Bombay High Court
Pancham International Limited And ... vs Shevam S/O Jugalkishor Kothari And 2 ... on 20 August, 2025
2025:BHC-NAG:8266
wp.425.2024.Judgment.odt
(1)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
CRIMINAL WRIT PETITION NO.425 OF 2024
1. Pancham International Ltd.,
A Company registered under the provisions
of Companies Act, 1956 having its office
at 1108, 11th Floor, Om Tower - 32,
Chowringhee Road, Kolkata (WB) - 700071.
2. Bimal Singh Kothari,
Adult, Occupation : Business,
Having business at 123,
12th Floor, B - wing, (original Accused Nos.1 and 3)
Mittal Court, 224,
Nariman Point, Mumbai 400 021. ..... PETITIONERS
// VERSUS //
1. Shevam s/o Jugalkishore Kothari
Aged about 38 Years,
Occupation : Business,
Proprietor of M/s Ramchandra
Ramgaopal Financial Services,
Having office at Gorakshan Road,
Akola, District Akola. ... (Original Complainant)
2. Rajendra Kumar Baid,
Adult, Occupation : Business,
Having office at 1108, 11th Floor,
Om Tower - 32, Chowringhee Road,
Kolkata (WB) - 700071. ... (Original Accused No.2)
3. Dhyan Chand Swami,
Adult, Occupation - Business,
Having business at 123, 12th Floor, .... RESPONDENTS
B-wing, Mittal Court, 224,
Nariman Point, Mumbai 400 021. (Orig. Accused No.4)
4. State of Maharashtra ... Deleted
Proforma Respondent
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(2)
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Mr. A. S. Mardikar, Senior Counsel a/b Mr. Rohan Chandurkar with
Mr. Benny Joseph, Counsel for the petitioners.
Mr. M. G. Sarda, Counsel for the respondent No.1.
Mr. Borwankar, Counsel for the respondent Nos.2 and 3.
-------------------------------------------
CORAM : URMILA JOSHI-PHALKE, J.
RESERVED ON : 16.07.2025
PRONOUNCED ON : 20.08.2025
JUDGMENT :
1. Rule. Rule made returnable forthwith. By consent of
parties, heard finally.
2. By present writ petition, the petitioners seek following
reliefs by invoking Articles 226 and 227 of the Constitution of India.
(a) It is therefore respectfully prayed that this Hon'ble
Court may kindly be pleased to call for records and
proceedings of Criminal Revision Application No.94/2022
(Pancham International Limited and 3 others Vs. Shevam s/o
Jugalkishore Kothari and 1 Another) from the Court of
Sessions Judge, Akola (date of disposal, 12th April 2024).
(b) And be further pleased to call the records and
proceedings of S.C.C. No.7222 of 2021 pending before the
learned Judicial Magistrate, First Class, 7 th Court, Akola and
after examining the correctness, legality and validity of the
said impugned judgment and order and the said impugned
order be further pleased to examine the correctness, legality
and validity thereof and be further pleased to issue an
appropriate writ, order and direction to set them aside and
quash them and also quash and set aside the impugned
wp.425.2024.Judgment.odt
judgment and order of learned Sessions Judge, Akola passed
in C.R.A. No.94/2022 dated 12 th April 2022 and the impugned
order passed by the Judicial Magistrate First Class, 7 th Court,
Akola in S.C.C. No. 7222 of 2021 dated 20th January, 2022.
(c) That pending and hearing final disposal of this petition
further proceedings in Criminal Case SCC No.7222/2021
pending before learned Judicial Magistrate, First Class, 7 th
Court, Akola may kindly be stayed.
(d) Ad-interim and interim reliefs in terms of prayer
clauses 'b' and 'c' may kindly be granted.
3. Petitioner No.1 is a Company duly incorporated under
the Companies Act. The respondent No.1 is the original complainant
filed a complaint through its Proprietor Ramchandra Ramgaopal
Financial Services. The complaint was filed by the complainant on
an allegation that the present petitioner No.1 Company had
purchased pulses, edible oil and other goods from Navalkishore
Kothari Sons which is a partnership firm having its office at Akola.
