SPR Constructions Private Limited vs Revanza Business India Private Limited

2026:MHC:4272
CRL.OP.No.27541 of 2026
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 28.09.2026
PRONOUNCED ON : 15.10.2026
CORAM
THE HON'BLE MR JUSTICE G.K. ILANTHIRAIYAN
CRL.OP.No.27541 of 2026
CNR:{HCMA012293122026}
and
CRL.MP.Nos.18244 and 18245 of 2026
1. M/s.SPR Constructions Private Limited
Rep. by Authorised Signatory, Mr.Hitesh Kumar
Kawad,
Having its Registered Office at No.57, Narayan
Mudali Street, Sowcarpet, Chennai – 600 079.
2. Chetan Bohra
Director, M/s.SPR Constructions Private Limited,
No.57, Narayan Mudali Street, Sowcarpet,
Chennai-600079,
also at Site Office, No.1, Cooks Road, Perambur,
Chennai – 600 012.
3. Hitesh Kumar Kawad
Erstwhile Director and Authorised Signatory,
OSIAN ONE - SPR Highliving, Ground Floor
Bungalow, No.28,
EVK Sampath Salai, Vepery, Chennai – 600 007.
4. Navin Ranka
Director and Authorised Signatory,
M/s.SPR Constructions Private Limited
No.57, Narayan Mudali Street,
Sowcarpet, Chennai – 600 079.
also at Site Office, No.1, Cooks Road,
Perambur, Chennai – 600 012.
...Petitioner(s)
Vs
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M/s.Revanza Business India Private Limited,
Rep. by its Authorised Signatory Mr.Sushil Lalwani,
Having its Registered Office at No.23, EVR Salai,
P.H.Road, Periamet,
Chennai – 600 003, also at Digital Zone-I, 2nd Floor,
No.79, Old Mahabalipuram Road, Karapakkam,
Chennai – 600 119.
...Respondent(s)
PRAYER: Criminal Original Petition is filed under Section 528 of BNSS, to
call for the records relating to S.T.C.No.17013 of 2026 pending on the file of
the learned Metropolitan Magistrate, Fast Track Court-II, Egmore, Chennai and
quash the said proceedings, insofar as such cheques arise out of the same
transactions and the same alleged running account.
For Petitioners 1 to 3 : Mr.J.Ravindran
Senior Counsel
for M/s.Archana JR.
th
For 4 Petitioner : Mr.Hasan Mohamed Jinnah
Senior Counsel
for M/s.Archana JR.
For Respondent : Mr.G.Rajagopalan
Senior Counsel
for M/s.Praveen S.Purohit
ORDER
This Criminal Original Petition has been filed seeking to quash the
proceedings in S.T.C. No. 17013 of 2026, pending on the file of the learned
Metropolitan Magistrate, Fast Track Court-II, Egmore, Chennai.
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2. The petitioners are the accused in the complaint lodged by the
respondent for the offence punishable under Section 138 read with Section 141
of the Negotiable Instruments Act, 1881 (hereinafter referred to as the “NI
Act”). The case of the complainant is that the accused approached the
respondent seeking substantial financial accommodation for the real estate
business of the first accused. The complainant agreed to extend continuing
structured financial accommodation and a collateral-backed investment
arrangement in favour of the first accused. Pursuant to the execution of
promissory notes by the accused, the complainant extended the financial
accommodation. The accused also executed sale agreements, construction
agreements, sale deeds and other collateral documents in respect of several
villas, flats and commercial units forming part of their project in favour of the
complainant.
3. According to the complainant, after giving credit to the repayments
made by the accused, a sum of Rs.44,47,97,000/- remained due and payable as
of May 2026. Towards partial discharge of the said outstanding liability, the
accused issued several cheques aggregating to Rs.2,20,00,000/-. The said
cheques were presented for collection on various dates but were returned
dishonoured with the remarks “Payment Stopped by Drawer” and “Exceeds
Arrangement”. Thereafter, upon issuance of the statutory notice, the
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complainant lodged a private complaint against the accused and the same was
taken cognizance by the learned Trial Court.
