Varun Vs. Toolika Pandey - That post the issuance of the moratorium, it is the Insolvency Resolution Professional who has the authority to operate the bank accounts of the company, and on the dishonour of the cheques issued in the name of the company under CIRP, the accused persons/directors therein cannot be said to be in control and management of the affairs of the company, and, therefore, cannot be prosecuted.

 HC Delhi (2024.03.28) in Varun Vs. Toolika Pandey [(2024) ibclaw.in 312 HC, CRL.M.C. 5187/2022 & CRL.M.A. 20714/2022] held that; 

• That post the issuance of the moratorium, it is the Insolvency Resolution Professional who has the authority to operate the bank accounts of the company, and on the dishonour of the cheques issued in the name of the company under CIRP, the accused persons/directors therein cannot be said to be in control and management of the affairs of the company, and, therefore, cannot be prosecuted.

Excerpts of the order;

# 1. This petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (in short, ‘Cr.P.C.’) praying for quashing of the complaint, being CC No.1940/2020, titled Toolika Pandey v. Today Homes and Infrastructure Pvt. Ltd. & Ors., filed by the respondent herein inter alia against the petitioner, under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 (in short, ‘NI Act’).

# 2. At the outset, it is noticed that the respondent, in spite of service of notice, has not entered appearance. The respondent is, therefore, proceeded ex-parte.

# 3. The above complaint has been filed by the respondent alleging therein that he had booked flats in the project named ‘Canary Greens’ at Behrampur, Sector-73, District Gurugram, Haryana, a project launched by the accused no.1 company, that is, Today Homes and Infrastructure Pvt Ltd.. The respondent alleges that the accused nos.2 to 5 in the complaint case are the Directors as well as Authorized signatories and are engaged in the day-to-day routine business affairs of the accused No. 1 Company and thereby have been directly dealing with the respondent for receiving the payments in respect of booked flats and have been instrumental in allotment of flats to the respondent. The respondent alleges that the accused Nos. 2 to 5 are liable for all the acts and deeds, done for and on behalf of, the accused no.1 company, including all liabilities arising towards the respondent. The petitioner herein has been arrayed as the accused no.3 in the said complaint.

# 4. The complaint further alleges that, as the accused no.1 company failed to hand over the possession of the flats to the respondent in spite of timely payment by the respondent, the respondent filed a complaint, being Complaint Case No.832/2015, before the learned National Consumer Disputes Redressal Commission, New Delhi (in short, ‘NCDRC’) against the accused no.1 and its directors/representatives, seeking a refund of the amount paid. The petitioner was not made a party in the said proceedings.

# 5. By an Order dated 31.01.2017 passed in the above complaint, the learned NCDRC directed the accused to refund the amount paid by the respondent alongwith interest. The respondent thereafter filed an Execution Petition, being Execution Application No. 102/2017 before the learned NCDRC, wherein by an Order dated 26.09.2018, a schedule for refund was prescribed. The respondent alleges that, in order to make the payment in terms of the Order dated 26.09.2018 of the learned NCDRC, the accused nos.4 and 5 acting for and on behalf of the accused no.1 company, issued six post-dated cheques. They assured the respondent that these cheques would be duly honoured on presentation.

# 6. The respondent alleges that these cheques when presented, however, were returned dishonoured with the remark ‘Funds Insufficient’. The respondent thereafter issued legal notices dated 08.01.2020 and 17.01.2020 to the accused seeking payment of the said cheque amounts, however, no payment was made to the respondent by the accused.

# 7. On the abovementioned complaint, summons were issued to the accused, including the petitioner herein, vide order dated 18.02.2020 passed by the learned Metropolitan Magistrate-02, New Delhi District, Patiala House Courts, New Delhi. The petitioner challenges this order as well.

# 8. The petitioner, who appears in person, submits that the petitioner had joined the accused no.1 company only as an Additional/Non-Executive Director and in his professional capacity as a lawyer, on 25.10.2019, that is, post the handing over of the cheques in question. In this regard, he has drawn my attention to the Form No.DIR-12 filed as Annexure P-8 with the present petition, and to the Company Master Data filed as Annexure P/10 with the present petition. He further submits that by an Order dated 31.10.2019 passed in (IB)-2130(ND)2019, the learned National Company Law Tribunal, New Delhi Bench (in short, ‘NCLT’) had issued a moratorium against the accused no.1 company and had appointed Interim Resolution Professional (‘IRP’). He submits that the cheques in question were presented by the respondent post the issuance of the moratorium and the appointment of the IRP by the learned NCLT. He submits that, therefore, the petitioner cannot be made liable for the non-payment of the cheques and, in any case, the petitioner is not covered under Section 142 of the NI Act and, therefore, cannot be made an accused in the complaint case.