The transaction between the present petitioner No.1 and
Navalkishore Kothari Sons are prior to year 2002. An amount of
Rs.35,26,102/- was due and payable by the petitioner No.1 to
Navalkishore Kothari Sons as on 31.03.2002. It was agreed
between the petitioner No.1 and the Navalkishore Kothari Sons that
the petitioner No.1 shall pay interest on the outstanding amount at
the rate of 12% per annum. The petitioner No.1 had acknowledged
the amount payable to Navalkishore Kothari Sons in writing from
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time to time. These acknowledgements are for the amount along
with the interest. However, the petitioner No.1 failed to pay the
amount to Navalkishore Kothari Sons. On 06.04.2021, Navalkishore
Kothari Sons has transferred the debt due from the petitioner No.1
to the complainant. This transfer has been effected by way of
registered instrument duly signed for and on behalf of Navalkishore
Kothari Sons. As per this agreement, the complainant has agreed
to pay an amount of Rs.70,00,000/- to Navalkishore Kothari Sons
on or before 31.12.2021. In consideration thereof, it is agreed that
the complainant shall be entitled to receive, recover and retain the
amount from petitioner No.1. It was specifically informed the
complainant that in view of the acknowledgement given by the
petitioner No.1, the debt is within limitation.
4. After the aforesaid agreement, the complainant
contacted to the petitioners for recovery of the amount. During the
said meeting with the petitioners, the petitioners acknowledged the
amount due and during negotiation agreed to pay an amount of
Rs.75,00,000/- to the complainant towards full and final settlement
of the account. The petitioner No.2 and other co-accused were
present at the time of negotiation and final agreement upon the
amount. Accordingly, the petitioner company had issued a cheque
of Rs.75,00,000/- bearing No.818895 dated 21.07.2021 of Axis
Bank Limited in favour of the respondent - original complainant.
wp.425.2024.Judgment.odt
The petitioner No.1 company had assured that the cheque would be
honoured on its presentation to the bank for encashment.
Accordingly, the complainant presented the cheque through his
account with the Axis Bank on 14.10.2021. However, the cheque
has been dishonoured for the reason 'Account Closed'. Therefore,
the respondent - complainant issued a notice to the petitioners
through the Advocate on 20.10.2021 and called upon the petitioners
to make payment of the cheque amount. Despite the notice duly
served on petitioners on 23.10.2021, the petitioners failed to make
payment of the cheque amount within a period of 15 days and
therefore, the complainant was constrained to file the complaint.
5. The Magistrate has taken cognizance of the said
complaint and passed an order of issuance of process on
20.01.2022. Being aggrieved and dissatisfied with the order of
issuance of process, the petitioner along with its Directors
challenged the order by preferring Criminal Revision Application
No.94/2022. The said revision application came to be dismissed
and therefore, the petitioners approached to this Court for quashing
and setting aside the order of issuance of process and quashing of
the criminal proceeding.
6. The ground raised in the petition is that the petitioner
No.1 is a Company duly incorporated under the Companies Act,
1956 and did not transact any business before 2002 with the
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respondent No.1 - complainant or with his Predecessor, as alleged
in the complaint. The complaint is factually frivolous and filed with
sole and mala fide intention to harass and extract money from the
petitioners. It is further contended that the petitioners are not
bound by the agreement on which the respondent No.1-
complainant is relied upon as the petitioner was not a party to the
said agreement, therefore, the principles underlying the transfer of
actionable claim would not be applicable at all. The cheques were
neither issued by the petitioners nor its Director and therefore, the
order of issuance of process is liable to be quashed and set aside.
It is further contended that even accepting that there was a debt
which was transferred, it is time barred debt. In view of that also
the order of issuance of process is also liable to be quashed and set
aside.
7. Heard learned Senior Counsel Mr. Mardikar for the
petitioners, who submitted that the alleged cheque was issued
against the discharge of legal and enforceable debt. However, there
was no transaction between the petitioners and the original
complainant, who is respondent No.1 in the present petition. The
cheque was issued against the discharge of time barred debt. The
endorsement on the cheque is 'Account Closed', which does not
come within the purview of Section 138 of the Negotiable
Instruments Act (for short 'the N.I.Act'). The cheque was dated
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21.07.2021 i.e. after closure of the account. There was no
enforceable liability on the date of issuance of cheque. Verification
statement nowhere refers to the said agreement. No inquiry was
conducted under Section 202 of Code of Criminal Procedure (for
short 'the Cr.P.C.') as the petitioners were not party to the said
agreement and therefore, the provisions under Section 25(3) of the
Contract Act, will also not help the complainant. There was no legal
enforceable debt against the present petitioners. In view of that,
the petition deserves to be allowed.
