Delhi District Court
Oyo Hotels And Homes Pvt Ltd vs Smart Hotels Pvt Ltd on 29 August, 2025
IN THE COURT OF MS. VANSHIKA MEHTA, JMFC (NI ACT)- 04/ PHC/
NEW DELHI
CC No. 8416/2019
Unique Case ID No. DLND02-014385-2019
In the matter of: -
OYO HOTELS AND HOMES PVT LTD
(Oravel Stays Pvt. Ltd.)
241, West End Marg,
Near Saket Metro Station,
Sainik Farm, New Delhi
...........Complainant
Versus
1. Smart Hotels Pvt. Ltd.
13 Wilson Garden Motilal Talera Marg,
Pune Maharashtra 411001, India
Also at
Hotel Smart Inn
1226/2, Off Fergusson College Road,
Next to Venus Traders, Shivaji Nagar, Deccan Gymkhana,
Pune Maharashtra 411001, India
2. Mr. Harshad Suresh Talera
13 Wilson Garden Motilal Talera Marg,
Pune Maharashtra 411001, India
3. Mr. Praveen Mutha
11, MIT Olympus Apartments,
2nd Floor, Lane No. E, Opp. Bank of India,
Koregaon Park, Pune 411001, Maharashtra
....................Accused
Date of Institution : 20.06.2019
Offence Punishable Under Section : U/s 138 Negotiable Instrument
Act, 1881
Plea of Accused : Not guilty
Date of presentation : 06-06-2019
Date of decision : 29.08.2025
Final Order: : Acquittal
Argued by: : Sh. Mudassar Khan, Ld. Counsel
for complainant.
: Ms. Aarzoo Aneja, Ld. Counsel
for accused.
Digitally
signed by
CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 1 of 23 VANSHIKA
VANSHIKA MEHTA
MEHTA Date:
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JUDGMENT
"If we do not maintain justice, justice will not maintain us." - Francis Bacon INTRODUCTION AND FACTUAL MATRIX
1. Accused is produced before the court to stand trial for the offence punishable u/s 138 of the Negotiable Instruments Act, 1881 ("Act" or "NI Act"). He was summoned by this court to face the trial vide order dated 04.07.2019.
2. Tersely put, it is the case of the complainant that the Complainant is a company engaged in the business of managing hospitality establishments, having its office at 241, West End Marg, Near Saket Metro Station, MB Road, Mittal Garden, Sainik Farm, New Delhi, and is duly represented through its authorized representative, Mr. Yogesh Vishnoi, who has been authorized by way of a valid authorization to file and prosecute the present complaint. In the course of its business, the Complainant has successfully managed various hospitality properties and established a recognized name in the market. The Accused approached the Complainant/Oravel Stays Private Limited, representing themselves as being in possession of a property known as Hotel Smart Inn, located at 1226/2, Off Fergusson College Road, Next to Venus Traders, Shivaji Nagar, Deccan Gymkhana, Pune, Maharashtra - 411004, consisting of 60 rooms available for commercial boarding and lodging. Relying on the representations of the Accused, the Complainant entered into a Marketing and Operational Consulting Agreement dated 29.08.2018, under which the Complainant was granted rights to list the said property under its brand "OYO Rooms." In terms of the Agreement, the Accused was granted royalty-free access to the Complainant's intellectual property, brand name, and trademark "OYO ROOMS," which substantially enhanced the business and revenue of the Accused.
VANSHIKA MEHTA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 2 of 23 Digitally signed by VANSHIKA MEHTA Date: 2025.08.29 16:34:53 +0530 2.1. Pursuant to the Agreement, the Complainant also advanced a sum of Rs.30,00,000/- to the Accused as financial assistance, which was to be adjusted against revenues generated by the Accused. However, the Accused failed to discharge their obligations under the Agreement. In acknowledgment of their liability, the Accused issued Cheque No. 001748 dated 01.04.2019 for a sum of Rs.2,50,000/-, drawn on HDFC Bank, in favour of the Complainant. The said cheque, when presented by the Complainant through its banker, HDFC Bank Limited, Connaught Place Branch, New Delhi, was dishonoured vide return memo dated 09.04.2019 with the remarks "STOP/INST." Despite intimation and sufficient opportunity, the Accused failed to make payment of the cheque amount. Consequently, the Complainant issued a legal demand notice dated 25.04.2019, duly sent through registered post, courier, and e-mail, demanding payment of Rs.2,50,000/-, clearly warning that legal proceedings would follow in case of default.
2.2. Despite service of the notice, the Accused failed to comply with the demand within the statutory period of 15 days. The Accused, while having enjoyed the benefits of financial assistance, knowingly, deliberately, and malafidely issued the cheque with full knowledge that the same would not be honoured. Such conduct of the Accused amounts to deliberate dishonesty and fraudulent intent, thereby rendering them liable to be prosecuted under Section 138 of the Negotiable Instruments Act, 1881, as well as under Section 420 of the Indian Penal Code, 1860. The dishonour of the cheque with the remarks "STOP/INST" itself establishes the willful and intentional act of cheating on part of the Accused. The Complainant, left with no other recourse due to the default and fraudulent conduct of the Accused, has been compelled to approach this Hon'ble Court seeking prosecution of the Accused in accordance with law.
