme 147
.
- In company cases, the holder must know transaction specifics, including who signed the cheque2024 Supreme(Online)(KER) 13476 2024 Supreme(Online)(KER) 49206.
Detailed Analysis
Legal Principles for Holders Filing Complaints
Courts have consistently ruled that a holder can depose and verify complaints under Section 138 . As held: The Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions2022 3 Supreme 147. The complaint is valid if the holder explicitly states their therein
.
The Supreme Court has addressed this directly: Whether a power-of-attorney holder can sign and file a complaint petition on behalf of the complainant? Whether the eligibility criteria prescribed by Section 138 of the filed by the power of attorney holder on behalf of the original complainant and the necessity of specific averments as to the knowledge of the power of attorney2025 Supreme(Online)(SC) 4305. Specific averments are mandatory.
Impact When is Already Marked
Once the complainant's is marked as evidence, a holder with can proceed even if the original complainant is unavailable. Courts note: The evidence of the complainant on and that of the accused cannot be equated. The provisions of being procedural in nature would apply to the cases that were pending on the date the provisions came into force2005 0 Supreme(Bom) 559. Thus, prior affidavits bolster the holder's position
.
Scenarios When Holder is Unavailable or Laid Up
If the holder, having filed a marked based on , becomes unavailable, proceedings can continue if the record supports it. In one case: The complaint was originally filed by Shibu.L.P, the complainant. There is no mention in the complaint to the effect that the transaction was witnessed by the power of attorney holder, PW1. It was during evidence, PW1 the power of attorney holder filed chief and in the chief he had stated that he was aware of the facts of this case
. remains insufficient.
For company complainants: Even though PW1 is not the power of attorney holder of the company, during cross examination his evidence is that he did not know the transaction, who signed the cheque, and executed the cheque, directly. He also did not know who wrote the cheque. It is required by the complainant to make specific assertion as to the knowledge of the power of attorney2024 Supreme(Online)(KER) 13476 2024 Supreme(Online)(KER) 49206. Lack of knowledge about signatories (e.g., directors) weakens the case.
and Competency
During , holders' knowledge is rigorously tested. I am not oblivious of the fact that during , PW1, the power of attorney holder, stated that he had regarding the transaction in this case2025 Supreme(Online)(Ker) 26738. Courts verify if the holder is competent to depose on the complainant's behalf
.
In trials, holders as PW1 mark documents (e.g., Exts. P1 to P7) if knowledge is proven 2025 Supreme(Online)(Ker) 42398. For remote , courts may appoint commissions under IND_Delhi_CRLMC-2385_ _DHC_3501 2022 Supreme(Online)(DEL) 3894.
Exceptions and Limitations
- holders cannot proceed without , regardless of prior affidavits2022 3 Supreme 147.
- Mere marking of affidavits without proven knowledge is inadequate2022 3 Supreme 147.
- If not examined or lacking knowledge, attempts to proceed may fail
.
- No specific mention of transaction witnessing in complaint invalidates deposition
.
Recommendations for Complainants
- Confirm holder's before filing under Section 138.
- Explicitly state knowledge in the complaint or to avoid challenges.
- If is marked and is unavailable, rely on record evidence demonstrating knowledge.
- In company cheque cases targeting directors, ensure knows signing details.
- Consider affidavits under Section 145 ; oral examination isn't always mandatory.
Key Takeaways and Conclusion
holders play a pivotal role in Section 138 proceedings, especially for busy complainants or companies pursuing directors for dishonoured cheques. However, is the cornerstone—without it, even marked affidavits falter. Judgments like those in 2022 3 Supreme 147 and
underscore this, reinforced by cases stressing specific averments and scrutiny 2025 Supreme(Online)(SC) 4305 2025 Supreme(Online)(Ker) 26738.
In essence, a properly examined holder demonstrating can effectively prosecute cheque dishonour cases, even if the complainant is unavailable, provided authority and knowledge are explicitly documented. This upholds justice while preventing abuse.
For tailored advice, especially on directors' liability in company matters, seek professional legal counsel. Stay informed to safeguard your financial transactions!
References
- 2022 3 Supreme 147: holder must have ; can depose if witnessed transaction.
: Prior affidavits support if knowledge asserted; invalid.
- 2025 Supreme(Online)(SC) 4305: Eligibility and averments for filing.
- 2024 Supreme(Online)(KER) 13476, 2024 Supreme(Online)(KER) 49206: Knowledge of cheque signatory required in company cases.
- Other cited precedents on examination and commissions.