# 9. He places reliance on the judgment dated 21.09.2023 passed by a Co-ordinate Bench of this Court in a bunch of petitions filed by the petitioner herein, including Crl.M.C. 3602/2022, titled Varun v. Amit Khanna Neutral Citation no.2023:DHC:6872, wherein considering the petitioner’s position as a Non-Executive Director, the Complaint Cases against the petitioner had been quashed.

# 10. He also places reliance on the judgment of this Court in Govind Prasad Todi & Anr. v. Govt. of NCT of Delhi & Anr. Neutral Citation no.2023:DHC:4149, in support of the submission that if the cheque is presented for payment after the Corporate Insolvency Resolution Process (‘CIRP’) has been initiated against the main accused, that is, the company, and the moratorium has been issued, the complaint against the directors would not be maintainable.

# 11. I have perused the contents of the complaint and considered the submissions made by the petitioner, who appears in person.

# 12. As is noted hereinabove, Form No.DIR-12, which the petitioner has annexed with the present petition, shows that the petitioner was appointed only as an Additional/Non-Executive Director of the accused no. 1 Company and that too, only on 25.10.2019, that is, post the issuance of the cheques in question by the accused no.1 company.

# 13. In Amit Khanna (Supra), this Court in the bunch of petitions filed by the petitioner herein, has dismissed similar complaints under Section 138 of the NI Act filed against the petitioner, by observing as under:

• “23. It is pertinent to mention that the Courts are bound to follow the directions in letter and spirit. A perusal of the FORM 32/ Form No. DIR -12 makes it manifestly evident that the petitioner was only appointed in the capacity of an Additional Director-Non Executive w.e.f. 25.10.2019 in the accused company. A perusal of the complaint reveals that the subject cheques which came to be disounoured were in fact issued on 24.07.2019, which is prior to the date of appointment of the petitioner as an Additional/Non-Executive Director in the accused company.

• 24. In view of the above it can be easily inferred that the petitioner could not possibly have been responsible for or in charge of the day to day affairs of the company or its conduct of business at the relevant time when the cheques were issued. Moreover, neither was he a signatory to the cheques in question. It would thus be travesty of justice and abuse of the process of the courts if the complaints were kept pending qua the petitioner especially in absence of any cogent material against him for committing the said offence.

• Ld. MM while issuing summons took cognizance of the offence under section 138 NIA and mechanically summoned the petitioner in the capacity of a Director of the accused company without applying his judicial mind.

• Xxxx

• 26. In the present case, the Ld.MM committed an error by summoning the petitioner, who was not even an Additional Director- Non Executive in the accused company at the time when the cheques were issued and thus was not handling the affairs or the conduct of business of the accused company at the relevant time. These facts were also mentioned in the reply on behalf of the petitioner to the legal notices of the complainants. However,

• Ld. MM ignoring such vital aspects, mechanically proceeded to issue summons to the present petitioner.”

# 14. A perusal of the contents of the complaint also shows that the cheques in question were presented for encashment by the respondent post the Order dated 31.10.2019 passed by the learned NCLT, issuing a moratorium against the accused no.1 company.

# 15. In Govind Prasad Todi (Supra), under similar circumstances, another Coordinate Bench of this Court has observed that post the issuance of the moratorium, it is the Insolvency Resolution Professional who has the authority to operate the bank accounts of the company, and on the dishonour of the cheques issued in the name of the company under CIRP, the accused persons/directors therein cannot be said to be in control and management of the affairs of the company, and, therefore, cannot be prosecuted.

# 16. Keeping in view the above principles, in my view, the petitioner has been able to make out ground for quashing of the Impugned Complaint qua the petitioner.

# 17. Accordingly, the petition is allowed. Consequently, the complaint case, being CC No.1940/2020, titled Toolika Pandey v. Today Homes and Infrastructure Pvt. Ltd. and Ors. is hereby quashed as against the petitioner herein. The pending application is also disposed of as being rendered infructuous.