4. Mr. J. Ravindran, learned Senior Counsel appearing for petitioners 1
to 3/accused 1 to 3, and Mr. Hasan Mohamed Jinnah, learned Senior Counsel
appearing for the fourth petitioner/fourth accused, submitted that the cheques in
question were not issued towards the discharge of any legally enforceable debt
or liability. They contended that the complaint does not disclose the date on
which the alleged loan was borrowed or specify the amount allegedly borrowed
by the accused. Instead, the complainant has merely asserted that a sum of
Rs.44,47,97,000/- was due and payable by the accused, without furnishing the
necessary particulars. They further pointed out that the complaint does not
disclose the dates on which the cheques were presented for collection. In such
circumstances, they submitted that no cause of action had arisen for initiating
proceedings under Section 138 read with Section 141 of the NI Act, particularly
when no legally enforceable debt or liability existed against the accused. It is
further submitted that, under the Construction Agreement dated 04.05.2023, any
dispute arising out of or relating to the terms and conditions of the agreement,
including the interpretation and validity thereof and the respective rights and
obligations of the parties, was required to be settled amicably through mutual
discussion and, failing such settlement, referred to the Adjudicating Officer
appointed under the Real Estate (Regulation and Development) Act, 2016.
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Therefore, according to them, the complainant ought not to have initiated
proceedings under Section 138 read with Section 141 of the NI Act.
5. It was also submitted that, even before the issuance of the statutory
notice contemplated under Section 138 of the NI Act, the accused had issued a
notice dated 18.05.2026, calling upon the complainant to forthwith return all the
original security cheques/post-dated cheques, including the 38 cheques
subsequently presented by the complainant, along with the remaining cheques,
and to furnish a written undertaking that the complainant would not misuse any
of the instruments or initiate any wrongful legal proceedings and to comply with
the said demand within seven days from the date of receipt of the notice.
6. Despite the aforesaid notice, the complainant proceeded to present the
cheques for a total sum of Rs.34,10,00,000/- and initiated proceedings under
Section 138 of the NI Act. Apart from the above proceedings, the complainant
also lodged a complaint, which was registered as Crime No.133 of 2026 on the
file of the CCB, Tambaram, for the offences punishable under Sections 420,
406, 467, 468, 471, 506(ii) and 120-B of the IPC, alleging that the accused had
wrongfully retained and misappropriated a sum of Rs.44.47 crores. It is further
submitted that, following the registration of the FIR, the investigating agency
summoned the accused and, by exerting coercive pressure, compelled them to
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pay a sum of Rs.10,00,00,000/-. Accordingly, the accused paid the said sum
pursuant to a Memorandum of Understanding-cum-Deed of Settlement dated
16.06.2026.
7. It is further submitted that the accused No. 1 and 3 have also instituted
a suit in O.S. No. 3405 of 2026 before the learned Assistant City Civil Court,
Chennai, seeking a declaration that the Memorandum of Understanding-cum-
Deed of Settlement dated 16.06.2026, executed between the accused and the de
facto complainant at the police station, is null and void on various grounds. In
the meantime, the complainant has also initiated proceedings under Section 138
of the NI Act. In view of the above circumstances, it is submitted that the
essential ingredients of the offence punishable under Section 138 of the NI Act
are not attracted against the petitioners/accused and that the proceedings are
therefore liable to be quashed.
8. Per contra, Mr. G. Rajagopalan, learned Senior Counsel appearing for
the respondent, filed a counter affidavit and submitted that, though the
complainant had not specifically mentioned the dates on which the cheques
were presented for collection, the complaint contains a tabular statement setting
out the details of the cheques, the return memos issued by the respective
bankers, and the reasons for their dishonour. He further submitted that the
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complaint categorically specifies the outstanding liability towards which the
accused had issued the cheques. All the cheques were returned unpaid with the
endorsements “Exceeds Arrangement” and “Payment Stopped by Drawer”.
Thereafter, upon issuance of the statutory notice, the complainant initiated
proceedings against the accused under Section 138 of the NI Act.
9. The learned Senior Counsel further submitted that the grounds raised
by the accused could be considered only by the learned trial Court during the
trial, upon the parties adducing evidence. He further submits that the issues
raised involve mixed questions of fact and law, which cannot be adjudicated in
proceedings under Section 482 of the Code of Criminal Procedure. He
contended that the complainant had made out a prima facie case for the learned
trial Court to take cognizance of the offence punishable under Section 138 of
the NI Act. He further submitted that the cheques issued by the accused had
been dishonoured by the respective banks and, therefore, the statutory
presumption contemplated under Section 139 of the NI Act would arise in
favour of the complainant, to the effect that the cheques were issued towards the
discharge of a legally enforceable debt or liability. In this regard, he pointed out
that the accused had issued a total of 105 cheques, all of which were returned
dishonoured.