3. The accused persons were summoned vide order dated 04.07.2019, and on 13.05.2022, notice was framed against all the accused persons under Section 251 Cr.P.C. for the offence punishable under Section 138 of the Negotiable Instruments Act.
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2025.08.29 16:34:56 +0530 3.1. The accused No. 1 (represented through accused no.2, Mr. Harshad Talera) pleaded not guilty and claimed trial. He admitted having signed the cheque in question and further admitted that the particulars on the impugned cheque were filled in by his accounts department. He also admitted having received the legal notice. According to him, despite there being no liability, the complainant presented the cheque in question.
He stated that their company had already apprised the complainant that payment was due from the complainant's end, and instead of making payment of the said due amount, the complainant presented the cheque in question. For this reason, stop-payment instructions were issued. He asserted that he has no liability qua the cheque in question.
3.2. The accused No. 2 (represented through Harshad Suresh Talera) pleaded not guilty and claimed trial. He admitted having signed the cheque in question and further admitted that the particulars on the impugned cheque were filled in by his accounts department. He also admitted having received the legal notice. According to him, despite there being no liability, the complainant presented the cheque in question.
He stated that their company had already apprised the complainant that payment was due from the complainant's end, and instead of making payment of the said due amount, the complainant presented the cheque in question. For this reason, stop-payment instructions were issued. He asserted that he has no liability qua the cheque in question.
3.3. The accused No. 3 (Mr. Praveen Mutha) pleaded not guilty and claimed trial. He denied having signed the cheque in question and further denied that the handwriting of the particulars on the cheque was his. He stated that the cheque belonged to the firm and asserted that the particulars on the cheque in question were not filled in by him.
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2025.08.29 16:34:59 +0530 3.4. He denied having received the legal notice on the ground that he does not look after the affairs of the company. He further stated that he had no role to play in the affairs of the accused company and that he was made a director merely to fulfil the minimum statutory requirement of directors. He categorically stated that he has no knowledge of any transaction with the complainant and no knowledge of any liability towards the complainant.
EVIDENCE LED BY THE COMPLAINANT
4. The complainant in order to prove its case, examined AR of complainant Sh. Yogesh Vishnoi as CW-1 examined in its evidence led before the court on 21.10.2023, CW-1 tendered in evidence by way of affidavit Ex. CW-1/A and relied upon the following documents: -
(1) Ex. C-1 - Authority letter;
(2) Ex. C-2 - Marketing and operational consulting agreement; (3) Ex. C-3 - Extract of transaction;
(4) Ex. C-4 - Original cheque;
(5) Ex. C-5 - Returning memo;
(6) Ex. C-6-Legal notice;
(7) Ex. C-7(Colly) - Postal receipts.
4.1. Upon his cross-examination, complainant CW-1, inter alia, stated that he joined the complainant company in October 2018 as Senior Executive (Legal), though he does not remember the exact date. After joining, when he was handed over the documents of the present matter, he came to know that the agreement between the parties was executed in August 2018. Volunteered: when he joined the original complainant, his primary responsibility was related to dispute resolution. He further stated that he went through the agreement before signing his affidavit of evidence and clarified that the validity of the agreements Ex. C-2 and Ex. C-3 was one year, with an auto-renewal clause, as the complainant generally executed agreements for one year subject to such renewal.
Digitally
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VANSHIKA MEHTA
MEHTA Date:
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4.2. On being confronted with agreement Ex. C-2, the witness admitted that Ex. C-2 was executed for a duration of three years. He admitted that the cheque in question was given to the complainant as a security cheque against the business advance amount. He denied the suggestion that proceedings under the I&B Code, 2016 are presently pending against OYO Hotels and Homes Pvt. Ltd. Volunteered: there has been no change in the existing board members. He expressed lack of knowledge regarding any claim filed by the accused company before the NCLT. On being shown Form-A filed by the accused before the IRP (Mark C-1/D1), he stated that the proceedings qua the same stood closed as settled with the original debtor. He denied knowledge of any proceedings pending before the Hon'ble Supreme Court challenging the order of NCLAT. Volunteered: other concerned team members might be aware.
4.3. The witness admitted that as per Ex. C-1, the complainant had an obligation of a minimum assured benchmark monthly revenue of Rs.15 lakhs towards the accused, subject to availability of inventory/rooms and penalty clauses as mentioned at page 29 of the agreement. He was then shown internal email dated 06.08.2019 (Ex. C-1/D2), and he admitted that as per the table therein, for the months of September 2018 to January 2019, the complainant had to make payment to the accused. Volunteered: the same document also shows that the accused failed to make available the full inventory/rooms during September 2018 to March 2019. He further admitted that as per Ex. C-1, the advance had to be adjusted by OYO against claims receivable by the hotel and all payments collected by OYO on behalf of the hotel, and the balance was to be adjusted either at the end of the term or on termination of the agreement. He stated that he needed to check whether the agreement with the complainant had been discharged/terminated. He admitted that the agreement was valid till 2021 and that the cheque in question was presented in 2019. Volunteered: the cheques were given on a month-to-month basis.
