Delhi High Court
Gurvinder Singh Toor vs Rohit Malhotra on 1 August, 2025
Author: Swarana Kanta Sharma
Bench: Swarana Kanta Sharma
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 01.08.2025
+ CRL.M.C. 1474/2022 & CRL.M.A. 6375/2022
GURVINDER SINGH TOOR .....Petitioner
Through: Mr. Sagar Pathak, Advocate.
versus
ROHIT MALHOTRA .....Respondent
Through: Mr. Arjun Dewan and Mr.
Akash Arora, Advocates.
CORAM:
HON'BLE DR. JUSTICE SWARANA KANTA SHARMA
JUDGMENT
DR. SWARANA KANTA SHARMA, J
1. The petitioner has approached this Court by way of this
petition, seeking quashing of the Complaint Case No. 2435/2020,
titled “Rohit Malhotra v. Gurvinder Singh Toor” under Section 138
of the Negotiable Instruments Act, 1881 [hereafter „NI Act‟] pending
before the learned Metropolitan Magistrate, West District, Tis Hazari
Court, Delhi [hereafter „Magistrate‟].
FACTUAL BACKGROUND
2. Brief facts of the case, as set out in the petition and evident
from the complaint filed in this case, are that the petitioner is the
Principal Director of a company incorporated under the name Zoi
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International Company Ltd. [hereafter „the Company‟], which is
engaged in the business of textiles and used garments. The
respondent herein was also one of the Principal Directors of the
Company, holding 45% equity shareholding. He resigned from the
directorship of the Company on 06.07.2020. The respondent had
initially met the petitioner along with one Mr. Manish Alag in
November 2018 to discuss a business project aimed at establishing a
branch of the Company in Thailand. Pursuant to these discussions,
the respondent decided to collaborate in the business and purchased
45% of the Company‟s shareholding. However, owing to certain
disputes among the directors, the respondent, in February 2020,
decided to sell his 45% equity stake in the Company. It was agreed
that the petitioner would purchase the respondent‟s shares for a total
consideration of ₹1,90,00,000/-. Since the petitioner needed time to
arrange the funds, the parties agreed that a formal Share Purchase
Agreement would be executed at a later date.
3. At the respondent‟s insistence, a Memorandum of
Understanding (MoU) was executed on 14.02.2020, wherein it was
recorded that the respondent would resign from his position as
Principal Director, and that a proper Share Purchase Agreement
would be executed thereafter, followed by the payment of the agreed
consideration. On the same date, i.e., 14.02.2020, the petitioner
issued two post-dated cheques – cheque no. 385471 dated 30.03.2020
for ₹1,13,50,000/- and cheque no. 385472 dated 26.03.2020 for
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₹76,50,000/-, both drawn on Axis Bank Ltd., Gandhidham, Gujarat
[hereafter „the said cheques‟] – towards the total consideration
amount, in anticipation of the execution of the Share Purchase
Agreement.
4. However, vide an e-mail dated 18.03.2020, the petitioner
informed the respondent of his inability to proceed with the share
purchase as contemplated under the MoU dated 14.02.2020, citing
personal reasons and financial difficulties. Consequently, he
terminated the MoU. In response, the respondent, through an e-mail
dated 23.03.2020, alleged that the termination was illegal, asserting
that the MoU did not contain a termination clause and that the
petitioner could not unilaterally cancel the agreement. Subsequently,
on 25.03.2020, the petitioner replied to the said e-mail, denying the
allegations and requesting the respondent not to present the said
cheques for encashment, stating that stop payment instructions had
already been issued in this regard.
5. However, the respondent presented both post-dated cheques
(bearing nos. 385471 and 385472) for encashment, which were
returned unpaid vide separate Return Memos dated 02.06.2020, by
the bank for the reason „Payment Stopped by Drawer‟. The
respondent thereafter sent a legal notice dated 15.06.2020 in terms of
Section 138(b) of NI Act; however, no reply was received by the
respondent. Thereafter, the present complaint under Section 200 of
the Cr.P.C., for offence under Section 138 of NI Act was filed by the
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respondent.
6. The petitioner/accused was summoned by the learned
Magistrate vide order dated 11.01.2021. Vide order dated 28.01.2022,
the learned Magistrate framed notice under Section 251 of Cr.P.C.
against the present petitioner.
THE RIVAL CONTENTIONS
7. It is argued by the learned counsel appearing for the petitioner
that the respondent had ceased to be the holder in due course of the
said cheques upon receipt of the petitioner‟s e-mail dated 18.03.2020,
wherein the petitioner had communicated his decision to terminate
the MoU. It is submitted that the respondent was fully aware, by then,
that stop payment instructions had already been issued by the
petitioner to his bank, and therefore, no legally enforceable liability
subsisted at the time of presentation of the cheques. It is further
contended that the cheques in question were not issued against an
existing liability but were based on a future obligation, contingent
upon the execution of a Share Purchase Agreement. The learned
counsel argues that the post-dated cheques were intended to be
honoured only upon the occurrence of the said future event, i.e., the
formal execution of the Share Purchase Agreement. Since no such
agreement was ever executed, the liability did not crystallize and the
respondent could not claim that the cheques were issued in discharge
of a legally enforceable debt.