# 18. There shall be no order as to costs.

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Gurmeher Singh Vs. State of U.P. and Anr. - This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.

 HC Allahabad (2024.04.09) in Gurmeher Singh Vs. State of U.P. and Anr. [(2024) ibclaw.in 267 HC, Application u/s 482 No. – 7597 of 2024] held that;

• This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.

Blogger’s Comments; Hon’ble HC Kerala (14.11.2023) in Afsal Hussain v. K.S. Muhammed Ismail & Anr. [Crl. Rev. Pet No. 1060 Of 2008] held that.

• Unless and until, it is established that such juristic person commits offence under Section 138 of the N.I Act, no person referred to in Section 141 of the N.I Act can be proceeded against, summoned, prosecuted or convicted for offence under Section 138 of the N.I Act.

• Commission of offence under Section 138 of the N.I Act by a juristic person is an inevitable legal pre-requisite or the condition precedent to proceed against a person referred to under Section 141 of the N.I Act and to hold him guilty of the said offence.

• When the company is found not guilty of the offence alleged, the Managing Director cannot be held vicariously liable for the offence committed by the company.

• The liability of persons referred to in Section 141 of the N.I Act is co-extensive with that of the company, firm or association of individuals, in a prosecution under Section 138 of the N.I Act.

The question is when proceedings against the company cannot continue due to Moratorium, how come the legal pre-requisite or the condition precedent to proceed against a person referred to under Section 141 of the N.I Act and to hold him guilty of the said offence shall be fulfilled.

Excerpts of the order;

# 1. Heard learned counsel for the applicant and Sri Rajeev Kr. Singh, learned A.G.A. for the State.

# 2. The instant application has been filed seeking quashing of the impugned order dated 12.1.2024 passed by Additional District & Sessions Judge, Court No.8/Special Judge (NDPS Act), Gorakhpur in Criminal Revision No. 107 of 2023 (Gurmeher Singh Majithia vs. State of U.P. & others) as well as the order dated 23.3.2023 passed by Addl. Civil Judge (J.D.), court No.8, Gorakhpur and stay the further proceeding of Complaint Case No. 6272 of 2020 (Harish Chand Jaiswal vs. M/s Saraya Industries Ltd. & others), u/s 138 N.I. Act, P.S. Kotwali, District Gorakhpur, pending before Addl. Civil Judge (J.D.), Court No.8, Gorakhpur.

# 3. Facts giving rise to the present case are that opposite party No.2 had filed an application u/s 138 N.I. Act against the applicant and his company, namely, M/s Saraya Industries Ltd. Learned trial court, after perusal of the complaint and other evidences on record, issued summon to the present applicant being the active director of the company by order dated 8.2.2021. That order was challenged by the applicant by way of Revision No. 107 of 2023 before Addl. District & Sessions Judge, Court No.8, Gorakhpur, but the said revision was also rejected by order dated 12.1.2024. Feeling aggrieved by both the orders, the applicant has filed the present application.

# 4. The contention of learned counsel for the applicant is that the applicant is the director of the company on whose behalf the cheque in question was issued. As the insolvency proceeding is going on against the company under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “I.B.C.”), therefore, as per Section 14 of I.B.C. any proceeding including the proceeding u/s 138 N.I. Act cannot be executed or proceeded further against the company and the applicant, being the director, has not given any guarantee for any amount payable under cheque in question. It is also submitted that no finding was recorded that the applicant being the director has an active role in day to day business. In support of her submission learned counsel for the applicant has relied upon the judgement of the Apex Court in the case of P. Mohanraj and others vs. M/s Shah Brothers Ispat Pvt. Ltd.; (2021) 6 SCC 258 in which the Apex Court observed that once the insolvency proceeding is pending against the company, then no proceeding including the proceeding u/s 138 N.I. Act can be executed against the company.

# 5. Per contra, learned A.G.A. has submitted that Section 14 of I.B.C. prohibits the execution only against the company and not against the natural person. It is further submitted that specific allegations were made against the applicant who actively played role in persuading opposite party No.2 to invest money in the company of the applicant.

