Saturday, 10 August 2019

Whether complaint for dishonour of cheque is maintainable if cheque is issued for discharging time barred loan?

The controversy in the case on hand is squarely covered by the aforesaid judgment of the Division Bench of this court. The cheque issued for discharging liability for a time barred loan would constitute a fresh promise and consequently liability under Section 138 of the N.I. Act in the event of dishonor of such cheque will have to be fastened on the defaulter. It is not in dispute that loan was sanctioned in the year 2003. Respondent No. 1 has not seriously assailed issuance of cheque by him on 7.9.2009. The cheque issued amounts to promise within the meaning of Section 25(3) of the Contract Act and on account of dishonor of such a cheque, complaint under Section 138 of the N.I. Act would be maintainable.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Criminal Appeal No. 72 of 2013

Decided On: 20.01.2017

 Pragati Credit Co-operative Society Ltd. Vs.  Suresh and Ors.

Hon'ble Judges/Coram:
Indira Jain, J.
Citation: 2017 ALLMR (CRI) 3081


1. The present appeal takes an exception to the judgment and order dated 30.3.2012 passed by the learned Judicial Magistrate, First Class, Katol in Summary Criminal Case No. 912/2009. The facts giving rise to the appeal may be stated in nutshell as under:

a) Appellant is a registered co-operative society. Respondent No. 1 was in need of money and in the year 2003, he approached the appellant-society for loan of Rs. 30,000/-. On 3.9.2003, loan of Rs. 30,000/- was sanctioned to respondent No. 1. He agreed to repay the loan with interest thereon in monthly installments. He was irregular in repayments.

b) On 7.9.2009, respondent No. 1 issued cheque for Rs. 82,000/- drawn on Shikshak Sahakari Bank, Katol in favour of appellant-society. The cheque was presented for encashment. On 11.9.2009, cheque was returned by the banker with endorsement "insufficient funds". In turn, banker informed appellant-society. On receipt of memo from the bank, appellant-society issued statutory notice to respondent No. 1 on 8.10.2009. Since respondent No. 1 did not comply with the demand in the notice, criminal proceedings under Section 138 of the Negotiable Instruments Act (for short "N.I. Act") were instituted on 25.11.2009.

2. Particulars of accusations were explained to accused/respondent No. 1. He denied the accusations. Complainant examined its duly authorized signatory as a sole witness. Accused did not examine himself or any other witness in favour of his defence. After scrutiny of the evidence and documents produced by complainant-society, trial court came to the conclusion that penal liability under Section 138 of the N.I. Act does not arise, as claim of complainant was barred by limitation and cheque was not issued in the discharge of legal liability. In consequence thereof, trial court acquitted the accused of the offence punishable under Section 138 of the N.I. Act.

3. Being aggrieved thereof, appellant-society has preferred the instant appeal. Submission is that, in calculating the period of limitation from the date of disbursement of loan, trial court committed a gross error and totally ignored the settled legal position that a cheque issued towards the time barred debt is enforceable by virtue of Section 25(3) of the Contract Act and hence it cannot be said that there is no legally enforceable debt or liability in terms of Section 138 of the N.I. Act.

4. Heard Shri J.D. Bastian, learned counsel for appellant. He placed reliance on the decision of this Court in Mr. Dinesh B. Chokshi v. Rahul Wasudeo Bhatt and another (MANU/MH/1711/2012 : 2012 ALL MR (Cri) 3656) and submitted that cheque was issued by respondent No. 1 on 7.9.2009. It was presented to the bank and dishonoured on 11.9.2009. He submits that by issuing cheque in the year 2009, respondent No. 1 admitted the dues and extended the period of limitation. The learned counsel submitted that this important aspect has been totally lost sight of by the trial court and prays to quash and set aside the impugned judgment and order and further convict respondent No. 1 in accordance with the law.

5. Despite service of notice, none appeared for respondent No. 1. Respondent No. 2 is a formal party. Shri I.J. Damle, A.P.P. represents respondent No. 2-State.

6. Before adverting to the facts of the present case, it will be necessary here to make a reference to paragraphs 19 to 21 of the decision of this court in Mr. Dinesh B. Chokshi (supra), as follows:

19. Under the Explanation to Section 138, the debt or other liability referred to in the main Section has to be a legally enforceable debt or liability. Merely because a cheque is drawn for discharge, in whole or in part of the debt or other liability, Section 138 of the said Act of 1881 will not be attracted. The provision will apply provided the debt or other liability is legally enforceable. Thus, Section 138 will not apply to a cheque drawn in discharge of a debt or liability which is not legally enforceable. There may be several categories of debts or other liabilities which are not legally enforceable. A debt or liability is legally enforceable if the same can be lawfully recovered by adopting due process of law. The emphasis is on the fact that the debt or other liability must be a legally enforceable liability. A debt or liability ceases to be legally enforceable after expiry of the period of limitation provided in the law of limitation for filing a suit for recovery of the amount. Thus, a time barred debt by no stretch of imagination can be said to be a legally enforceable debt within the meaning of the explanation to section 138.

20. While recording our answer to the first Question, we have already held that a cheque issued for discharge of a debt which is barred by law of limitation is itself a promise within the meaning of Sub-section (3) of Section 25 of the Contract Act. A promise is an agreement and such promise which is covered by Section 25(3) of the Contract Act becomes enforceable contract provided that the same is not otherwise void under the Contract Act.

21. Therefore, while answering second question, we are specifically dealing with a case of promise created by a cheque issued for discharge of a time barred debt or liability. Once it is held that a cheque drawn for discharge of a time barred debt creates a promise which becomes enforceable contract, it cannot be said that the cheque is drawn in discharge of debt or liability which is not legally enforceable. The promise in the form of a cheque drawn in discharge of a time barred debt or liability becomes enforceable by virtue of Sub-section (3) of Section 25 of the Contract Act. Thus, such cheque becomes a cheque drawn in discharge of a legally enforceable debt as contemplated by the explanation to section 138 of the said Act of 1881. Therefore, even the second question will have to be answered in the affirmative.

The controversy in the case on hand is squarely covered by the aforesaid judgment of the Division Bench of this court. The cheque issued for discharging liability for a time barred loan would constitute a fresh promise and consequently liability under Section 138 of the N.I. Act in the event of dishonor of such cheque will have to be fastened on the defaulter. It is not in dispute that loan was sanctioned in the year 2003. Respondent No. 1 has not seriously assailed issuance of cheque by him on 7.9.2009. The cheque issued amounts to promise within the meaning of Section 25(3) of the Contract Act and on account of dishonor of such a cheque, complaint under Section 138 of the N.I. Act would be maintainable. The law has been elaborately discussed by this court in the above referred authority and following the same, this court, in the facts and circumstances of the case, finds that the learned trial court committed a serious error of law in holding that the complaint is barred by limitation.

As acquittal of the accused is solely on the ground of limitation, it would be necessary to remand the matter to the trial court to decide the matter afresh on merits in accordance with the law. Hence, the following order:

(i) Criminal Appeal No. 72 of 2013 is partly allowed.

(ii) Impugned judgment and order dated 30.3.2012 passed by the Judicial Magistrate, First Class, Katol in Summary Criminal Case No. 912/2009 is quashed and set aside and the matter is remanded to the trial court for its fresh disposal on merits in accordance with the law.

(iii) No order as to costs.


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