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8. It is also submitted that the MoU itself was terminated by the
petitioner on 18.03.2020, prior to the presentation of the said
cheques, and as such, the respondent was no longer entitled to present
the cheques or initiate proceedings under Section 138 of the NI Act.
The learned counsel for the petitioner further argues that the learned
Magistrate failed to appreciate this aspect of the matter at the stage of
summoning, particularly that no legal debt or liability existed at the
time when the cheques were issued. Attention is drawn to the specific
clauses of the MoU dated 14.02.2020, which clearly contemplate the
execution of a formal Share Purchase Agreement before any transfer
of shares or payment would be effected. The relevant clauses are
reproduced below:
“3) Mr. Rohit Malhotra undertakes to transfer the above
shareholding unconditionally to Mr. Gurvinder Singh Toor
immediately on realization of above referred cheques and
agrees to perform such acts as may be necessary for legal
transfer of title of such shares as per regulations prevalent in
country of Thailand including signatures on the Share Purchase
Agreement.
4) Post Signing of the Share Purchase Agreement and the
Consideration of the Equity Stake sale being realised by Mr.
Rohit Malhotra, he agrees to resign as a Director in the said
company. Further, he agrees to hand -16- over any documents,
agreements, papers related to the company which he may be
holding to Mr. Gurvinder Singh Toor.
6) Both the above parties will enter into a detailed share
purchase agreement to execute the transfer of the shares as per
the terms of this MoU and the Rules and Regulations as
mandated.”
9. It is contended that there are no specific allegations in the
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complaint against the petitioner which would make out a case under
Section 138 of the NI Act. A bare reading of the above clauses, it is
argued, makes it evident that the MoU was dependent on the
fulfilment of certain future conditions and that the cheques were not
issued in respect of a present, subsisting liability but rather in
anticipation of a future contractual arrangement that never
materialized.
10. Conversely, the learned counsel for the respondent has argued
that the cheques in question were issued by the petitioner towards
repayment of a substantial investment made by the respondent in the
Company. It is contended that the petitioner had agreed to purchase
the respondent‟s 45% equity shareholding for a total sum of
₹1,90,00,000/- in terms of the MoU dated 14.02.2020, and the
cheques were issued pursuant to this binding arrangement. It is
argued that a legal liability existed at the time of issuance and
presentation of the cheques, as the MoU clearly envisaged payment
prior to the execution of the Share Purchase Agreement, and not the
other way around. It is further submitted that the MoU did not
contain any termination clause and that the obligation to transfer
shares was to arise only after the payment was received. Thus, the
cheques were not issued towards a future or contingent liability but
were part of a concluded agreement. The learned counsel draws
attention to the distinction between a Memorandum of Understanding
and a Share Purchase Agreement, arguing that the MoU itself was a
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complete agreement as to consideration and payment terms. In
support of his argument, he relies on the judgment of the Hon‟ble
Supreme Court in Ripudaman Singh v. Balkrishan: (2019) 4 SCC
767, to contend that consideration arising under such agreements is a
legally enforceable debt within the meaning of Section 138 of the NI
Act.
11. It is also argued that the MoU could not have been unilaterally
terminated by the petitioner merely on the ground of financial
constraints. The counsel submits that the respondent did not commit
any breach, and the petitioner‟s e-mail dated 18.03.2020 cannot
amount to legal termination of the agreement. The respondent‟s reply
dated 23.03.2020 disputed this attempted termination. Therefore, the
liability of the petitioner under the cheques remained alive and
subsisting when they were presented for encashment. The learned
counsel also contends that the presumption under Section 139 of the
NI Act operates in favour of the respondent and has not been rebutted
by the petitioner. It is submitted that the defence now taken by the
petitioner, that the cheques were issued merely as security, can only
be adjudicated upon after trial. It is argued that disputed questions of
fact such as existence of legal liability cannot be examined in
proceedings under Section 482 Cr.P.C., and for this, reliance is
placed on HMT Watches Ltd. v. M.A. Abida & Anr: (2015) 11 SCC
776.