# 6. Considering the submissions of learned counsel for the parties and on perusal of record, it is clear that the applicant, being director of the company, has played active role in day to day business of the company and also persuaded opposite party No.2 to invest money in the liquor business. So far as the Section 14 of I.B.C. is concerned, this Section prohibits any proceeding against the corporate debtor. Section 14 of the I.B.C. is quoted as under:-

“14. Moratorium.—(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely—

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Explanation.—For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period.

(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

(2-A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.

(3) The provisions of sub-section (1) shall not apply to—

(a) such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;

(b) a surety in a contract of guarantee to a corporate debtor.

(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:

Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.”

# 7. The Apex Court in the case of P. Mohanraj and others vs. M/s Shah Brothers (supra) already considered this issue in detail and observed that moratorium u/s 14 of I.B.C. is applicable against the corporate debtor and not against the natural person like the applicant. The above judgement was again reiterated by the Apex Court in the case of Narindar Garg and others vs. Kotak Mahindra Bank Ltd. and others; 2022 SCC OnLine SC 517. Paragraph No. 102 of the P. Mohanraj and others vs. M/s Shah Brothers (supra) is quoted as under:-

• “102. Since the corporate debtor would be covered by the moratorium provision contained in Section 14 IBC, by which continuation of Sections 138/141 proceedings against the corporate debtor and initiation of Sections 138/141 proceedings against the said debtor during the corporate insolvency resolution process are interdicted, what is stated in paras 51 and 59 in Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] would then become applicable. The legal impediment contained in Section 14 IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Sections 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Sections 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.”

# 8. From the perusal of the above quoted judgement, it is clear that on commencement of insolvency resolution process, the moratorium u/s 14 of I.B.C. prohibiting the proceeding u/s 138/141 N.I. Act will be applicable only against the corporate debtor and not against the natural persons like the directors of the company for their vicarious liability. Therefore, this judgement does not help the applicant.

# 9. From the perusal of the complaint as well as the statement of opposite party No.2, it is clear that there are clear allegations against the applicant that he was actually involved in day to day business of the company in question, therefore, he is also liable as per Section 141 of N.I. Act.

# 10. In view of the above, this Court does not find any good ground to quash the impugned proceeding. However, it is open for the applicant to raise all these issues during trial.

# 11. Accordingly, the application stands dismissed.

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K. Hymavathi Vs. The State of Andhra Pradesh & Anr. - 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.

SCI (2023.09.06) in K. Hymavathi Vs. The State of Andhra Pradesh & Anr. [(2023) ibclaw.in 99 SC, Neutral Citation - 2023 INSC 811, SLP (Crl) Nos. 7455, 7457, 7458 and 7459 of 2019] held that;

• But we are certain that at this stage of the proceedings, to say that the cheque drawn by the respondent was in respect of a debt or liability, which was not legally enforceable, was clearly illegal and erroneous.

• 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. 

• That in respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires.

Excerpts of the order;

# 1. Leave granted.

# 2. The appellant is assailing the judgment dated 12.02.2019 passed by the High Court of Andhra Pradesh at Amravati in Criminal Petition No. 12675 of 2018 and analogous petitions. Through the judgment, the High Court while allowing the petitions before it, quashed the criminal proceedings against Respondent No. 2, being C.C. No.681 of 2017 and analogous complaints on the file of II Additional Chief Metropolitan Magistrate at Visakhapatnam. The appellant is the complainant in CC No. 681 of 2017 and the other complaints, filed against the accused – respondent no.2 under Section 138 and 142 of the Negotiable Instruments Act (‘NI Act’ for short). The appellant is therefore before this Court claiming to be aggrieved by the said judgment.

# 3. The brief facts of the case as narrated in the first of the above appeal are that the appellant and respondent no.2 are known to each other. Due to their acquaintance respondent no.2 approached the appellant to borrow a sum of Rs 20,00,000/- stating that he required the amount to finance his son’s higher education to study medicine and for domestic expenses. In order to assure the re-payment, respondent no.2 executed a promissory note on 25.07.2012 wherein it was agreed that the amount was to be repaid in full and along with interest at 2% per month. There was a condition in the promissory note that the full and final payment will be made by December, 2016. The respondent No.2 failed to comply with the condition in the promissory note but on 28.04.2017 issued a cheque bearing No.548045 drawn on the Vijaya Bank, J.P. Marg, Visakhapatnam for a sum of Rs. 10,00,000/- towards partial discharge of the debt. The cheque when presented for collection was returned by the Bank on 15.05.2017 due to insufficient funds to honour the cheque. The appellant got issued a legal notice dated 24.05.2017 to respondent No.2, which was replied to by respondent No.2 on 01.06.2017. The appellant sent a rejoinder to the said reply on 03.06.2017. Respondent No.2 sent a reply to the said rejoinder on 07.06.2017. The appellant thereafter filed complaints under Section 138 of the NI Act on 11.07.2017 before the Special Magistrate, Vishakhapatnam vide CC No. 681 of 2017 and analogous complaints. The learned Special Magistrate in accordance with law, took cognizance of the complaint under Section 138 of NI Act against the respondent No.2 -accused vide order dated 14.09.2018 and ordered the issue of summons. 

