Obligations under a Memorandum of Understanding can establish legally enforceable debt, relevant to Section 138 of the NI Act.

JUDGMENT :

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 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 Rs. 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 Rs. 1,13,50,000/- and cheque no. 385472 dated 26.03.2020 for Rs. 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 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 lea