8. Per contra, learned Counsel for the respondents
submitted that the petitioner No.2 and respondent Nos.2 and 3 and
the original accused No.5 were Directors of the petitioner's company
at the time of issuance of cheque. They failed to comply with the
statutory notice issued under Section 138 of the N.I.Act within the
prescribed period. The offence under Section 138 of the N. I. Act is
triggered upon the failure to pay the amount of the cheque. The
bank account upon which the cheque was drawn was closed on
03.10.2013. The phrase 'amount of money is insufficient' as it
appears in Section 138 of the N.I.Act is broad category and
dishonoured due to such reasons as the account closed falls within
the category derived under Section 138 of the N.I. Act. All the
individuals responsible for the conduct of the Company's business
are potentially lack up to prosecution. The contention of the
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petitioners that the petitioner No.2 along with the respondent Nos.
2 and 3 are not parties to the agreement dated 06.04.2001
between the respondent No.1 and his predecessor and there is no
privity of contract between the petitioners and the respondent No.1
is relevant. There was transfer of an actionable claim and
transaction between the creditor and transferee, the debtor's
participation in signing the agreement is not required. There need
not be any privity of contract between the transferee and the debtor
still the transfer is entitled to recover the amount from the debtor
and against the said liability the cheque was issued. The learned
trial Court as well as Revisional Court has considered this aspect
and rightly issued the process.
9. In support of the contention learned Senior Counsel for
the petitioners placed reliance on Abhijit Pawar Vs. Hemant
Madhukar Nimbalkar and another reported in (2017) 3 SCC
528, Vijay Dhanuka and others Vs. Najim Mamtaj and others
reported in (2014) 14 SCC 638, Odi Jerang Vs. Nabajyoti
Baruah and Ors. order passed by the Apex Court in Special
Leave to Appeal (Crl.) No.2135/2022 dated 22.08.2023,
Bansilal S. Kabra Vs. Global Trade Finance Limited and
another reported in (2024) SCC OnLine Bom 416.
10. Learned Counsel for the respondents also placed
reliance on P. Rasiya Vs. Abdul Nazer and another reported in
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2022 SCC OnLine SC 1131, Rajesh Jain Vs. Ajay Singh
reported in (2023) 10 SCC 148, Shankar Finance and
Investment vs. State of Andhra Pradesh and others reported
in (2008) 8 SCC 536, NEPC Micon Ltd. and others Vs. Magma
Leasing Ltd. reported in (1999) 4 SCC 253, Mr. Ritwik s/o
Milind Buddhisagar vs. The Dharampeth Mahila Multi State,
Co-operative Society, Limited Nagpur in Criminal Application
(APL) No.32/2024 decided on 17.04.2024, K. Hymavathi Vs.
State of Andhra Pradesh and another reported in 2023 SCC
OnLine SC 1128, Dinesh B. Chokshi Vs. Rahul Vasudeo Bhatt
reported in 2013 (2) Mh. L.J. 130.
11. The thread of the argument of the learned Senior
Counsel was that though the inquiry contemplated under Section
202 of Cr.P.C. is mandatory in case the accused resides outside the
jurisdiction of the learned Magistrate, before whom, the complaint is
made, but when the case entirely depends on documents
particularly in complaint filed for offences punishable under Section
138 of N.I. Act, there is a need to adduce the evidence and even an
affidavit filed by the complainant would suffice the purpose of
inquiry. The learned Chief Judicial Magistrate has not conducted the
inquiry under Section 202 of the Cr.P.C. and therefore, the entire
proceeding requires to be quashed and set aside.
wp.425.2024.Judgment.odt
12. Considering the submissions made by the learned
Counsel for the respective parties, it would be appropriate to refer
Section 202 of Cr.P.C. which reads as under:
"202. Postponement of issue of process.--(1) Any
Magistrate, on receipt of a complaint of an offence of which
he is authorised to take cognizance or which has been made
over to him under section 192, may, if he thinks fit, [and
shall, in a case where the accused is residing at a place
beyond the area in which he exercises his jurisdiction,]
postpone the issue of process against the accused, and either
inquire into the case himself or direct an investigation to be
made by a police officer or by such other person as he thinks
fit, for the purpose of deciding whether or not there is
sufficient ground for proceeding:
Provided that no such direction for investigation shall be
made,--
(a) where it appears to the Magistrate that the
offence complained of is triable exclusively by the
Court of Session; or
(b) where the complaint has not been made by a
Court, unless the complainant and the witnesses
present (if any) have been examined on oath under
section 200.
(2) In an inquiry under sub-section (1), the Magistrate may,
if he thinks fit, take evidence of witnesses on oath:
Provided that if it appears to the Magistrate that the offence
complained of is triable exclusively by the Court of Session,
he shall call upon the complainant to produce all his
witnesses and examine them on oath.