4.4. He identified on page 17 of Ex. C-1 that the fact of cheque presentation on a month-to-month basis is provided. He denied the suggestion that para 11 of Digitally signed by CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 6 of 23 VANSHIKA VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:06 +0530 his affidavit of evidence falsely mentioned that the cheque was presented on the assurance of the accused. Volunteered: the accused was informed at the time of execution of agreement that the cheques would be presented monthly. He admitted that Ex. CW1/D2 (3 pages) records that the complainant had made a payment of Rs.3,48,046/- to the accused in February 2019 via NEFT, though he could not produce proof immediately. On being asked if he could bring the proof on the next date, he stated that he would need to check with the finance team. At this stage, cross-examination was deferred at the request of Ld. Counsel for the accused.
4.5. On the next date, CW-1 produced a payment certificate which was marked CW1/D3. On being shown the bank statement of accused company bearing account no. 50200013736332 for the period 01.04.2018 to 31.03.2019 (Mark CW1/X1), he was confronted with his earlier stand that two payments of Rs.2,53,876/- and Rs.94,170/- totaling Rs.3,48,046/- were made to the accused company in February 2019. He admitted that these entries are not reflected in the accused's bank statement Mark CW1/X1. He explained that as per financial records and the payment certificate, the payments were made, but he could not produce the complainant's bank account statement due to the high-value nature of transactions. He reiterated that he had relied on the complainant's bank records for verifying the payments. He admitted that he could not show from Mark CW1/X1 that the accused company had received the payments. He confirmed that most payments by the complainant were released into HDFC Bank account no. 50200013736332 in the name of Smart Hotels Pvt. Ltd. He admitted that Mark CW1/X1 was indeed the account in which payments were usually made.
He denied the suggestion that no such payments were made and rejected the suggestion that he was deposing falsely.
4.6. He admitted that the agreement was digitally signed on behalf of OYO through email address [email protected] and phone no. 9370057575, though he was unaware of the competent person who signed it. He admitted that the agreement was for 60 rooms and that Smart Hotels had provided 12 post-
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dated cheques of Rs.2.5 lakhs each as security against a Rs.30 lakh business advance. He confirmed the exclusive clause whereby the accused could not sell rooms through any other online aggregator. He further admitted that bookings were managed by OYO, payments could be collected either by OYO or at the hotel, and that the cheques had to be presented monthly or adjusted against the business advance. He denied the suggestion that cheques were mandatorily encashed every month, clarifying that they could be reconciled against monthly receivables. He admitted that as per OYO's internal records, Rs.15 lakhs of the business advance had been recovered and the balance remained pending.
4.7. He admitted that for February 2019, the receivable from the hotel was Rs.2,605.32/-, which was adjusted against the business advance loan, and that the cheque for April 2019 was encashed in reference to the business advance of Rs.30 lakhs. On being confronted with Ex. CW1/D2, he admitted that for some months, reconciliation was done instead of encashment and that November 2018 showed a negative balance of Rs.11,835/-, hence no cheque was encashed. He clarified that though the accused had given security cheques of Rs.2.5 lakhs each, the business advance was to be recovered at Rs.3 lakhs per month for 10 months (November 2018 to August 2019).
4.8. He admitted that the complainant had a right to present the cheque in question under clause 3 of page 17 of the agreement. He admitted that the closing balance for March 2019 was Rs.10,528/- and that reconciliation was to be done through NEFT, though cheques were also taken as security. He admitted that for February 2019, revenue was only Rs.1,02,881/- against 62 room nights and was below the benchmark of Rs.15 lakhs. He stated that he did not recall whether the agreement was formally terminated but volunteered that the property was blocked due to low 3C score. He admitted that accused no.2 was proceeded against as he was signatory to the cheque, and accused no.3 was impleaded as he was a director, though he had no knowledge if accused no.3 was part of the operations. He admitted that there is nothing on record to show involvement of accused no.3 in the transaction.
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2025.08.29 16:35:12 +0530 4.9. He denied the suggestion that the complainant arbitrarily charged Rs.3 lakhs for February 2019. He reiterated that as per Ex. CW1/D2, the monthly reconciliation reflected the closing balances. He denied the suggestion that there was inconsistency in his deposition regarding encashment/reconciliation of cheques and affirmed that his statement regarding set-off of Rs.3 lakhs per month was correct. He admitted that information regarding cheque encashment must have been communicated by complainant's City Accountant Manager, Mr. Digesh Harin Khaede.
STATEMENT OF THE ACCUSED
5. Thereafter, on 24.03.2025, the statement of the accused persons under Section 313 Cr.P.C., read with Section 281 Cr.P.C., was recorded.