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10. The learned Senior Counsel further submitted that the accused had
also executed a promissory note for a sum of Rs.34,10,00,000/- and, thereafter,
issued cheques for the said amount. However, all the cheques were returned
dishonoured with the endorsements “Exceeds Arrangement” and “Payment
Stopped by Drawer”. He further contended that, after registration of the FIR, the
accused themselves came forward to settle the outstanding liability and
executed a Memorandum of Understanding-cum-Deed of Settlement, agreeing
to pay a sum of Rs.30,00,00,000/-, of which Rs.10,00,00,000/- was to be paid
within four days and the remaining sum of Rs.20,00,00,000/- on or before
14.07.2026. Pursuant to the said settlement, the accused paid a sum of
Rs.10,00,00,000/- through RTGS transfer but subsequently defaulted in paying
the balance amount. It is further submitted that, in order to evade their liability,
the accused had instituted O.S.No.3405 of 2026, challenging the very
Memorandum of Understanding-cum-Deed of Settlement, on false and
vexatious grounds. He contended that the grounds raised by the accused
involved disputed questions of fact that could be adjudicated only by the learned
trial Court upon appreciation of evidence. Accordingly, he prayed for dismissal
of the present petition seeking to quash the proceedings.
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11. In support of his contention, the learned Senior Counsel for the
respondent relied upon the following judgments of the Hon’ble Supreme Court
of India:-
(i) In the case of Municipal Corporation of Delhi vs. Ram Kishan
Rohtagi and others reported in (1983) 1 SCC 1 , in which the Hon’ble Supreme
Court of India held as follows:-
“8. Another important consideration which is to be kept in
mind is as to when the High Court acting under the provisions of s.
482 should exercise the inherent power in so far as quashing of
criminal q proceedings are concerned. This matter was gone into
in greater detail in Smt. Nagawwa v. Veeranna Shivalingappa
Konjalji where the scope of ss. 202 and 204 of the present Code
was consider ed and while laying down the guidelines and the
grounds on which proceedings could be quashed this Court
observed as follows: [SCC para 5, p. 741 : SCC (Cri) pp. 511-12]
"Thus, it may be safely held that in the following cases an
order of the Magistrate issuing process against the accused can be
quashed or set aside:
(1) Where the allegations made in the complaint or the
statements of the witnesses recorded in support of the same taken
at their face value make out absolutely no case against the accused
or the complaint does not disclose the essential ingredients of an
offence which is alleged against the accused;
(2) Where the allegations made in the complaint are patently
absurd and inherently improbable so that no prudent person can
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ever reach a conclusion that there is sufficient ground for
proceeding against the accused;
(3) Where the discretion exercised by the Magistrate in
issuing process is capricious and arbitrary having been based
either on no evidence or on materials which are wholly irrelevant
or inadmissible; and (4) Where the complaint suffers from
fundamental legal defects, such as, want of sanction, or absence of
a complaint by legally competent authority and the like. The cases
mentioned by us are purely illustrative and provide sufficient
guidelines to indicate contingencies where the High Court can
quash Proceedings.”
(ii) In the case of Rajendra Bihari Lal and another vs. State of Uttar
Pradesh and others reported in (2026) 7 SCC 339 , in which the Hon’ble
Supreme Court of India held as follows:-
“74. The power to quash criminal proceedings is guided by
the principle of preventing the abuse of the process of law or
miscarriage of justice, and of securing the ends of justice. It can be
done by the High Court in exercise of its extraordinary power
under Article 226 of the Constitution or by exercise of its inherent
powers under Section 482 of the Cr.P.C. (Section 528 of the
Bhartiya Nagarik Suraksha Sanhita, 2023 (for short, “the
B.N.S.S.”)) and even by the Supreme Court under Article 32 of the
Constitution, if the circumstances so require.