(3) If an investigation under sub-section (1) is made by a
person not being a police officer, he shall have for that
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investigation all the powers conferred by this Code on an
officer in charge of a police station except the power to arrest
without warrant.
13. Section 202 of the Cr.P.C. speaks about postponing the
issuance of process against the accused in case he resides beyond
the area in which the Magistrate before whom the complaint is
made exercises his jurisdiction. In that case, the Magistrate either
inquire into the case himself or direct an investigation to be made
by the police officer for the purpose of deciding whether there are
sufficient grounds for proceedings or not. Whether the inquiry as
contemplated under Section 202 of Cr.P.C. is mandatory is the
question arise for consideration.
14. Learned Senior Counsel for the petitioner placed
reliance on the decision of Abhijit Pawar Vs. Hemant Madhukar
Nimbalkar and another referred supra, wherein the Hon'ble Apex
Court dealt with this issue and observed that Section 202 Cr.P.C.
was amended in the year 2005 by the Code of Criminal Procedure
(Amendment) Act, 2005, with effect from 22.06.2006 by adding the
words 'and shall, in a case where the accused is residing at a place
beyond the area in which he exercises his jurisdiction'. There is a
vital purpose or objective behind this amendment, namely, to ward
off false complaints against such persons residing at a far-off places
in order to save them from unnecessary harassment. Thus, in those
cases where the accused is residing at a place beyond the area in
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which the Magistrate exercises his jurisdiction, it is mandatory on
the part of the Magistrate to conduct an enquiry or investigation
before issuing the process, so that false complaints are filtered and
rejected. It is further held that the requirement of conducting
enquiry or directing investigation before issuing process is,
therefore, not an empty formality. What kind of "enquiry" is needed
under this provision has also been explained in Vijay Dhanuka
(2014) 14 SCC 638, wherein it is held "No specific mode or
manner of inquiry is provided under Section 202 of the Code. In the
inquiry envisaged under Section 202 of the Code, the witnesses are
examined whereas under Section 200 of the Code, examination of
the complainant only is necessary with the option of examining the
witnesses present, if any. This exercise by the Magistrate, for the
purpose of deciding whether or not there is sufficient ground for
proceeding against the accused, is nothing but an inquiry envisaged
under Section 202 of the Code." The amended provision casts an
obligation on the Magistrate to apply his mind carefully and satisfy
himself that the allegations in the complaint, when considered along
with the statements recorded or the enquiry conducted thereon,
would prima facie constitute the offence for which the complaint is
filed. He also placed reliance on Vijay Dhanuka and others Vs.
Najim Mamtaj and others referred supra, wherein also the
Hon'ble Apex Court by referring Section 200 and 202 of the Cr.P.C.
observes that "Section 202 of the Code, inter alia, contemplates
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postponement of the issue of the process "in a case where the
accused is residing at a place beyond the area in which he exercises
his jurisdiction" and thereafter to either inquire into the case by
himself or direct an investigation to be made by a police officer or
by such other person as he thinks fit. In the face of it, what needs
our determination is as to whether in a case where the accused is
residing at a place beyond the area in which the Magistrate
exercises his jurisdiction, inquiry is mandatory or not."
15. Learned Counsel for the respondent No.1 also placed
reliance on the decision of the Hon'ble Apex Court in expeditious
trial of cases under Section 138 of NI Act in Suo Motu Writ
Petition (Crl.) No.2 of 2020 decided on 16.04.2021 [(2021)
16 SCC 116] wherein requirement to conduct inquiry of direct
investigation before issuing process where accused residing beyond
territorial jurisdiction of Magistrate concerned held mandatory
purpose is to protect innocent persons residing at far of places from
being harass. In the said judgment after discussing all facts of the
various aspects relevant and connected to the issues before it, the
five-Judge Bench of the Apex Court held:
(i) The High Courts are requested to issue practice
directions to the Magistrates to record reasons before
converting trial of complaints under Section 138 of the Act
from summary trial to summons trial.
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(ii) Inquiry shall be conducted on receipt of complaints
under Section 138 of the Act to arrive at sufficient grounds to
proceed against the accused, when such accused resides
beyond the territorial jurisdiction of the court.
(iii) For the conduct of inquiry under Section 202 CrPC,
evidence of witnesses on behalf of the complainant shall be
permitted to be taken on affidavit. In suitable cases, the
Magistrate can restrict the inquiry to examination of
documents without insisting for examination of witnesses.
