Bounced cheques worth Rs 1.1 crore — but High Court quashed the case. Why?

A company got seven cheques worth Rs 1.1 crore. All bounced. They filed a case. The High Court killed it. The Supreme Court just revived it — and slammed the High Court.

The question that hung over the case was deceptively simple: could a company's General Manager (Accounting), who had personally witnessed the deal and reconciled the accounts, file a criminal complaint on the company's behalf — or did the law demand a separate, formal power of attorney for every signature on every document?

When the cheques came back — stamped 'account closed'

TRL Krosaki Refractories, a company based in Odisha, received seven cheques from SMS Asia Private Limited. The total amount was Rs 1.10 crore — a substantial sum by any measure. The cheques were drawn in TRL Krosaki's favour.

When TRL Krosaki presented them for payment, the bank returned every single one. The endorsement stamped on each cheque read: "account closed." The company's accounting department must have felt the weight of that phrase — seven times over, each cheque representing a broken promise of payment.

The company sent legal notices demanding payment. SMS Asia did not respond. The silence from the other side was complete. No reply, no explanation, no offer to make good the amount.

TRL Krosaki then filed a criminal complaint under Sections 138 and 142 of the Negotiable Instruments Act, 1881 — the provisions that deal with cheque bouncing. The complaint was filed through the company's General Manager (Accounting). This officer had witnessed the underlying business agreement between the two companies. He had also handled the reconciliation of accounts that led to the cheques being issued. His signed affidavit accompanied the complaint, a sworn statement that he knew the facts personally.

The trial court — the SDJM (Sub-Divisional Judicial Magistrate) at Panposh, Uditnagar Rourkela, later transferred to Jharsuguda — took cognizance (formally accepted the complaint for consideration) and issued summons to SMS Asia. The magistrate's nod was the first green light in a long journey. The complaint was registered as I.C.C. Case No.422 of 2015.

The High Court's intervention — a case killed on paper

SMS Asia did not go to trial quietly. Instead, they approached the Orissa High Court at Cuttack with a petition under Section 482 of the CrPC (the High Court's inherent power to quash proceedings that are an abuse of process).

Their argument was specific: the General Manager who filed the complaint was not properly authorised. He lacked a formal power of attorney. He did not have sufficient knowledge of the transaction. Therefore, the complaint was defective from the start.

The High Court agreed. Relying on the Supreme Court's earlier judgment in A.C. Narayanan v. State of Maharashtra (2014), the High Court held that the complaint lacked proper averments — formal statements — regarding the authorisation and knowledge of the person filing it. The court quashed the cognizance order on 14 December 2017. The case was dead. The file, thin as it was, was closed.

TRL Krosaki appealed to the Supreme Court.

What the Supreme Court saw differently — the bench's careful reading

The Supreme Court bench — Justices N.V. Ramana, A.S. Bopanna, and Hima Kohli — heard the appeal on 22 February 2022. They found a fundamental problem with the High Court's reasoning.

Section 142(1)(a) of the Negotiable Instruments Act requires that a complaint for cheque bouncing must be made by the payee — the person to whom the cheque was written — or by the holder in due course. When the payee is a company, the complaint must be in the company's name. But who signs it on behalf of the company?

The Supreme Court held that an indication in the complaint and the sworn statement that the company is represented by an authorised person who has knowledge of the transaction is prima facie (on the face of it) sufficient for the Magistrate to take cognizance. The averment of authorisation and knowledge need not follow any particular format. It must be gathered from the circumstances and the manner in which it is stated, based on the facts of each case.

In this case, the General Manager (Accounting) had witnessed the business agreement. He had handled the account reconciliation. He had personal knowledge of the transaction. The complaint stated that he was duly authorised. That was enough to let the case proceed to trial.

Why the High Court's reading was wrong — a deeper look at the ratio

The Supreme Court clarified that the requirement in A.C. Narayanan of a "specific assertion" and "explicit" averment regarding the knowledge of the power of attorney holder "cannot be understood to mean that the assertion must be in any particular manner." When the complainant is a company — as distinguished from an individual payee using a power of attorney holder — the position must be viewed from a different standpoint.

A company acts through its employees. An authorised employee representing the company with prima facie material showing knowledge of the transaction is sufficient. The law does not require a separate, notarised power of attorney for every employee who signs a complaint.

The court also noted that if there is any serious dispute regarding the authorisation of the person prosecuting the complaint or whether that person has knowledge of the transaction, it is open for the accused to dispute and establish the same during trial. Dismissal of a complaint at the threshold — or quashing under Section 482 CrPC — on such grounds is unjustified.

The High Court had effectively decided a factual dispute without a trial. That, the Supreme Court said, was an error. The seven precedents cited in the judgment — from Vishwa Mitter v. O.P. Poddar to Vinita S. Rao v. Essen Corporate Services — all pointed in one direction: authorisation is a matter for trial, not for a summary kill.

The procedural journey itself told a story. The complaint was first registered as I.C.C. Case No.422 of 2015 before the SDJM, Panposh, before being transferred to Jharsuguda. Cognizance was taken on 5 November 2015. The High Court quashed it on 14 December 2017. The Supreme Court restored it on 22 February 2022. Nearly seven years had passed since the cheques bounced, and the case was only now returning to the trial court.

The Rs 1 lakh cost and the message

The Supreme Court set aside the Orissa High Court's order dated 14 December 2017. The complaint — I.C.C. Case No. 422 of 2015 — was restored to the file of the SDJM, Jharsuguda. The court directed that the complaint be listed on 15 March 2022, and that the respondent shall appear without fresh summons. The complaint must be concluded within six months.

And then came the sting: the appeal was allowed with costs of Rs 1,00,000 — to be paid by SMS Asia to TRL Krosaki. The amount was not trivial. It was a judicial signal: frivolous challenges to properly filed complaints will carry a price tag.

THE PLAY: When a company files a cheque-bouncing complaint, an authorised employee with personal knowledge of the transaction can sign the complaint — no separate power of attorney is needed at the threshold, and the High Court cannot quash the case on disputed questions of authorisation.

The seven cheques were worth Rs 1.1 crore. The High Court killed the case on a technicality. The Supreme Court brought it back to life — and made the party that killed it pay.