84. The decision in Neeharika, inter alia, held as follows:-
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84.1. First, the police have the statutory right and duty under
the relevant provisions of the Cr.P.C. to investigate into cognizable
offence. As a matter of rule, the courts should not interfere at the
stage of investigation of a cognizable offence, however, in cases
where no cognizable offence is disclosed in the FIR, the court
should not permit an investigation to continue. The power of
quashing should be exercised sparingly with circumspection. The
courts should not interfere at the stage of investigation of offences
except where non-interference would result in miscarriage of
justice.
84.2. Secondly, the decision of Bhajan Lal, in so many words,
holds that the courts should not interfere at the stage of
investigation except in cases where non-interference would result
in miscarriage of justice. The High Courts are well within their
jurisdiction to quash an FIR/complaint with due regard to the
restraints imposed by law, more particularly, the parameters laid
down in R.P. Kapur v. State of Punjaband Bhajan Lal.
84.3. Thirdly, where the initiation of criminal proceedings
amounts to an abuse of the process of law, or in exceptional cases
where non- interference would result in a miscarriage of justice,
the High Court, in exercise of its powers under Section 482 of the
Cr.P.C. and/or Article 226 of the Constitution, may quash the FIR,
complaint, or criminal proceedings, and may even stay the
proceedings.”
12. Heard the learned Counsel appearing on either side and perused the
materials placed on record.
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13. Upon perusal of the records and consideration of the submissions
made by the learned Senior Counsel appearing on either side, the following
issues arise for consideration:
(i) Whether the cheques in question were issued towards the discharge of
a legally enforceable debt or liability, particularly when the complaint does not
specify the date of borrowal or the total amount allegedly borrowed by the
accused?
(ii) Whether the proceedings initiated by the complainant under Section
138 of the Negotiable Instruments Act, 1881, are maintainable in view of the
execution of the Memorandum of Understanding-cum-Deed of Settlement dated
16.06.2026 and the payment of Rs.10,00,00,000/- pursuant thereto?
14. The petitioners are arrayed as accused Nos. 1 to 4 in the complaint.
The first accused is the company, while accused Nos. 2 to 4 are its former
directors. The crux of the complaint is that the accused approached the
complainant seeking financial assistance for carrying on their real estate
business, including the construction of villas, flats, and other properties. The
complainant extended the financial assistance sought by the accused. According
to the complaint, after giving credit to the repayments made by the accused, a
sum of Rs.44,47,97,000/- remained outstanding. Towards partial discharge of
the said subsisting liability, the accused issued 14 cheques aggregating to
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Rs.2,35,00,000/-. However, when the cheques were presented for collection,
they were returned unpaid with the endorsements “Payment Stopped by
Drawer” and “Exceeds Arrangement”. Thereafter, upon issuance of the statutory
notice, the complainant lodged the present complaint.
15. Upon perusal of the entire complaint, it is evident that the
complainant has not specified the date on which the accused allegedly borrowed
the loan amount. The complaint is also silent as to the dates on which the
alleged borrowings were made and the respective amounts borrowed by the
accused. It is stated that the cheques were issued towards partial discharge of
the alleged subsisting liability, aggregating to Rs.2,35,00,000/-. Further, though
the complainant has furnished the dates on which the cheques were returned,
along with the corresponding return memos, the complaint does not specifically
disclose the dates on which the cheques were presented for collection. Though
the dates of presentation may be ascertainable from the cheques and the
corresponding bank return memos, the same assumes significance in the present
case in view of the subsequent developments, including the issuance of notice
by the accused, presentation and dishonour of the cheques, execution of the
Memorandum of Understanding-cum-Deed of Settlement, payment of
Rs.10,00,00,000/- by the accused pursuant thereto, and institution of the civil
suit challenging the said settlement. These circumstances necessitate an
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examination of the sequence of events in order to ascertain the nature and
subsistence of the alleged liability when the cheques were presented for
collection. Furthermore, the complaint does not set out the complete particulars
of the alleged independent inter-corporate deposit (ICD) transactions
corresponding to the cheques in question. In particular, it does not contain a
transaction-wise statement setting out the alleged advances, the corresponding
repayment obligations, or the manner in which the alleged outstanding liability
of Rs.44,47,97,000/- was computed.