(iv) It is recommend that suitable amendments be made
to the Act for provision of one trial against a person for
multiple offences under Section 138 of the Act committed
within a period of 12 months, notwithstanding the restriction
in Section 219 CrPC.
(v) The High Courts are requested to issue practice
directions to the trial courts to treat service of summons in
one complaint under Section 138 forming part of a
transaction, as deemed service in respect of all the complaints
filed before the same court relating to dishonour of cheques
issued as part of the said transaction.
(vi) The judgments of this Court in Adalat Prasad,
(2004) 7 SCC 338 and Subramanium Sethuraman,
(2004) 13 SCC 324 have interpreted the law correctly and it
is reiterated that there is no inherent power of trial courts to
review or recall the issue of summons. This does not affect
the power of the trial court under Section 322 CrPC to revisit
the order of issue of process in case it is brought to the
court's notice that it lacks jurisdiction to try the complaint.
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(vii) Section 258 CrPC is not applicable to complaints
under Section 138 of the Act and findings to the contrary in
Meters and Instruments, (2018) 1 SCC 560 do not lay
down correct law. To conclusively deal with this aspect,
amendment to the Act empowering the Trial Courts to
reconsider/recall summons in respect of complaints under
Section 138 shall be considered by the Committee constituted
by an order of the Supreme Court dated 10.03.2021.
(viii) All other points, which have been raised by the
Amicus Curiae in their preliminary report and written
submissions and not considered herein, shall be the subject
matter of deliberation by the aforementioned Committee. Any
other issue relating to expeditious disposal of complaints
under Section 138 of the Act shall also be considered by the
Committee.
16. He further placed reliance on the Criminal Application
(APL) No.32/2024 referred supra, wherein the coordinate Bench
has considered the aspect of Section 202 and observed that the
present complaints are filed for the offence punishable under
Section 138 of N.I. Act and while issuing the process the learned
Magistrate has passed the order after considering the affidavit of
the complainant and as the ingredients are put forth. Thus, he
submitted that the Hon'ble Apex Court has already observed that
the said inquiry as far as the complaints under Section 138 of the
N.I. Act are concerned is inapplicable and therefore, the ground
raised in the petition on the basis of no inquiry is held is
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unsustainable and on that ground itself the writ petition deserves to
be dismissed.
17. He invited my attention towards the para No.10 of the
decision of the Hon'ble Apex Court in the case of Expeditious trial
of cases under Section 138 of NI Act, wherein the Hon'ble Apex
Court has observed that "Section 202 of the Code confers
jurisdiction on the Magistrate to conduct an inquiry for the purpose
of deciding whether sufficient grounds justifying the issue of process
are made out. The amendment to Section 202 of the Code with
effect from 23.06.2006, vide Act 25 of 2005, made it mandatory for
the Magistrate to conduct an inquiry before issue of process, in a
case where the accused resides beyond the area of jurisdiction of
the court. (See: Vijay Dhanuka v. Najima Mamtaj, Abhijit
Pawar v. Hemant Madhukar Nimbalkar and Birla Corporation
Limited v. Adventz Investments and Holdings Limited). There
has been a divergence of opinion amongst the High Courts relating
to the applicability of Section 202 in respect of complaints filed
under Section 138 of the Act. Certain view that it is mandatory for
the Magistrate to conduct an inquiry, as provided in Section 202 of
the Code, before issuance of process in complaints filed under
Section 138. Contrary views have been expressed in some other
cases. It has been held that merely because the accused is residing
outside the jurisdiction of the court, it is not necessary for the
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Magistrate to postpone the issuance of process in each and every
case. Further, it has also been held that not conducting inquiry
under Section 202 of the Code would not vitiate the issuance of
process, if requisite satisfaction can be obtained from materials
available on record" and thereafter the Hon'ble Apex Court by
referring the Section 145 observed that on a holistic reading of
Section 145 along with Section 202, we hold that Section 202 (2) of
the Code is inapplicable to complaints under Section 138 in respect
of examination of witnesses on oath. The evidence of witnesses on
behalf of the complainant shall be permitted on affidavit. If the
Magistrate holds an inquiry himself, it is not compulsory that he
should examine witnesses. In suitable cases, the Magistrate can
examine documents for satisfaction as to the sufficiency of grounds
for proceeding under Section 202.