# 4. The fact situation in the analogous appeals is also similar except for the date of the promissory note and the date of the cheque. However, in all the promissory notes the period for repayment indicated is the same and all other facts arising for consideration are similar. Hence for the purpose of narration and consideration of the law, the facts relating to the appeal arising out of SLP(Crl.) No.7455 of 2019 is referred herein.

# 5. The respondent No.2 herein however filed the petition in CRL.P No.12675 of 2018 and analogous petitions under Section 482 of the Criminal Procedure Code, 1973 (for short ‘CrPC’) before the High Court praying to quash proceedings under CC No. 681 of 2017 and analogous complaints. The High Court allowed the petitions filed under Section 482 CrPC by respondent no.2 herein, noting various judgments by this Court and the various High Courts, and observing that the limitation for enforcing the promissory notes had expired much prior to the issuance of the cheques in question. As such, it was held this was a fit case for quashing since the complaint filed seeking prosecution was not in respect of a legally recoverable debt. 

# 6. Mr. Sanchit Garga, learned counsel appearing on behalf of the appellant while assailing the judgment passed by the High Court, would contend that the High Court did not appreciate that the promissory note executed by respondent No.2 has the binding effect of a contract and hence the complaint under Section 138 of NI Act is maintainable when a cheque is drawn to pay wholly or in part, a debt which is enforceable and there is no bar of limitation. The cheque amounts to a promise governed by Section 25 (3) of the Indian Contract Act, 1872. Such promise which is an agreement is an exception to the general rule that an agreement without consideration is void. Though on the date of making such promise by issuing a cheque, the debt which is promised to be paid, even if is time-barred is a legally recoverable one. In view of Section 25 (3) of the Indian Contract Act, the promise/ agreement is valid and therefore the same is enforceable. The learned counsel for the appellant has argued on the principle that the limitation act only bars the remedy and not the right of a party. He has relied upon the decision of this Court in S. Natarajan v. Sama Dharman, (2021) 6 SCC 413 and A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642. 

# 7. Mr. Sidharth Luthra, learned senior counsel appearing as Amicus Curiae on behalf of respondent No. 2 – accused who has failed to appear despite service of notice, would however seek to sustain the judgment passed by the High Court. The learned Amicus Curiae has fairly put on record a compilation showcasing the different view taken by various High Courts, as well as the position of law stated by this Court. It is contended that the earlier view while considering that the presumption under Section 139 NI Act will apply, did not consider the scope in a criminal trial and the bearing that Section 322 of CrPC would have in the light of the decision in Expeditious Trial of Cases Under Section 138 of NI Act 1881, (2021) SCC OnLine SC 325 and thus did not consider the jurisdictional fact for invoking Section 138 NI Act. It is further contended that the debt being time-barred was not a legally enforceable debt and where a debt is barred by law such debt or liability based on a void contract is against public policy and NI Act cannot apply in such cases. In order to attract Section 25(3) of the Indian Contract Act, an express promise made in writing and signed by the person is required is his contention. 

