- 1 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 6TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR. JUSTICE HEMANT CHANDANGOUDAR WRIT PETITION NO. 105585 OF 2023 (GM-RES) BETWEEN: SHRI. MOHAN RAGHAVAN, AGE: 52 YEARS, OCC: BUSINESS, R/O: BENNY CRESCENT APARTMENT, BENSON TOWN, BENGALURU-560 046. … PETITIONER (BY SRI. NANDISH PATIL, SRI. SHIVAPRASAD SHANTANGOUDAR AND SRI. RAMACHANDRA V. BHAT, ADVOCATES) AND: SHRI. VIJAYKUMAR MUDDANNA SHETTY, AGE: 60 YEARS, OCC: BUSINESS, R/O: F-2, EMBASSY APARTMENTS, NEAR NCC OFFICE, JADHAV NAGAR, BELAGAVI-590 001. … RESPONDENT (BY SRI. JAGADISH PATIL, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO, ISSUE WRIT IN THE NATURE OF CERTIORARI QUASHING PROCEEDINGS PENDING ON THE FILE OF VII JMFC BELAGAVI FOR TAKING COGNIZANCE AND ISSUING SUMMONS IN CC NO.556/2023 FOR THE OFFENCES PUNISHABLE U/S. 138 OF N.I. ACT BY ORDER DATED: 20-07-2023 VIDE ANNEXURE-‘A’ IN THE INTEREST OF JUSTICE. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: THE HON'BLE MR. JUSTICE HEMANT CHANDANGOUDAR B K MAHENDRAKUMAR Digitally signed by B K MAHENDRAKUMAR Location: HIGH COURT OF KARNATAKA DHARWAD BENCH Date: 2025.02.11 15:51:59 +0530 - 2 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 ORAL ORDER 1. The petitioner has filed the present writ petition challenging the cognizance taken for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the NI Act’). 2. The respondent/complainant has filed a private complaint under Section 200 of the Code of Criminal Procedure, 1973 (hereinafter referred to as ‘Cr.P.C.’), alleging the commission of an offence under Section 138 of the NI Act. The allegations in the complaint are that the petitioner/accused approached the complainant in the year 2014, expressing his intention to start a hotel business, including lodging and boarding, on lease for a period of ten years. The petitioner is alleged to have assured the complainant that he would be taken as a partner in the said hotel business. Based on such assurance, the complainant is said to have contributed a sum of ₹11,00,000/- towards the business. However, instead of being made a partner, the complainant was allegedly designated as the General Manager of the hotel, drawing a monthly remuneration of ₹60,000/-. 3. The complainant has averred that the hotel business was conducted profitably until the year 2016. However, when he insisted on the repayment of the invested amount of ₹11,00,000/- along with interest, the petitioner issued the subject cheque towards the discharge of the alleged debt. The said cheque, when presented for encashment, was dishonored with an endorsement stating, “Account Closed.” - 3 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 4. The learned counsel for the petitioner has vehemently contended that: i) The complainant was authorized to operate the bank account in question and had access to banking transactions related to the said account. ii) The SMS alert facility for the said account was linked to the mobile number of the complainant. iii) The cheque in question was drawn from a series of cheque leaves bearing numbers 148826 to 148850, issued on 29.04.2020, whereas the last cheque book had been issued on 11.04.2018. iv) There is no material evidence on record to substantiate that the complainant had indeed invested an amount of ₹11,00,000/- in the alleged business venture. v) In the absence of a legally recoverable debt or liability, the initiation of criminal proceedings under Section 138 of the NI Act is impermissible and constitutes an abuse of the process of law. 5. In response, the learned counsel for the respondent/complainant has submitted that: i) The complainant’s income-tax returns for the financial years 2014- 15 to 2016-17 establish that he had advanced a sum of ₹11,00,000/- towards the business. ii) The subject cheque was issued towards the repayment of the said investment amount, including accrued interest. iii) The complainant has, therefore, demonstrated the existence of a legally enforceable debt against the petitioner, warranting prosecution under Section 138 of the NI Act. - 4 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 iv) Accordingly, the petition is devoid of merit and deserves to be dismissed. 6. The arguements of the learned counsel of the parties have been examined. a) The petitioner has produced a communication issued by Axis Bank dated 23.08.2023, indicating that the bank account in question stood in the name of M/s. Top In Town Deluxe and was closed on 16.05.2023. b) As per the banking records, the complainant was a Letter of Authorization (LOA) holder for the said account. c) The mobile number registered for SMS alerts in respect of this account was that of the complainant. d) The records further confirm that the last cheque book for this account was issued on 11.04.2018. e) The complainant’s income-tax returns indicate that he had advanced a loan of ₹2,00,000/- to the petitioner and an additional sum of ₹2,00,000/- to M/s. Top In Town Deluxe. f) However, the income-tax return for the assessment year 2015-16 does not reflect any loan of ₹2,00,000/- advanced to the petitioner but only acknowledges the loan extended to M/s. Top In Town Deluxe. 7. The alleged investment in the business dates back to the year 2011. It is pertinent to note that, as per Article 19 of the Limitation Act, 1963, the period of limitation prescribed for the recovery of a loan amount or an actionable claim based on an oral agreement is three years from the date on which the right to sue accrues. - 5 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 i) In the present case, the subject cheque is alleged to have been issued in the year 2023, which is well beyond the three- year limitation period. ii) As per Section 18 of the Limitation Act, 1963, any acknowledgment of a debt to extend the limitation period must be in writing and signed by the debtor before the expiry of the limitation period. iii) In the instant case, no such written acknowledgment of the debt has been produced to demonstrate that the limitation period was extended. iv) Consequently, by the time the cheque was issued, the alleged debt had already become time-barred, rendering it legally unenforceable. 8. Furthermore, the complainant has failed to produce any cogent material establishing that an amount of ₹11,00,000/- was actually invested by him in the hotel business. The absence of such documentary evidence raises serious doubts regarding the very existence of the alleged debt. 9. It is well settled that, for an offence under Section 138 of the NI Act to be made out, the cheque must have been issued towards the discharge of a legally enforceable debt or liability. A time-barred debt does not constitute a legally enforceable debt within the meaning of the NI Act. - 6 - NC: 2025:KHC-D:2333 WP No. 105585 of 2023 10. In light of the above findings, it is evident that: i) The subject cheque was issued in 2023 in relation to an alleged investment made in 2011, well beyond the limitation period. ii) No written acknowledgment of debt was executed within the limitation period to extend the enforceability of the alleged claim. iii) The complainant has not established a prima facie case to substantiate that the subject cheque was issued towards a legally recoverable debt. 11. In view of the foregoing, the continuation of criminal proceedings against the petitioner would amount to an abuse of the process of law. ORDER i) Accordingly, the writ petition is allowed. ii) The criminal proceedings in C.C. No.556/2023 pending on the file of the VII JMFC, Belagavi, insofar as it relates to petitioner/accused, is hereby quashed. Sd/- (HEMANT CHANDANGOUDAR) JUDGE KMS CT:BCK List No.: 1 Sl No.: 39