5.1. The accused No. 1 (represented through accused no.2 Harshad Talera) admitted that the complainant is engaged in the business of managing hospitality establishments and that Mr. Yogesh Vishnoi has been authorized to institute the present complaint, though he added that no board resolution in favour of Mr. Yogesh Vishnoi is on record. He admitted that he had approached the complainant with the desire and intention to work with it, representing that he was in possession of premises run under the name and style of Hotel Smart Inn, located at 1226/2, Off Fergusson College Road, Pune, consisting of 60 rooms which could be used commercially for boarding and lodging. He admitted that pursuant to his representation, a Marketing and Operational Consulting Agreement dated 29.08.2018 was executed with the complainant (Ex. C-2), by virtue of which the complainant was given the right to list the said hotel on its online platform as part of OYO Rooms.
He, however, denied that the sum of Rs.30,00,000/- advanced by the complainant was financial assistance, stating instead that it was a guarantee from the complainant. He admitted that both addresses mentioned in the legal demand notice were correct, but stated that he had vacated the Talera Marg address sometime in 2019. He also admitted that the email ID [email protected] is his Digitally signed by CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 9 of 23 VANSHIKA VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:15 +0530 correct email address. He admitted that he had signed the cheque in question, though the particulars, including date and name of payee, were filled in by his accounts department.
He alleged that the complainant has filed a frivolous complaint against him. He admitted that he had business dealings with the complainant but claimed that, in fact, he has a claim of Rs.96 lakhs against the complainant and that proceedings in respect thereof are pending before the Hon'ble Supreme Court. He declined to lead any defence evidence.
5.2. The accused No. 2 (represented through Harshad Suresh Talera) admitted that the complainant is engaged in the business of managing hospitality establishments and that Mr. Yogesh Vishnoi has been authorized to institute the present complaint, though he added that no board resolution in favour of Mr. Yogesh Vishnoi is on record. He admitted that he had approached the complainant with the desire and intention to work with it, representing that he was in possession of premises run under the name and style of Hotel Smart Inn, located at 1226/2, Off Fergusson College Road, Pune, consisting of 60 rooms which could be used commercially for boarding and lodging. He admitted that pursuant to his representation, a Marketing and Operational Consulting Agreement dated 29.08.2018 was executed with the complainant (Ex. C-2), by virtue of which the complainant was given the right to list the said hotel on its online platform as part of OYO Rooms.
He, however, denied that the sum of Rs.30,00,000/- advanced by the complainant was financial assistance, stating instead that it was a guarantee from the complainant. He admitted that both addresses mentioned in the legal demand notice were correct, but stated that he had vacated the Talera Marg address sometime in 2019. He also admitted that the email ID [email protected] is his correct email address. He admitted that he had signed the cheque in question, though the particulars, including date and name of payee, were filled in by his accounts department.
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2025.08.29 16:35:18 +0530 He alleged that the complainant has filed a frivolous complaint against him. He admitted that he had business dealings with the complainant but claimed that, in fact, he has a claim of Rs.96 lakhs against the complainant and that proceedings in respect thereof are pending before the Hon'ble Supreme Court. He declined to lead any defence evidence.
5.3. The accused No. 3 (Mr. Praveen Mutha) admitted that the complainant is engaged in the business of managing hospitality establishments and that Mr. Yogesh Vishnoi has been authorized to file and institute the present complaint, though he added that no board resolution in favour of Mr. Vishnoi is on record.
He admitted that he had approached the complainant with the intention to work with it by representing that he was in possession of premises run under the name and style of Hotel Smart Inn, Pune, consisting of 60 rooms, but stated that he is only a sleeping director, not responsible for the day-to-day affairs of the accused company and has no knowledge of the transaction in question. He further admitted that an Agreement dated 29.08.2018 (Ex. C-2) was executed, but reiterated that he is a sleeping director unaware of the transaction and its terms.
He denied the allegation that the complainant had advanced a sum of Rs.30,00,000/- to him as financial assistance, again stating that he had no knowledge of the transaction and was not responsible for the daily affairs of the company. He also denied having issued cheque no. 001748 dated 01.04.2019 for Rs.2,50,000/- (Ex. C-4), claiming that he is a sleeping director and not concerned with the same. He admitted that the said cheque was dishonoured with the remark "STOP/INST" vide return memo dated 09.04.2019 (Ex. C-5), but maintained that he is a sleeping director not aware of the transaction in question. He admitted that he had received the legal demand notice dated 25.04.2019 (Ex. C-6 and C-7), and also admitted that both the addresses mentioned therein are correct and that the email ID [email protected] is his correct email ID.
He specifically denied having signed the cheque in question or filled its particulars, including the date and the name of the payee. He stated that the Digitally signed by VANSHIKA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 11 of 23 VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:20 +0530 complainant has filed a frivolous complaint against him. He admitted that he had business dealings with the complainant but added nothing further except to state that he has nothing more to say. He declined to lead any defence evidence.