16. Even according to the complainant, the cheques were obtained in the
course of commercial transactions between the parties. However, the
complainant subsequently sought to characterise the underlying relationship as a
loan accommodation, as though the cheques had been independently issued
towards the discharge of a loan liability. The complainant later decided that it
no longer wished to retain the units booked by it and sought cancellation of the
bookings and refund of the amounts paid. Accordingly, several Cancellation
Deeds were executed between the parties, including those dated 30.06.2023 and
05.05.2025. The parties agreed to cancel the bookings and effect the refund in a
phased manner through instalments. According to the accused, the total
refundable amount was approximately Rs.23,96,74,415/-, out of which a sum of
Rs.22,28,99,716/- had already been refunded. As the balance amount was
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payable in instalments, the first accused handed over several post-dated cheques
purely as security for the refund arrangement, with the specific understanding
that the cheques would be presented for collection only when the corresponding
instalments fell due and would be returned upon payment of the respective
instalments.
17. It is further revealed that, though the complainant referred to 38
cheques aggregating to Rs.34,10,00,000/-, the complaint in question was lodged
only in respect of 14 cheques aggregating to Rs.2,20,00,000/-. According to the
accused, the cheques were issued as security in connection with the refund
arrangement between the parties and not towards any independent or subsisting
loan liability. Most of the cheques were returned dishonoured with the
endorsement “Payment Stopped by Drawer”, while the remaining cheques were
returned with the endorsement “Exceeds Arrangement”. During the course of
presentation of the cheques, the accused issued a legal notice dated 18.05.2026,
subsequent to the execution of the Cancellation Deeds dated 30.06.2023 and
05.05.2025. The said notice was duly received by the complainant. In the
notice, the accused stated that, up to March 2026, a total sum of
Rs.20,08,76,244/- had been refunded to the complainant and that the actual net
balance refundable was only Rs.3,03,78,827/-. It was further stated that the said
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balance would be refunded in instalments, corresponding to the cancellation of
the agreements relating to the remaining units.
18. Further, the accused called upon the complainant to forthwith return
all the original security cheques, including the 38 cheques that had already been
presented for collection, as well as the remaining cheques. The accused also
called upon the complainant to furnish a written undertaking that the
instruments would not be misused and that no wrongful legal proceedings
would be initiated on the basis of those instruments, within seven days from the
date of receipt of the notice. The said notice was duly received by the
complainant. Despite receipt of the notice, the complainant once again
presented the cheques for collection, and the same were returned unpaid with
the endorsements “Payment Stopped by Drawer” and “Exceeds Arrangement”.
Immediately upon issuance of the notice by the accused, instructions were
issued to the bank to stop payment, pursuant to which the cheques were returned
dishonoured. Even after issuance of the statutory notice contemplated under
Section 138 of the NI Act, the complainant lodged a complaint, which was
registered as Crime No.133 of 2026 on the file of the Inspector of Police, CCB,
Tambaram, for the offences punishable under Sections 420, 467, 468, 471 and
506(ii), r/w. Sections 120B and 34 of the IPC.
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19. Upon perusal of the FIR, it is revealed that the accused had allegedly
dishonestly induced the complainant to extend financial assistance and
thereafter cheated the complainant to the tune of Rs.44,47,97,000/-. On the basis
of the said FIR, the accused were summoned for enquiry by the investigating
agency. During the course of the investigation, the accused were allegedly
compelled to execute the Memorandum of Understanding-cum-Deed of
Settlement dated 16.06.2026, i.e., on the very next day after the registration of
the FIR. Pursuant to the said settlement, the parties agreed to settle the entire
liability for a sum of Rs.30,00,00,000/-, out of which the accused paid a sum of
Rs.10,00,00,000/-. As regards the remaining sum of Rs.20,00,00,000/-, the
accused agreed to pay the same on or before 14.07.2026, for which Cheque
No.000005, dated 14.07.2026, drawn on Indian Overseas Bank, Cathedral
Branch, was issued. However, the complainant did not present the said cheque
for collection.
