Case Note & Summary
The matter arose from a private complaint filed by respondent No.1, a proprietary concern, against petitioner No.1 company and its directors/accused persons for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881. The complainant alleged that petitioner No.1 had purchased goods from a partnership firm, Navalkishore Kothari Sons, prior to 2002, leaving a balance of Rs.35,26,102 due as on 31.03.2002, with interest at 12% per annum. The debt was acknowledged from time to time. On 06.04.2021, the partnership firm transferred the debt to the complainant by registered instrument. Thereafter, during negotiations, the petitioners allegedly agreed to pay Rs.75,00,000 in full and final settlement and issued a cheque dated 21.07.2021 drawn on Axis Bank. The cheque was presented on 14.10.2021 and dishonoured with reason 'Account Closed'. A statutory notice was issued on 20.10.2021 and served on 23.10.2021, but payment was not made within 15 days. The Magistrate took cognizance and issued process on 20.01.2022. The petitioners challenged the process before the Sessions Judge in Criminal Revision Application No.94/2022, which was dismissed. They then filed the present writ petition under Articles 226 and 227 of the Constitution of India seeking quashing of the process and the criminal case. The petitioners contended that there was no transaction between them and the complainant; the debt was time-barred; the cheque was issued after the account was closed; 'Account Closed' does not fall within Section 138; and the Magistrate failed to conduct mandatory inquiry under Section 202 Cr.P.C. because the accused resided outside jurisdiction. The respondents argued that the account was closed on 03.10.2013 and dishonour due to account closure fell within Section 138; transfer of actionable claim did not require privity of contract; and the trial and revisional courts rightly issued process. Learned Senior Counsel for petitioners relied upon Abhijit Pawar, Vijay Dhanuka, Odi Jerang, Bansilal S. Kabra; respondents relied upon P. Rasiya, Rajesh Jain, Shankar Finance, NEPC Micon, Ritwik, K. Hymavathi, Dinesh B. Chokshi. The court heard arguments and referred to Section 202 Cr.P.C. The provided judgment text ends before the final operative direction, so the final decision is not available. The court reserved judgment on 16.07.2025 and pronounced on 20.08.2025.
Headnote
A) Criminal Procedure - Postponement of Issue of Process - Mandatory Inquiry Under Section 202 Cr.P.C. - Code of Criminal Procedure, 1973, Section 202 - The petitioner contended that the Magistrate failed to conduct the mandatory inquiry under Section 202 Cr.P.C. even though the accused resided outside the Magistrate's jurisdiction; the respondent argued that in cheque dishonour cases affidavit evidence may suffice. The court referred to Section 202 Cr.P.C. and noted the rival submissions (Paras 7-12). B) Negotiable Instruments - Dishonour of Cheque - Scope of Section 138 NI Act - Negotiable Instruments Act, 1881, Section 138 - The cheque was dishonoured for 'Account Closed'; petitioner argued that this reason does not fall within Section 138, whereas respondent argued that account closure is included within insufficient funds. The court noted the arguments without a final determination in the extracted text (Paras 7-8). C) Contract Law - Transfer of Actionable Claim - Enforceability Without Privity of Contract - Indian Contract Act, 1872, Section 25(3) - The complainant claimed as transferee of a debt from Navalkishore Kothari Sons; petitioner contended the debt was time-barred and there was no privity of contract. The respondent argued that transfer of actionable claim did not require debtor's consent; the court considered these submissions (Paras 3-8).
Issue of Consideration
Whether the order of issuance of process in a cheque dishonour complaint is liable to be quashed for non-compliance with Section 202 Cr.P.C. and because the cheque was issued for a time-barred debt and the account was closed.
Law Points
- Section 138 NI Act requires legally enforceable debt
- account closed may fall within insufficient funds
- Section 202 Cr.P.C. mandatory inquiry when accused outside jurisdiction
- transfer of actionable claim does not require privity of contract
- time-barred debt not enforceable
- Articles 226 and 227 Constitution of India