EVIDENCE LED BY THE DEFENCE
6. the accused did not lead defence evidence and statement qua the same has been recorded vide order dated ARGUMENTS ADVANCED BY THE PARTIES
7. Ld. Counsel for the complainant has argued that the Complainant entered into a Marketing and Operational Conseco Agreement dated 29.08.2018 with the accused. Under the said Agreement, the Complainant was granted rights to operate the hotel under its brand name and had also extended financial assistance of Rs.30,00,000/- to the Accused, to be adjusted against the revenue generated.
7.1. It is further argued that in acknowledgment of their liability under the Agreement, the Accused persons issued cheque no. 001748 dated 01.04.2019 for Rs.2,50,000/- drawn on HDFC Bank in favour of the Complainant.
7.2 It is further contended that once the issuance of the cheque is admitted or not disputed, statutory presumptions under Sections 118(a) and 139 of the NI Act come into play. Reliance is placed on Hiten P. Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16] and Rangappa v. Sri Mohan [(2010) 11 SCC 441], wherein the Hon'ble Supreme Court has categorically held that once signatures on the cheque are admitted, the presumption of existence of a legally enforceable debt arises, and the burden shifts upon the Accused to rebut the same.
8. Per contra, the Ld. Counsel for the Accused no 1 and 2 has argued that the complaint itself is not maintainable as the Complainant has failed to produce a valid Board Resolution authorising the institution of proceedings. It is submitted that the "Authority Letter" filed by the Complainant merely names Mr. Yogesh Digitally CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 12 of 23 signed by VANSHIKA VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:23 +0530 Vishnoi as an Authorised Representative, but the same is signed by the General Counsel of the company and not issued under the seal of the Board of Directors.
8.1 Reliance is placed on Maruti Feeds and Farms Pvt. Ltd. v. Basanna Pattekar [(2017) 4 ICC 457], wherein it has been held that since a company is a juristic person, authorisation to depose or file a complaint must flow either from the Articles of Association or from a specific resolution of the Board. In the absence of such authorisation, the very institution of the complaint is vitiated.
8.2. It is further argued that the cheque dated 01.04.2019 for Rs.2,50,000/-
was not issued in discharge of any crystallised debt but solely as a "performance security" under Clause 3 of the Marketing and Operational Consulting Agreement dated 29.08.2018. The Complainant had advanced Rs.30,00,000/- as a business advance, to be adjusted against assured benchmark revenue of Rs.15 lakhs per month.
8.3. Reliance is placed on Dashrathbhai Patel (supra) and Bharat Barrel & Drum Mfg. Co. v. Amin Chand Pyarelal [(1999) 3 SCC 35] to contend that the statutory presumption under Sections 118 and 139 NI Act stands rebutted by the surrounding circumstances and documentary evidence.
9. The Ld. Counsel for the Accused no 3 submitted that the complaint under Section 138 of NI Act is not maintainable against Accused No. 3, Mr. Praveen Mutha. He is merely a Sleeping Director of the Accused Company and had no role in its financial dealings, execution of the Agreement, or issuance of the cheque in question. The Complainant's own admitted figures demolish its case. For March 2019, the revenue was only Rs.94,193/- (Ex. CW1/D2). Thus, instead of any liability upon the Accused, it was OYO which was obliged to make up the shortfall. Yet, despite knowing this, the Complainant unilaterally deposited the cheque dated 01.04.2019. Even assuming Complainant's incorrect calculations, the alleged due was only Rs.10,528/-; however, the cheque presented was for Rs.2,50,000/-.
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9.1. It has been further argued that the accused had, vide letter dated 03.02.2019, sought reconciliation of accounts which was never done. Two NEFT transfers allegedly made by the Complainant are not reflected in the certified HDFC Bank statements of the Accused (Ex. CW1/X1). Instead, the Complainant has produced only a self-generated Excel sheet on its own letterhead (Ex. C1/D3), which has no evidentiary value under the Indian Evidence Act.
ANATOMY OF FACTS AND FINDINGS THEREON LEGAL JURISPRUDENCE
10. So far so good. Having considered all the submissions, it is apposite to have a quick glance at relevant position of law. Section 138 of the Act provides as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the account. --
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless--(a)the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b)the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and(c)the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. --For the purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability.] VANSHIKA MEHTA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 14 of 23 Digitally signed by VANSHIKA MEHTA Date: 2025.08.29 16:35:29 +0530
11. It is a well-established principle of law that the Negotiable Instruments Act, 1881 (NI Act) provides for two critical presumptions--one under Section 118 and the other under Section 139.
Section 118 of the Act provides that it shall be presumed, until proven otherwise, that every negotiable instrument has been made or drawn for consideration. This presumption places the onus on the party challenging the instrument to disprove this presumption of consideration.
Section 139 of the Act further provides that, unless proven otherwise, it shall be presumed that the holder of the cheque received it for the discharge of, in whole or in part, any debt or liability. This creates a strong legal presumption in favor of the complainant, especially in cases involving dishonored cheques.