20. On the other hand, the complainant initiated proceedings under
Section 138 of the NI Act in respect of the cheques that had already been
presented for collection and returned dishonoured with the endorsements
“Payment Stopped by Drawer” and “Exceeds Arrangement”. It is, therefore,
evident that, notwithstanding the execution of the Memorandum of
Understanding-cum-Deed of Settlement dated 16.06.2026, the complainant
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proceeded to present the cheques which had been issued only as security in
connection with the refund arrangement between the parties. In these
circumstances, the accused instituted a suit in O.S. No. 3405 of 2026 before the
learned Assistant City Civil Court, Chennai, seeking a declaration that the
Memorandum of Understanding-cum-Deed of Settlement dated 16.06.2026 is
null and void, along with a permanent injunction restraining the complainant
from enforcing any claim under the said settlement. The suit is still pending
adjudication. Notwithstanding the pendency of the said suit, the complainant
has also initiated the present proceedings under Section 138 of the NI Act.
A cumulative consideration of the transactions between the parties and the
averments in the complaint reveals that the particulars necessary to ascertain the
nature and extent of the alleged liability have not been clearly set out.
In particular, the complaint does not disclose the principal amount allegedly
advanced by the complainant, the dates and amounts of the respective advances,
or the rate of interest, if any, charged on such advances. The manner in which
the alleged outstanding liability of Rs.44,47,97,000/- was arrived at is also not
explained through a transaction-wise account. These omissions assume
significance in the light of the rival claims concerning the nature of the
underlying transactions, the alleged security cheques, the refund arrangement
and the subsequent settlement between the parties.
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21. Further, the interest claimed by the complainant may attract the
provisions of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act,
2003. In this regard, Section 3 of the said Act prohibits the charging of
exorbitant interest on any loan. Therefore, unless the nature and legality of the
interest claimed are established, the amount demanded by the complainant
cannot be treated as a legally enforceable debt. Hence, the complaint does not
satisfy the requirements contemplated under Section 138 of the NI Act. The
specific case of the accused is that they have not committed any offence
punishable under Section 138 of the NI Act, as the amount actually payable to
the complainant on the dates on which the cheques were presented for
encashment was less than the amounts mentioned in the respective cheques. It is
also not in dispute, according to the respondent's own case, that, pursuant to the
execution of the Memorandum of Understanding-cum-Deed of Settlement dated
16.06.2026, the accused paid a sum of Rs.10,00,00,000/- through a banking
transaction. The effect of the said payment on the subsisting liability,
particularly in relation to the amounts covered by the cheques and the dates of
their presentation, therefore, assumes significance in determining whether the
essential ingredients of the offence under Section 138 of the NI Act are
satisfied.
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22. Where part-payment is made after the issuance of a post-dated
cheque but before its presentation for encashment, the legally enforceable debt
subsisting on the date of presentation may be less than the amount specified in
the cheque. A part-payment or even full payment may be made between the date
on which the debt accrues and the date on which the cheque is presented for
encashment. In such circumstances, the cheque may not represent the legally
enforceable debt subsisting on the date of its presentation. In this regard, the
learned Senior Counsel relied upon the judgment of the Hon’ble Supreme Court
of India in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel and
another, reported in (2023) 1 SCC 578, wherein the Hon’ble Supreme Court
held as follows:
“19. This Court in NEPC Micon Ltd. v. Magna Leasing Ltd.6 held
that the Courts must interpret Section 138 with reference to the
legislative intent to suppress the mischief and advance the remedy. The
objective of the Act in general and Section 138 specifically is to
enhance the acceptability of cheques and to inculcate faith in the
efficacy of negotiable instruments for the transaction of business.
Section 138 criminalises the dishonour of cheques. This is in addition
to the civil remedy that is available. Through the criminalisation of the
dishonour of cheques, the legislature intended to prevent dishonesty on
the part of the drawer of a negotiable instrument.8 The interpretation
of Section 138 must not permit dishonesty of the drawee of the cheque
as well. A cheque is issued as security to provide the drawee of the
cheque with a leverage of using the cheque in case the drawer fails to
pay the debt in the future. Therefore, cheques are issued and received
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as security with the contemplation that a part or the full sum that is
addressed in the cheque may be paid before the cheque is encashed.
20. The judgments of this Court on post-dated cheques when read
with the purpose of Section 138 indicate that an offence under the
provision arises if the cheque represents a legally enforceable debt on
the date of maturity. The offence under Section 138 is tipped by the
dishonour of the cheque when it is sought to be encashed. Though a
post-dated cheque might be drawn to represent a legally enforceable
debt at the time of its drawing, for the offence to be attracted, the
cheque must represent a legally enforceable debt at the time of
encashment. If there has been a material change in the circumstance
such that the sum in the cheque does not represent a legally
enforceable debt at the time of maturity or encashment, then the
offence under Section 138 is not made out.”