12. It is further pointed out that the learned Magistrate had
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conducted an inquiry under Sections 200 and 202 of Cr.P.C. before
issuing summons to the petitioner. Additionally, it is submitted that
the respondent has also filed CS (COMM) No. 531/2020 before this
Court seeking specific performance of the MoU dated 14.02.2020. In
the said suit, when no written statement was filed by the petitioner,
the respondent moved I.A. No. 15134/2022 seeking a summary
judgment under Order XIII-A CPC. This Court, vide judgment dated
28.06.2024, held the MoU to be a binding and enforceable contract
and directed the petitioner to pay ₹1,90,00,000/- to the respondent,
upon which the Share Purchase Agreement would be executed. It is
argued that although the civil court‟s findings are not binding on the
criminal court, they carry persuasive value in assessing the nature of
the liability.
13. Lastly, it is contended that the petitioner did not challenge the
summoning order before the Sessions Court and thus failed to
exhaust the remedies available to him before invoking the jurisdiction
of this Court. In view of the above, the learned counsel submits that
there existed a legally enforceable debt on the date of issuance of the
cheques and that the MoU was not merely an agreement for future
consideration but a binding contract requiring immediate payment. It
is thus prayed that the present petition be dismissed.
14. This Court has heard arguments addressed by the learned
counsel appearing for either side, and has perused the material
available on record.
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ANALYSIS & FINDINGS
15. The issue before this Court is whether the Complaint case in
question can be quashed – on the ground that cheques issued by the
petitioner in favour of the respondent, pursuant to the MoU dated
14.02.2020, which got dishonored, were not issued in discharge of a
legally enforceable debt or liability within the meaning of Section
138 of the NI Act.
16. The Hon‟ble Apex Court in case of Dashrathbhai Trikambhai
Patel v. Hitesh Mahendrabhai Patel: (2023) 1 SCC 578, has held
that to constitute an offence under Section 138 of NI Act, following
ingredients are required to be fulfilled:
“11. Section 138 of the Act provides that a drawer of a cheque
is deemed to have committed the offence if the following
ingredients are fulfilled:
(i) A cheque drawn for the payment of any amount of money to
another person;
(ii) The cheque is drawn for the discharge of the „whole or part’
of any debt or other liability. „Debt or other liability’ means
legally enforceable debt or other liability; and
(iii) The cheque is returned by the bank unpaid because of
insufficient funds.
However, unless the stipulations in the proviso are fulfilled the
offence is not deemed to be committed. The conditions in the
proviso are as follows:
(i) The cheque must be presented in the bank within six months
from the date on which it was drawn or within the period of its
validity;
(ii) The holder of the cheque must make a demand for the
payment of the „said amount of money‟ by giving a notice in
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receipt of the notice from the bank that the cheque was returned
dishonoured; and
(iii) The holder of the cheque fails to make the payment of the
said amount of money within fifteen days from the receipt of
the notice…”
17. The case of the petitioner, as argued before this Court, is
premised on the absence of one of the aforesaid ingredients in this
case, i.e. there being no „legally enforceable debt or other liability‟.
18. In light of what has been contended on behalf of the petitioner,
the liability of the petitioner, as alleged by the respondent, is to be
assessed in the context of the validity and enforceability of the MoU
dated 14.02.2020. However, it is to be noted in this regard that in
Rohit Malhotra v. Gurvinder Singh Toor: CS (COMM) No.
531/2020, a Coordinate Bench of this Court examined the very same
MoU and upheld its validity. The Court found that the MoU was
executed for facilitating the respondent‟s exit from the Company, in
return for transfer of his 45% equity shareholding to the petitioner for
a consideration of ₹1.9 crore, against which two post-dated cheques
were admittedly issued by the petitioner in favour of the respondent.
The Coordinate Bench held that the MoU dated 14.02.2020
constituted a concluded and binding contract. The petitioner had
already acted upon it by issuing the cheques and could not
subsequently retract his obligations by issuing stop payment
instructions. The Court categorically observed that the petitioner was
not entitled to unilaterally dishonour his commitments under the
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MoU by purporting to terminate it without the respondent‟s consent.
In the absence of mutual agreement between the parties, such
termination was held to be invalid. The Coordinate Bench also held
that a concluded contract cannot be rescinded or varied unilaterally,
except by mutual consent or if it is shown to be incomplete or
inconclusive. The Coordinate Bench further noted that since the
respondent had not committed any breach of the MoU, the petitioner
could not invoke financial constraints as a ground to walk away from
his contractual obligations. The Bench also observed that clause 6 of
the MoU clearly contemplated the execution of a Share Purchase
Agreement (SPA) as a necessary step to effectuate the transfer of
shares, and therefore, in exercise of its equitable jurisdiction, the
Court could direct specific performance of the SPA based on the
terms of the MoU.
19. In the present matter, since it has already been held by the
Coordinate Bench that the unilateral termination of the MoU by the
petitioner was not legally valid, this Court finds no reason to take a
different view. As a result, at this stage and for the purpose of present
petition, it can be held that prima facie, there was no suspension or
extinguishment of the petitioner‟s obligations arising under the MoU.