APPLICATION OF LAW
12. Applying the aforesaid law at hand to the facts of the case, the accused no. 1 and 2 during framing of notice u/s 251 Cr.P.C on 13.05.2022 admitted having signed the cheque in question and further admitted that the particulars on the impugned cheque were filled in by his accounts department. Thus, signature on the cheques is an admitted fact. Further, the cheque dishonoured for the reason "stop payment" instructions. It is axiomatic that dishonour upon "stop payment"
instructions can constitute an offence under Section 138 NI Act provided a legally enforceable debt subsisted on the date of presentation.1 12.1. A careful examination of the Negotiable Instruments Act's provisions, particularly Sections 20, 87, and 139, makes it abundantly evident that whoever signs a cheque and gives it to the payee is still accountable unless he provides proof to refute the assumption that the cheque was written to settle a debt or release a liability. In the event that the drawer has properly signed the cheque, it 1 VANSHIKA M.M.T.C. Ltd. v. Medchl Chemicals & Pharma (P) Ltd., (2002) 1 SCC 234. MEHTA Digitally signed by CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 15 of 23 VANSHIKA MEHTA Date: 2025.08.29 16:35:32 +0530 makes no difference who filled it out. The criminal provisions of Section 138 would apply if the cheque was otherwise legitimate.2
13. Suffice to say, the presumption qua the existence of legal liability as prescribed u/s 139 of the NI Act is liable to be attracted only when the accused admits the issuance of cheque whereas in the facts at hand, the accused has categorically denied having signed the impugned cheque in question and further denied that the handwriting of the particulars on the cheque was his. In view of the fact that the issuance of the cheque on question is not an admitted fact, the assumption under Section 139 NI Act is liable to be attracted.
APPRECIATION OF EVIDENCE
14. Points for Determination
1. Whether the complaint is maintainable in absence of a valid Board Resolution?
2. Whether the cheque in question was issued towards a legally enforceable debt or liability?
3. Whether Accused No. 3 can be held vicariously liable?
Issue 1 -- Whether the complaint is maintainable in absence of a valid Board Resolution?
14.1. The Ld. Counsel for the accused has vehemently argued that the complainant has failed to produce a valid Board Resolution authorizing the institution of the present proceedings. It is submitted that Ex. CW-1, the so-called "Authority Letter" filed by the complainant, merely names Mr. Yogesh Vishnoi as an authorized representative but is signed only by the General Counsel of the company and not issued under the seal or authority of the Board of Directors. It is further argued that no specific resolution of the Board authorizing the initiation of prosecution under Section 138 of the N.I. Act has been placed on record.2
Basalingappa v. Mudibasappa, AIR 2019 SC 1983. Digitally signed by VANSHIKA VANSHIKA MEHTA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 16 of 23 MEHTA Date:
2025.08.29 16:35:35 +0530 14.2. No specific resolution of the Board authorising initiation of prosecution under Section 138 NI Act has been placed on record.
14.3. The complainant relies on Ex. C-1 (Authority Letter) to show authorization in favour of CW-1, Mr. Yogesh Vishnoi. However, it is correct that no contemporaneous Board Resolution or Articles authorizing the institution of the complaint or conferring power upon the signatory has been produced. The defence, therefore, contends that the complaint is vitiated for want of proper authorization, relying upon Maruti Feeds & Farms Pvt. Ltd. v. Basanna Pattekar, (2017) 4 ICC 457.
14.4. It is settled law that a complaint on behalf of a company can be instituted through an authorized representative or a power-of-attorney holder. However, there must be material on record to demonstrate that the person prosecuting is duly authorized. The power-of-attorney holder acts only as an agent of the grantor. When the grantor authorizes the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates such proceedings, it is in law the initiation by the grantor represented through his agent, and not by the attorney holder in his personal capacity ( cf. A.C. Narayanan v. State of Maharashtra, (2014) 11 SCC 790).
15. A perusal of the record reveals that Ex. C-1 is a mere letter signed by the General Counsel, with no material to show that it is backed by a Board Resolution. No minutes, extracts, or Articles have been filed to bridge this gap. Further, despite the objection being raised by the defence, the complainant neither produced a Board Resolution nor any subsequent ratification.
16. While it is true that defects in authorization are not invariably fatal, on the present facts, where the complainant had full opportunity yet failed to cure or substantiate authorization, the institution of the complaint remains infirm. This constitutes a substantial procedural deficiency weighing against the complainant.
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Issue 2 -- Whether the cheque represented a legally enforceable debt or was merely a security instrument
17. At the outset, it is pertinent to note that CW-1 during his cross- examination stated: -
"The validity of the agreement EX. C-2 and Ex.C-3 was one year. (Vol. The complainant company generally executes the agreement for one year only subject to auto renewal after one year). At this stage, agreement Ex. C-2 is put to the witness. It is correct that Ex. C-2 was executed for a duration of three years. It is correct that the cheque in question was given to the original complainant as a security cheque against the business advance amount by the original complainant."