# 8. At the threshold it would be apposite to take note of the decisions referred to by the learned counsel for the petitioner so as to place in perspective the scope of consideration in a petition filed under Section 482 of CrPC seeking quashment of a complaint filed under Section 138 of NI Act, more so keeping in view the presumption as incorporated under Section 139 of the NI Act. As noted, the learned counsel has relied on the decision in the case of S. Natarajan vs. Sama Dharman & Anr. (2021) 6 SCC 413 wherein it is held as hereunder:

• “6. The High Court referred to Section 25(3) of the Contract Act, 1872 on which reliance was placed by the complainant and observed that with regard to payment of time-barred debt, there must be a distinct promise to pay either whole or in part the debt; that the promise must be in writing either signed by the person concerned or by his duly appointed agent. The High Court then observed that unless a specific direction in the form of novation is created with regard to payment of the time-barred debt, Section 25(3) of the Contract Act cannot be invoked. The High Court then went into the question whether issuance of cheque itself is a promise to pay time-barred debt and referred to Sections 4 and 6 of the NI Act. After referring to certain judgments on the question of legally enforceable debt, the High Court stated that for the purpose of invoking Section 138 read with Section 142 of the NI Act, the cheque in question must be issued in respect of legally enforceable debt or other liability. The High Court then observed that since at the time of issuance of cheque i.e. on 1-2-2011, the alleged debt of the accused had become time-barred, the proceedings deserve to be quashed.

• 7. In our opinion, the High Court erred in quashing the complaint on the ground that the debt or liability was barred by limitation and, therefore, there was no legally enforceable debt or liability against the accused. The case before the High Court was not of such a nature which could have persuaded the High Court to draw such a definite conclusion at this stage. Whether the debt was time-barred or not can be decided only after the evidence is adduced, it being a mixed question of law and fact.”

# 9. The Learned counsel has further referred to the decision in the case of A.V. Murthy vs. B.S. Nagabasavanna (2002) 2 SCC 642 wherein it is held as hereunder: 

• “5. As the complaint has been rejected at the threshold, we do not propose to express any opinion on this question as the matter is yet to be agitated by the parties. But, we are of the view that the learned Sessions Judge and the learned Single Judge of the High Court were clearly in error in quashing the complaint proceedings. Under Section 118 of the Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. Even under Section 139 of the Act, it is specifically stated that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under sub-section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract. Moreover, in the instant case, the appellant has submitted before us that the respondent, in his balance sheet prepared for every year subsequent to the loan advanced by the appellant, had shown the amount as deposits from friends. A copy of the balance sheet as on 31-3-1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance sheet, it may amount to acknowledgment and the creditor might have a fresh period of limitation from the date on which the acknowledgment was made. However, we do not express any final opinion on all these aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent. 

• 6. This is not a case where the cheque was drawn in respect of a debt or liability, which was completely barred from being enforced under law. If for example, the cheque was drawn in respect of a debt or liability payable under a wagering contract, it could have been said that that debt or liability is not legally enforceable as it is a claim, which is prohibited under law. This case is not a case of that type. But we are certain that at this stage of the proceedings, to say that the cheque drawn by the respondent was in respect of a debt or liability, which was not legally enforceable, was clearly illegal and erroneous.”

# 10. 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 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.

# 11. Notwithstanding the above, the learned Amicus Curiae would submit that the decisions referred to hereinabove would have to be viewed differently keeping in view the subsequent decision of a Constitution Bench of this Court in the case of the Expeditious trial of Cases under Section 138 of NI Act, 2021 SCC Online SC 325 to contend that in the said decision the power of the Magistrate under Section 322 of CrPC being an aspect to be taken into consideration was considered. In a case where the Trial Court is informed that it lacks jurisdiction to issue process for complaints under Section 138 of the Act the proceedings will have to be stayed in such cases. Hence, it is contended that the power of the Trial Court to decide with regard to its jurisdiction is not taken away and in that circumstance exercise of power under Section 482 CrPC by the High Court would be justified. It is further contended by the learned Amicus Curiae that even the position under Section 25(3) of the Contract Act being applicable to criminal proceedings for dishonour of cheque will have to be examined in the background of the provision contained in the Explanation to Section 138 of NI Act which specifies that the debt or other liability enforceable would be only a legally enforceable debt or other liability. In such circumstances if the cheque is issued in respect of the debt which is not enforceable or a liability which cannot be recovered, in such event, the presumption under Section 139 of NI Act would not be available. 