The liability under the said MoU, including the issuance of cheques
towards the consideration amount, remained alive and subsisting on
the date of presentation of the cheques by the respondent.
20. In the present case, it is further material to note that the
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petitioner, at the time of framing of notice, has accepted that both the
cheques in question were signed by him, the other material
particulars had also been filled by him, and that he had also received
the statutory legal notice sent to him by the respondent/complainant.
Therefore, clearly, the presumption under Section 139 of the NI Act
would be attracted in this case.
21. The Hon‟ble Supreme Court in case of Oriental Bank of
Commerce v. Prabodh Kumar Tewari: 2022 SCC OnLine SC 1089
has held that a drawer who signs a cheque and hands it over to the
payee, is presumed to be liable unless the drawer adduces evidence to
rebut the presumption that the cheque has been issued towards
payment of a debt or in discharge of a liability. The relevant portion
is reproduced as under:
“16. A drawer who signs a cheque and hands it over to the
payee, is presumed to be liable unless the drawer adduces
evidence to rebut the presumption that the cheque has been
issued towards payment of a debt or in discharge of a liability.
The presumption arises under Section 139.”
22. Since there is a legal presumption that a cheque having been
issued would be in discharge of liability, it is important that such
presumption must receive due weightage while considering the
present petition. Moreover, the Hon‟ble Supreme Court in Rathish
Babu Unnikrishnan v. State (NCT of Delhi): 2022 SCC OnLine SC
513, has observed that the burden of proving that there is no existing
legally enforceable debt or liability, is to be discharged during the
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course of trial, and the same cannot be a ground for quashing of a
complaint or summoning order under Section 138 of NI Act. It was
concluded by the Supreme Court as under:
“16. The proposition of law as set out above makes it
abundantly clear that the Court should be slow to grant the
relief of quashing a complaint at a pre-trial stage, when the
factual controversy is in the realm of possibility particularly
because of the legal presumption, as in this matter. What is also
of note is that the factual defence without having to adduce any
evidence need to be of an unimpeachable quality, so as to
altogether disprove the allegations made in the complaint.
17. The consequences of scuttling the criminal process at a pre-
trial stage can be grave and irreparable. Quashing proceedings
at preliminary stages will result in finality without the parties
having had an opportunity to adduce evidence and the
consequence then is that the proper forum i.e., the trial Court is
ousted from weighing the material evidence. If this is allowed,
the accused may be given an un- merited advantage in the
criminal process. Also because of the legal presumption, when
the cheque and the signature are not disputed by the appellant,
the balance of convenience at this stage is in favour of the
complainant/prosecution, as the accused will have due
opportunity to adduce defence evidence during the trial, to
rebut the presumption.
18. Situated thus, to non-suit the complainant, at the stage of
the summoning order, when the factual controversy is yet to be
canvassed and considered by the trial court will not in our
opinion be judicious. Based upon a prima facie impression, an
element of criminality cannot entirely be ruled out here subject
to the determination by the trial Court. Therefore, when the
proceedings are at a nascent stage, scuttling of the criminal
process is not merited…”
23. The Hon‟ble Supreme Court in M.M.T.C Ltd. & Anr v.
Medchl Chemicals & Pharma (P) Ltd. & Anr: (2002) 1 SCC 234,
also held that burden shifts on the accused of proving that there exists
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no debt or liability, which has to be discharged during the trial.
24. This Bench in Akbar Ali v. State of NCT of Delhi & Anr:
2023 SCC OnLine Del 7702 had also observed as under:
“10. Thus, in view of the law laid down by Hon‟ble Apex
Court, it is undisputed that whether the debt was legally
recoverable or not is to be decided during the course of trial
and not at pre-trial stage. At the stage of filing of complaint and
issuing of summons, only a prima facie view has to be taken by
the Courts when considering quashing of such a complaint,
which can be done only in case when the petitioner is able to
prove, by bringing on record material of sterling quality, that
the essential ingredients of offence under Section 138 of NI
Act are not made out from the bare reading of the complaint.”
25. Therefore, in view of the foregoing discussion, this Court is of
the view that there exists no grounds to quash the complaint case
filed in respect of Section 138 of NI Act. In view of the fact that
issuance of cheque, signatures on the said cheques and filling of
material particulars on the cheque is admitted by the petitioner, this
Court is of the view that the contentions raised before this Court are a
matter of trial, and cannot be considered at this stage for quashing of
proceedings.
26. The present petition, alongwith pending application, is
accordingly dismissed.
27. It is however clarified that observations made in the judgment
are solely for the purpose of deciding present petition and shall not
affect the merits of the case during the trial.
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28. The judgment be uploaded on the website forthwith.
DR. SWARANA KANTA SHARMA, J
AUGUST 1, 2025/vc
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