"It is correct that as per the agreement Ex. C-1, the advance had to be adjusted by OYO against claim receivable by hotel and all payments collected by OYO on behalf of the hotel. It is agreed that the balance had to be adjusted at the "end" of the term or on termination of the agreement for the remaining business advance. I need to see whether the agreement with the complainant has been discharged/ terminated. It is correct that the duration of the agreement was till 2021 and the cheque in question was presented in the year 2019. (Vol. The cheques in question were given for a month-to-month basis). At this stage, Ex. C-1 is again put to the witness.
Witness submits that on page 17 of the agreement, the fact of cheque to be presented on a month-to-month basis is provided. It is wrong to suggest that under para no. 11 of affidavit of evidence, it has been wrongly mentioned that on the assurance of the accused, the cheque in question was presented for encashment."
18. During the course of cross-examination, CW-1 made several material admissions which go to the root of the complainant's case.
19. CW-1 candidly admitted that the cheque in question (Ex. C-4) was one of 12 post-dated cheques of Rs.2,50,000/- each, furnished by Accused No. 1 company as security against a "business advance" of Rs.30,00,000/- extended under the Marketing & Operational Consulting Agreement dated 29.08.2018 (Ex. C-2). The said agreement contemplated that the advance was to be adjusted on a month-to-month basis against the Assured Benchmark/Minimum Guarantee (MG) revenue. CW-1 further admitted that the cheques were not required to be Digitally signed by VANSHIKA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 18 of 23 VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:40 +0530 mandatorily encashed each month; rather, reconciliation and adjustment was to be carried out, and payments were to be settled accordingly.
20. It is trite that the mere nomenclature of a cheque as "security" does not, by itself, absolve the drawer of liability. The controlling question remains whether, on the date of presentation, a crystallized and legally enforceable debt/liability equivalent to the cheque amount existed. The settled position, as reiterated in Rangappa v. Sri Mohan (2010) 11 SCC 441 and A.C. Narayanan v. State of Maharashtra (2014) 11 SCC 790, is that even a security cheque can attract Section 138 of the NI Act, provided that a subsisting liability had crystallized on the date of presentation.
21. On a perusal of Ex. CW1/D2, being the complainant's own internal email, it is evident that the assured MG of Rs.15 lakhs was not achieved for the relevant months, including March 2019. Despite this, the complainant presented the cheque dated 01.04.2019 (Ex. C-4) for Rs.2,50,000/-. Even on the complainant's own showing, the reconciled closing balance for March 2019 was only Rs.10,528/-, far below the cheque amount. CW-1 further admitted that in several earlier months where reconciliation yielded a negative balance, the cheques were not presented and instead adjustment was carried out either by reconciliation entries or NEFT transfers.
22. The complainant sought to establish that two payments of Rs.2,53,876/- (08.02.2019) and Rs.94,170/- (25.02.2019), totalling Rs.3,48,046/-, had been made to the accused company, and produced Mark CW1/D3 (payment certificate) in support. However, when CW-1 was confronted with the certified HDFC bank account statement of the accused (Mark CW1/X1), these entries were not found to be reflected. Significantly, the complainant did not dispute the genuineness of Mark CW1/X1.
23. When further questioned, CW-1 deposed:
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2025.08.29 16:35:43 +0530 "As per the financial records/bank statement, these payments are reflected. Moreover, I have produced the payment certificate in support of these payments. I cannot bring the complete bank account statement of the complainant company due to high-value transactions. In order to ascertain that the above-mentioned payments were made, I took reference from the bank statements of the complainant company. However, I cannot show from Mark CW1/X1 that the above-mentioned payments were received by Accused No. 1 company.
Q. Can you confirm the account details of the accused in which payment was made by the complainant?
Ans. Most of payments released by complainant company to accused bank account name is HDFC bank bearing account no. 50200013736332 and same is in the name of accused company Smart Hotels Pvt. Ltd. It is correct that Mark CW1/X1 is the bank account state- ment of the account in which payments are generally made by com- plainant company."
24. CW-1 admitted during his cross-examination that Mark CW1/X1 is the account statement of the account in which payments are generally made by the complainant. He did not dispute the genuineness of the said document. Such non- disputation amounts to a deemed admission in law.
25. The complainant's attempt to establish that two payments of Rs.2,53,876/- (08.02.2019) and Rs.94,170/- (25.02.2019), totalling Rs.3,48,046/-, had been made to the accused company falls flat in view of the aforesaid Mark CW1/X1, which does not mention the alleged entries. This admission is further reinforced by the fact that CW-1 failed to produce the bank statement of the complainant to establish that the alleged payments were simultaneously reflected in the complainant's own account. Instead, CW-1 merely relied upon Ex. CW1/D3 (payment certificate).