18. Thus, by referring the decisions in the case of Abhijit
Pawar Vs. Hemant Madhukar Nimbalkar and another and
Vijay Dhanuka and others Vs. Najim Mamtaj and others relied
upon by the learned Senior Counsel for the petitioners. The Hon'ble
Apex Court in Expeditious trial of cases under Section 138 of
N.I. Act which is a Suo Motu Writ Petition (Crl.) No.2 of 2020
decided on 16.04.2021 held that Section 202 (2) of the Code is
inapplicable to complaints under Section 138 in respect of
examination of witnesses on oath. In view of that observations of
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the Hon'ble Apex Court herein the present case the ground raised
by the learned Senior Counsel for the petitioners that no inquiry
was held which is mandate of Section 202 is not sustainable.
19. The ground raised by the petitioners is that there was
no privity of contract between the petitioners and respondent No.1
and thus, there was no legal and enforceable debt and the cheque
was not issued by the petitioners against the legal and enforceable
debt. It is further contended that the debt as alleged is already time
barred and therefore, the petitioners are not liable for any action
against the time barred debt. Per contra, it is submitted on behalf
of the respondents that the cheque was issued against the
actionable claim. The actionable claim is defined under Section (3)
of the Transfer of Property Act. Before adverting to the merits of
the submissions it is necessary to refer the definition of actionable
claim given under Section 3 of the Transfer of Property Act.
20. Section 3 defines "actionable claim" means a claim for
any debt, other than a debt secured by mortgage of immoveable
property or by hypothecation or pledge of moveable property, or to
any beneficial interest in moveable property not in the possession,
either actual or constructive, of the claimant, which the Civil Courts
recognise as affording grounds for relief, whether such debt or
beneficial interest be existent, accuring, conditional or contingent.
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"a person is said to have notice" of a fact when he actually
knows that fact, or when, but for wilful abstention from an
enquiry or search which he ought to have made, or gross
negligence, he would have known it."
Explanation I.--Where any transaction relating to immovable
property is required by law to be and has been effected by a
registered instrument, any person acquiring such property or
any part of, or share or interest in, such property shall be
deemed to have notice of such instrument as from the date of
registration or, where the property is not all situated in one sub-
district, or where the registered instrument has been registered
under sub-section (2) of section 30 of the Indian Registration
Act, 1908 (16 of 1908), from the earliest date on which any
memorandum of such registered instrument has been filed by
any Sub-Registrar within whose sub-district any part of the
property which is being acquired, or of the property wherein a
share or interest is being acquired, is situated:]
Provided that--
(1) the instrument has been registered and its
registration completed in the manner prescribed by the
Indian Registration Act, 1908 (16 of 1908) and the rules
made thereunder,
(2) the instrument or memorandum has been duly
entered or filed, as the case may be, in books kept
under section 51 of that Act, and
(3) the particulars regarding the transaction to which the
instrument relates have been correctly entered in the
indexes kept under section 55 of that Act.
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Explanation II.--Any person acquiring any immoveable
property or any share or interest in any such property shall be
deemed to have notice of the title, if any, of any person who is
for the time being in actual possession thereof.
Explanation III.--A person shall be deemed to have had notice
of any fact if his agent acquires notice thereof whilst acting on
his behalf in the course of business to which that fact is
material:
Provided that, if the agent fraudulently conceals the fact,
the principal shall not be charged with notice thereof as
against any person who was a party to or otherwise
cognizant of the fraud.
21. Here the petitioner's claim is that they issued cheque
against enforceable debt against the transaction of the year 2002 is
unsustainable. The Limitation Act, 1963 typically bar a recovery of
debt after a certain period, Section 25(3) of the Indian Contract Act
provides a crucial exception. This section validates a written and
signed promise to pay a time barred debt. The issuance of a
cheque signed by the drawer or their authorized agents, fulfils its
requirement. It is important to note that past consideration is a
good consideration under the Indian Contract Act. The original
transaction, even if time barred, serves as valid past consideration
for the new promise to pay represented by the cheque. This
principle has been affirmed in numerous Judicial decisions therefore,
the cheque creates a new, legally enforceable obligations
independent of the original transactions limitation period. As far as
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the present matter is concerned, that the underlying transaction
occurred before 2002. The petitioner No.2 and respondent Nos.2
and 3 and the original accused No.5 were not associated with the
petitioner No.1 company. Petitioner No.2, respondent No.2 and 3
and the original accused No. 5 were Directors of the company at the
time of the issuance of cheque. The cheque was issued against the
discharge of legal and enforceable debt due against the petitioner
No.1. The agreement which is on record shows that on 06.04.2021,
Navalkishore Kothari Sons has transferred the debt due from the
accused No.1 to the complainant. This transfer has been effected
by way of registered instrument duly signed for an on behalf of
Navalkishore Kothari Sons. As per this agreement, the complainant
has agreed to pay an amount of Rs.70,00,000/- to Navalkishore
Kothari Sons on or before 31.12.2021. In consideration thereof it is
agreed that the complainant shall be entitled to receive, recover
and retain the amount from the accused No.1, it was specifically
contended in the complaint that the complainant was informed that
in view of that acknowledgement given by the petitioner No.1, the
debt is within limitation. After the aforesaid agreement, the
complainant initiated the action by contacting the petitioner No.1 for
recovery of the amount. During negotiations, the petitioner No.1
acknowledged the amount due and thereafter agreed to pay the
cheque of Rs.75,00,000/- to the complainant towards full and final
settlement and accordingly, the cheque was issued which was
wp.425.2024.Judgment.odt
dishonoured. After receipt of the notice also the cheque amount
was not paid and therefore, the complaint was filed.