23. The aforesaid judgment is squarely applicable to the facts of the
present case. In the case on hand, the complainant has failed to establish that the
amount represented by the cheques corresponded to the legally enforceable debt
or liability subsisting on the respective dates of their presentation for
encashment, particularly in view of the payments allegedly made by the accused
pursuant to the refund arrangement and the subsequent Memorandum of
Understanding-cum-Deed of Settlement. Therefore, in the absence of a legally
enforceable debt or liability to the extent of the amounts covered by the cheques
on the dates of their presentation, the essential ingredients of the offence
punishable under Section 138 of the NI Act are not satisfied.
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24. Upon perusal of the judgment of the Hon’ble Supreme Court of India
in Indus Airways Private Limited and Others v. Magnum Aviation Private
Limited and Another, reported in (2014) 12 SCC 539, it is evident that the
interpretation of the expression “for the discharge of any debt or other liability”
occurring in Section 138 of the NI Act is significant in determining the
applicability of the provision. The Explanation appended to Section 138
clarifies that the expression “debt or other liability” refers to a legally
enforceable debt or other liability. The Hon’ble Supreme Court observed that, to
attract the offence under Section 138 of the NI Act, the cheque must have been
issued towards the discharge of a legally enforceable debt or other liability.
Where a cheque is issued as an advance payment for the purchase of goods, but
the transaction does not materialise owing to cancellation of the purchase order
or otherwise, and the goods are not supplied, such a cheque cannot be construed
as having been issued towards the discharge of an existing debt or liability. The
Court further observed that a cheque issued by way of advance payment would
not represent an existing liability at the time of its issuance, in the absence of a
subsisting obligation to make the payment.
25. In view of the principles laid down in the aforesaid judgment, the
question as to whether the cheques in question were issued towards the
discharge of a legally enforceable debt or liability assumes significance. In the
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present case, the cheques were issued only as security in connection with the
refund arrangement between the parties and not towards the discharge of any
independent loan liability. Since, no corresponding liability existed to the extent
of the amounts covered by the cheques, the accused instructed their banker to
stop payment, pursuant to which most of the cheques were returned dishonoured
with the endorsement “Payment Stopped by Drawer”. It is further relevant to
note that, pursuant to the execution of the Memorandum of Understanding-cum-
Deed of Settlement dated 16.06.2026, the accused paid a sum of
Rs.10,00,00,000/-. However, the accused subsequently challenged the said
settlement by instituting O.S. No.3405 of 2026 before the learned Assistant City
Civil Court, Chennai, and the suit is still pending adjudication. Further, under
the terms of the said settlement, the accused had agreed to honour the Cheque
No.000005, dated 14.07.2026, drawn on Indian Overseas Bank, Cathedral
Branch, towards payment of the remaining sum of Rs.20,00,00,000/-. However,
the complainant did not present the said cheque for collection.
26. In the light of the aforesaid circumstances, particularly the nature of
the underlying transactions, the alleged security arrangement, the payment of
Rs.10,00,00,000/- under the settlement and the subsequent challenge to its
validity, the existence and extent of the legally enforceable liability on the dates
of presentation of the cheques assume significance. Hence, the complainant has
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failed to make out a prima facie case for maintaining the proceedings under
Section 138 of the Negotiable Instruments Act, 1881, in respect of the cheques
in question. Consequently, the proceedings initiated against the accused cannot
be sustained and is liable to be quashed.
27. Accordingly, the entire proceedings in S.T.C. No. 17013 of 2026,
pending on the file of the learned Metropolitan Magistrate, Fast Track Court-II,
Egmore, Chennai, are hereby quashed, and the Criminal Original Petition is
allowed. Consequently, the connected miscellaneous petitions are closed.
15.10.2026
Index: Yes/No
Speaking/Non-speaking order
Neutral Citation: Yes/No
dm
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To
The Metropolitan Magistrate, Fast Track Court-II,
Egmore, Chennai.
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G.K.ILANTHIRAIYAN J.
dm
CRL.OP.No.27541 of 2026
and
CRL.MP.Nos.18244 and 18245 of 2026
15.10.2026
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