26. In the absence of production of the complainant's bank statement, an adverse inference under Section 114(g) of the Indian Evidence Act, 1872, is liable to be drawn against the complainant, that had such evidence been produced, it would have brought the truth to the horizon. It is trite that if a party in possession of the best evidence withholds it, the Court may draw an adverse inference under Section 114(g) Evidence Act. Accordingly, the complainant's Digitally CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 20 of 23 signed by VANSHIKA VANSHIKA MEHTA MEHTA Date:
2025.08.29 16:35:48 +0530 omission to produce its own bank statement, the best evidence in the facts of the case weakens its claim, particularly when the authenticity of Mark CW1/X1 already stands admitted.3
27. From the above admissions, it is evincible that the substratum of a present and enforceable debt of Rs.2,50,000/- as on 01.04.2019 is missing. The cheque in question was admittedly issued as a security instrument within a running-account arrangement, where liability was contingent on future performance, reconciliation, and achievement of MG. The complainant's own documents (Ex. CW1/D2) show that for March 2019, the assured MG of Rs.15 lakhs was not met, and the reconciled balance was only Rs.10,528. The complainant's assertion of additional payments made in February 2019 also falls short, as the alleged NEFT transfers do not find corroboration in the certified bank statement (Mark CW1/X1), and the complainant failed to produce its own bank statement despite opportunity.
28. Thus, on the complainant's own showing, no crystallized liability equivalent to the cheque amount of Rs.2,50,000/- existed on 01.04.2019. The accused has thereby successfully rebutted the statutory presumptions under Sections 118(a) and 139 of the NI Act by relying on the contractual framework, complainant's internal records, and CW-1's admissions.
29. The Authorised Representative of the complainant himself, in cross- examination dated 09.01.2024 and 21.10.2024, admitted that Accused No. 1 had provided 12 post-dated cheques only as security against the business advance, and that such cheques were to be enforced only upon achievement of the MG and reconciliation of accounts. Absent such reconciliation and crystallization of liability, the foundation for prosecution under Section 138 NI Act does not survive.
Issue 3 -- Whether Accused No. 3 can be held vicariously liable?
3Gopal Krishnaji Ketkar v. Mohamed Haji Latif (AIR 1968 SC 1413). Digitally signed by VANSHIKA VANSHIKA MEHTA CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 21 of 23 MEHTA Date:
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30. CW-1 during his cross-examination candidly admits there is "nothing on record" implicating Accused No. 3. It is no more res integra that vicarious liability of directors under Section 141 NI Act is an exception to the general rule of criminal liability and must be strictly pleaded and proved: there must be specific averments and evidence that the person was in charge of and responsible for the conduct of the business at the relevant time. Mere designation as a director is insufficient.4
31. Perusal of record evinces that there is no averment or proof that he was in charge of and responsible for the conduct of business at the relevant time, that he signed the cheque, or that he participated in financial operations. It is axiomatic that specific averments and proof are indispensable to fasten vicarious liability; mere directorship does not suffice. Hence, the prosecution against Accused No. 3 is not maintainable and fails on merits.
DECISION
32. It is axiomatic that the degree of proof expected from the accused is not as rigorous as that of the complainant. He could discharge his onus by making dents in the case of the complainant. Therefore, once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/ liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the complainant and the presumption 'disappears' and does not haunt the accused any longer.5
33. This court is not oblivious of the fact that there exists a statutory presumption in favour of the complainant regarding existence of liability, however, it is well settled that such presumption is rebuttable in nature. Merely because the cheque was issued from an account maintained by the accused or that 4 SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.
5Basalingappa v. Mudibasappa, AIR 2019 SC 1983.
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the accused admits signature on the cheque, would not invite culpability under Section 138 of the NI Act.
34. Upon comprehensive consideration of the evidence, the accused no. 1, 2 and 3 have been able to create a dent in the complainant's story and have further raised strong suspicion about the case put forth by the complainant. The accused no. 1, 2 and 3 have demonstrated, on the preponderance of probabilities, that they owe no debt or liability towards the complainant.
35. Accordingly, in view of the above observations and principles of law, I am of the considered opinion that the accused no. 1, 2 and 3 have rebutted the presumption in favor of the complainant and have raised a probable defense. The complainant has not been able to prove its case beyond a reasonable doubt against the accused, and accordingly, the accused no. 1, 2 and 3 deserve to be acquitted.
36. Accordingly, this court hereby acquits the accused no.1 Smart Hotels Pvt. Ltd., accused no. 2 Mr. Harshad Suresh Talera and accused no.3 Mr. Praveen Mutha for the offence punishable u/s 138 of the Negotiable Instruments Act, 1881 in respect of cheque in question.
PRONOUNCED IN OPEN COURT ON 29.08.2025.
Present judgment consists of 23 pages and each page bears my initials.
Digitally signed by VANSHIKA VANSHIKA MEHTA MEHTA Date: 2025.08.29 16:35:58 +0530 (VANSHIKA MEHTA) JMFC (NI ACT)-04 PHC New Delhi/29.08.2025 CC No. 8416 / 2019 OYO Hotels and Homes Pvt. Ltd..Vs. Smart Hotels Pvt Ltd. page no. 23 of 23