22. As far as the submission of the learned Senior Counsel
Mr. Mardikar that Section 25(3) of the Contract Act will not come for
the help of the respondents, as already observed that in the year
2001 the said debt was transferred to the complainant and against
the said debt the said cheque was in question was issued. This
aspect is considered by the various decisions of the Hon'ble Aepx
Court as well as by this Court. It is observed in Rajesh Jain Vs.
Ajay Singh referred supra that the Court will necessarily presume
that the cheque had been issued towards discharge of a legally
enforceable debt/liability in two circumstances. Firstly, when the
drawer of the cheque admits issuance/execution of the cheque and
secondly, in the event where the complainant proves that cheque
was issued/executed in his favour by the drawer.
23. In the case of K. Hymavathi vs. State of Andhra
Pradesh reported in 2023 SCC OnLine SC 1128 wherein the
Hon'ble Apex Court in para No.10 observed that:
"From a perusal of the legal position enunciated, it is
crystal clear that this Court keeping in perspective the
nature of the proceedings arising under the NI Act and
also keeping in view that the cheque itself is a promise to
pay even if the debt is barred by time has in that
circumstance kept in view the provision contained in
wp.425.2024.Judgment.odt
Section 25(3) of the Contract Act and has indicated that if
the question as to whether the debt or liability being
barred by limitation was an issue to be considered in such
proceedings, the same is to be decided based on the
evidence to be adduced by the parties since the question
of limitation is a mixed question of law and fact. It is only
in cases wherein an amount which is out and out
non-recoverable, towards which a cheque is issued,
dishonoured and for recovery of which a criminal action is
initiated, the question of threshold jurisdiction will arise.
In such cases, the Court exercising jurisdiction under
Section 482 CrPC will be justified in interfering but not
otherwise. In that light, this Court was of the view that
entertaining a petition under Section 482 CrPC to quash
the proceedings at the stage earlier to the evidence would
not be justified."
24. In Dinesh B. Chokshi Vs. Rahul Vasudeo Bhatt
(referred supra) wherein also the Hon'ble Apex Court by referring
Section 25(3) of the Contract Act observed as follows:
"9. Thus, Sub-section (3) of Section 25 of the Contract
Act is an exception to the general rule that an agreement
made without consideration is void. Sub-section (3) of
Section 25 of the Contract Act applies to a case where
there is a promise made in writing and signed by a person
to be charged therewith to pay wholly or in part a debt
which is barred by law of limitation. A promise covered by
Sub-section (3) becomes enforceable agreement
notwithstanding the fact that it is a promise to pay a debt
which is already barred by limitation. Thus, Sub-section
wp.425.2024.Judgment.odt
(3) of Section 25 of the Contract Act applies to a promise
made in writing which is signed by a person to pay a debt
which cannot be recovered by reason of expiry of period
of limitation for filing a suit for recovery. Therefore, if a
debtor after expiry of the period of limitation provided for
recovery of debt makes a promise in writing signed by
him to pay the debt wholly or in part, the said promise
being governed by Sub-section (3) of Section 25 of the
Contract Act becomes an agreement which is enforceable
in law. By virtue of the promise governed by Sub-section
(3) of Section 25 of the Contract Act, the time barred debt
becomes enforceable. The Sub-section (3) of Section 25 of
the Contract Act does not apply to promise to pay all
categories of debts which are not enforceable in law. It
applies only to a debt which is not recoverable in law only
on the ground of bar created by the law of limitation.