# 12. Having referred to the judgments cited, prima facie we are of the opinion that the decision in S. Natarajan and A.V. Murthy (supra) has taken into consideration all aspects. No other elaboration is required even if the observations contained in the case of Expeditious Trial of Cases under Section 138 of NI Act (supra) is taken note, since, whether the debt in question is a legally enforceable debt or other liability would arise on the facts and circumstance of each case and in that light the question as to whether the power under Section 482 CrPC is to be exercised or not will also arise in the facts of such case. Even otherwise we do not see the need to tread that path to undertake an academic exercise on that aspect of the matter, since from the very facts involved in the case on hand ex facie it indicates that the claim which was made in the complaint before the Trial Court based on the cheque which was dishonoured cannot be construed as time-barred and as such it cannot be classified as a debt which was not legally recoverable, the details of which we would advert to here below. In that view, we have chosen not to refer to the cases provided as a compilation as it would be unnecessary to refer to the same. 

# 13. In that regard the perusal of the impugned judgment would disclose that the very narration as contained in para 4 of the impugned order would indicate that the consideration therein was predicated only on two facts as noted by the High Court, (i) that the promissory notes are of the year 2012, (ii) that the cheques are issued in the year 2017. It is in that light the High Court has indicated that the date of issuance of the cheque is beyond three years from the date of issuance of the promissory note so as to classify it as a time-barred debt. In this regard, on perusal of the records we note that the High Court has in fact misdirected itself, has proceeded at a tangent and has therefore erred in its conclusion.

# 14. As already noted, the facts are almost similar in all four cases and as such for the purpose of narration a perusal of the promissory note dated 25.07.2012 (Annexure P/1) would inter alia record as follows:

• “…..hereby admit to have availed a loan amount shown above for the purpose of meeting my own family expenses and for higher education of my children by collecting the cash amount of Rs.20,00,000/- (In words: Rupees Twenty Lakhs only) for which I do hereby further agree to pay a monthly interest of Rs.2/- (In words: Rupees Two only) per month and fully understand hereby that I am bound by virtue of the promissory to repay the capital or principal loan amount as well as the agreed payable monthly interest amount within the date of December 2016 by ensuring the total payment to you or any of your assignees as directed by you by taking the payable amount to your home and pay it there…”     (emphasis supplied)

# 15. A perusal of the above-extracted and emphasised portion would indicate that the promise is to repay the principal amount with the interest accrued within December, 2016. Hence, when the respondent had agreed to repay the amount within December, 2016, the cause of action to initiate proceedings to recover the said amount if not paid within December 2016 would arise only in the month of December, 2016. In that light, the limitation would be as provided under Article 34 to the Schedule in the Limitation Act, 1963. For the purpose of easy reference, the same is extracted here below: 

THE SCHEDULE

PERIODS OF LIMITATION

Description of suit	Period of limitation	Time from which period begins to run
PART II – SUITS RELATING TO CONTRACTS
34. On a bill of exchange or promissory note payable at a fixed time, after sight or after demand.	Three years	When the fixed time expires.

(emphasis supplied)

# 16. The provision would indicate that in respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires. Therefore, in the instant case, the time would begin to run from the month of December, 2016 and the period of limitation would expire at the end of three years thereto i.e. during December, 2019. In that light, the cheque issued for Rs.10,00,000/- which is the subject matter herein is dated 28.04.2017 which is well within the period of limitation. The complaint in CC No.681 of 2017 was filed in the Court of the Chief Metropolitan Magistrate on 11.07.2017. So is the case in the analogous complaints. Therefore, in the instant case not only the amount was a legally recoverable debt which is evident on the face of it, the complaint was also filed within time. Hence there was no occasion whatsoever in the instant case to exercise the power under Section 482 to quash the complaint. In that view, the order impugned dated 12.02.2019 passed by the High Court in Criminal Petition Nos.12652, 12670, 12675, and 12676 of 2018 is not sustainable. 

# 17. The order impugned is accordingly set aside.

# 18. The complaints bearing CC No.681 of 2018, CC No.644 of 2018, CC No.250 of 2018, and CC No.254 of 2018 are restored to the file of the Chief Metropolitan Magistrate, Visakhapatnam. Keeping in view that the matter has been pending from the year 2017, the Trial Court shall now proceed with the matters as expeditiously as possible but in any event shall dispose of the matter within six months from the date on which a copy of this judgment is furnished.

# 19. Before parting with the matter, we would like to place on record and command the usual, able assistance rendered by Mr. Sidharth Luthra, learned senior counsel as Amicus Curiae in the absence of respondent, in guiding this Court to arrive at its conclusion.

# 20. The appeals are accordingly allowed with no order as to costs.

# 21. Pending application, if any, shall stand disposed of.

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