Procedural Irregularities in Section 138 NI Act Complaints Do Not Vitiate Conviction Absent Failure of Justice: Kerala High Court - 2026-05-18

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Procedural Lapses in Cheque Dishonour Cases: When Do They Defeat Justice?

In a significant order clarifying the threshold for overturning criminal convictions, the High Court of Kerala recently addressed whether a technical defect in the initial filing of a complaint under Section 138 of the Negotiable Instruments Act (NI Act) could invalidate a lower court’s verdict. Justice G. Girish held that procedural irregularities regarding the "personal knowledge" of a Power of Attorney holder do not automatically render a conviction unsustainable, particularly when the original complainant has actively participated in the trial.

The Case Background

The matter stemmed from the dishonor of two cheques issued by the petitioner (Kannan) to the complainant, M/s. Adisiva Enterprises , for amounts totaling Rs. 29,75,000. Following the dishonor, a complaint was filed by the complainant's Power of Attorney holder. Both the Chief Judicial Magistrate Court, Kollam, and the Additional Sessions Court-VI, Kollam, convicted the petitioner, sentencing him to six months in prison and ordering compensation of Rs. 29,50,000.

The petitioner approached the Kerala High Court in a criminal revision petition, arguing that because the initial complaint lacked a statement affirming the Power of Attorney holder’s "direct personal knowledge" of the transactions, the entire prosecution was legally flawed.

Arguments of the Parties

The Petitioner contended that the Magistrate acted outside his powers by taking cognizance of the complaint. Relying on the Supreme Court judgments in Naresh Potteries v. M/s. Aarti Industries and Narayanan A.C. v. State of Maharashtra , the counsel argued that the failure to state personal knowledge in the complaint document itself was a fatal flaw that warranted setting aside the conviction.

The State and the Respondent maintained that the technicality was moot because the complainant himself appeared as PW1 during the trial and provided detailed evidence regarding the transaction. They argued that the petitioner had ample opportunity to cross-examine the complainant, and thus, no "failure of justice" occurred.

Legal Analysis: The "Failure of Justice" Test

The Court’s analysis hinged on Section 465 of the Code of Criminal Procedure. serves as a safeguard, preventing appellate or revision courts from reversing convictions based on mere errors or irregularities in proceedings, unless a "failure of justice" has demonstrably occurred.

Justice G. Girish distinguished the present case from the precedents cited by the petitioner. He noted that in Naresh Potteries and Narayanan A.C. , the challenges to the complaints were raised promptly, at the initial stages of the proceedings. In the present case, the petitioner waited until the revision stage to challenge the procedural regularity.

"The legislature imposed a prohibition that unless such error, omission or irregularity has occasioned 'a failure of justice' the superior Court shall not quash the proceedings merely on the ground of such error," the Court observed.

Key Observations

• On the nature of procedural defects: "The error, omission or irregularity in the proceedings held before or during the trial or in any enquiry were reckoned by the legislature as possible occurrences in criminal Courts."
• On testing 'Failure of Justice': "The expression 'failure of justice' would appear, sometimes, as an etymological chameleon... The criminal Court, particularly the superior Court should make a close examination to ascertain whether there was really a failure of justice or whether it is only a camouflage."
• On the role of the complainant: "It is by relying on the aforesaid evidence that the Trial Court and the Appellate Court found the petitioner guilty... and resorted to the conviction and sentence."

Court’s Decision and Practical Implications

The High Court upheld the petitioner’s conviction, affirming that the evidentiary trial cured any initial procedural irregularity. However, acknowledging the nature of the offence, the Court exercised its discretion to modify the sentence.

The six-month term of simple imprisonment was reduced to "imprisonment till the rising of the Court." Importantly, the order to pay Rs. 29,50,000 in compensation remains intact, with the default clause for non-payment still in effect.

This ruling serves as a vital reminder to litigants: technical challenges regarding the competence of a representative should be raised promptly at the trial court level. Once a trial has concluded and the original complainant has substantiated the claims via testimony, procedural technicalities will rarely provide a shield against conviction.