Thus, the promise under Sub-section (3) of Section 25 of
the Contract Act will not validate a debt which is not
enforceable on a ground other than the ground of bar of
limitation. For example, if there is a promise to pay an
amount advanced for immoral purposes which is hit by
Section 23 of the Contract Act, it will not attract Sub-
section (3) of Section 25 of the Contract Act and the said
provision will be attracted only when a promise is made in
writing and signed by the promisor to pay a debt which is
barred by limitation."
25. It is the case of the complainant that the petitioner No.1
company had purchased pulses, edible oil and other goods from
NavalkKishore Kothari Sons partnership firm having its office at
wp.425.2024.Judgment.odt
Akola. The transaction between the petitioner No.1 and
Navalkishore Kothari Sons are prior to the year 2002. The amount
due was Rs.35,26,102/-. It was agreed between the petitioner No.1
and the said Navalkishore Kothari and Sons that the petitioner No.1
shall pay interest on the outstanding amount at the rate of 12%.
Thus, petitioner No.1 had acknowledged the amount payable to
Navalkishore Kothari Sons in writing from time to time. On
06.04.2021, Navalkishore Kothari Sons has transferred the debt
which was due from the petitioner No.1 to the complainant. This
transfer has been effected by way of registered instrument duly
signed for on behalf of Navalkishore Kothari and Sons and the
cheque was issued against the said debt. The cheque was issued by
the petitioner No.1 after negotiation towards the full and final
settlement of the amount. Thus, by issuing the cheque the
petitioner No.1 acknowledged the amount is due from them and it
was a promise covered by Sub Section 3 will becomes enforceable
agreement notwithstanding the fact that it is a promise to pay a
debt which is already barred by limitation. As observed by the
Hon'ble Apex Court in the case of K. Hymavathi v. State of
Andhra Pradesh referred supra that if the question as to whether
the debt or liability being barred by limitation was an issue to be
considered in such proceedings, the same is to be decided based on
the evidence to be adduced by the parties since the question of
limitation is a mixed question of law and fact. It is only in cases
wp.425.2024.Judgment.odt
wherein an amount which is out and out non-recoverable, towards
which a cheque is issued, dishonoured and for recovery of which a
criminal action is initiated, the question of threshold jurisdiction will
arise. In such cases, the Court exercising jurisdiction under Section
482 CrPC will be justified in interfering but not otherwise. Thus, at
this stage, it would not be proper to give a finding as to whether the
debt was time barred or not.
26. On going through the entire record, the two grounds are
raised by the petitioners. As far as the ground that there was no
legal and enforceable debt and Section 25(3) of the Contract Act is
not applicable and will not help to the petitioners is already
answered that at this stage, it would not be proper to say that the
debt was time barred and therefore, it would not be justified to
interfere in the order passed by the learned Magistrate.
27. The another ground raised is that the learned Magistrate
ought to have record the reasons for not examining the witnesses
on affidavit while exercising power under Section 202 of Cr. P.C.
The Constitution Bench Judgment of the Apex Court while deciding
reference in Bansilal S. Kabra Vs. Golbal Trade Finance Limited
and another referred supra observed that it is nowhere stated that
it is mandatory to the Magistrate to record the reasons for not
examining the witnesses on affidavit while exercise power under
Section 202 of Cr.P.C. (Section 225 of the Bharatiya Nagarik
wp.425.2024.Judgment.odt
Suraksha Sanhita (BNSS), 2023) and the absence of recording the
reasons would amount to procedural lapses of non application of
mind. The submission of the learned Senior Counsel for the
petitioners that absence of any reason in the order of Magistrate as
to why he is restricting to the examination of the documents
without examining the witnesses would be illegality cannot be
accepted.
28. The Magistrate in the present case issued process by
examining the complainant i.e. verification of the complaint,
documents. This was sufficient compliance of Section 202 of Cr.P.C.
(Section 225 of the Bharatiya Nagarik Suraksha Sanhita (BNSS),
2023). The Revisional Court dealt with all aspects of the matter and
arrived at a plausible and just conclusion. I do not find any
perversity or error of jurisdiction in the impugned order and
judgment. No case is made out to cause interference in the
impugned order and judgment.
29. For the reasons stated above, the writ petition is devoid
of merit, liable to be dismissed. Hence, writ petition is dismissed.
Rule stands discharged.
(URMILA JOSHI-PHALKE, J.)
Sarkate.
Signed by: Mr. A.R. Sarkate
Designation: PA To Honourable Judge
Date: 21/08/2025 19:58:19
