Thursday, 2 April 2020

How to ascertain limitation for filing of suit if payment on account of debt is made by postdated cheque?

Shri Abhishek Manu Singhvi, learned senior Counsel has relied on two judgments of this Court, which need to be noticed: (i) Jiwanlal Achariya v. Rameshwarlal Agarwalla MANU/SC/0190/1966 : AIR 1967 SC 1118, and (ii) Kamla Devi and Ors. v. Pt. Mani Lal Tewari and Ors. MANU/SC/0375/1975 : (1976) 4 SCC 818. In Jiwanlal Achariya (supra), this Court had occasion to consider Section 20 of the Limitation Act, 1908, which was akin to present Section 19 of the Limitation Act, 1963. The Court was considering the question as to what shall be the date of a postdated cheque, whether it shall be the date on which cheque bears or the date the cheque is handed over to compute the start of fresh period of limitation. The Court held that the date which post-dated cheque bears subject to payment by the bank shall be treated as a date for start of the fresh period of limitation. In paragraph 8 of the judgment, it was observed that the proviso to Section 20 shall be treated to be complied with for the cheque itself is an acknowledgment of the payment in the handwriting of the person giving the cheque. Paragraph 8 of the judgment is as follows:

8. This brings us to the question of limitation. The facts are not in dispute now. The promissory note was executed on February 4, 1954. On the same date a postdated cheque bearing the date February 25, 1954 was given by the Defendant-Appellant to the Plaintiff-Respondent, the intention being that on being realised it would be credited towards part payment. It was realised sometime after February 25, 1954 and was credited towards part payment, the Appellant himself having made an endorsement admitting this part payment. But it is contended on behalf of the Appellant that as the post-dated cheque was given on February 4, 1954, that must be held to be the date on which part payment was made. It has been held by the High Court that the acceptance of the post-dated cheque on February 4, 1954 was not an unconditional acceptance. Where a bill or note, is given by way of payment, the payment may be absolute or conditional, the strong presumption being in favour of conditional payment. It followed from the finding of the High Court that the payment was conditional i.e. that the payment will be credited to the person giving the cheque in case the cheque is honoured. In the present case the cheque was realised and the question is what is the date of payment in the circumstances of this case for the purpose of Section 20 of the Limitation Act. Section 20 inter alia lays down that where payment on account of debt is made before the expiration of the prescribed period by the person liable to pay the debt, a fresh period of limitation shall be computed from the time when the payment was made. Where therefore the payment is by cheque and is conditional, the mere delivery of the cheque on a particular date does not mean that the payment was made on that date unless the cheque was accepted as unconditional payment. Where the cheque is not accepted as an unconditional payment, it can only be treated as a conditional payment. In such a case the payment for purposes of Section 20 would be the date on which the cheque would be actually payable at the earliest, assuming that it will be honoured. Thus if in the present case the cheque which was handed over on February 4, 1954 bore the date February 4, 1954 and was honoured when presented to the bank the payment must be held to have been made on February 4, 1954, namely, the date which the cheque bore. But if the cheque is post-dated as in the present case it is obvious that it could not be paid till February 25, 1954 which was the date it bore. As the payment was conditional it would only be good when the cheque is presented on the date it bears, namely, February 25, 1954 and is honoured. The earliest date therefore on which the Respondent could have realised the cheque which he had received as conditional payment on February 4, 1954 was 25th February, 1954 if he had presented it on that date and it had been honoured. The fact that he presented it later and was then paid is immaterial for it is the earliest date on which the payment could be made that would be the date where the conditional acceptance of a post-dated cheque becomes actual payment when honoured. We are therefore of opinion that as a post-dated cheque was given on February 4, 1954 and it was dated February 25, 1954 and as this was not a case of unconditional acceptance, the payment for the purpose of Section 20 of the Limitation Act could only be on February 25, 1954 when the cheque could have been presented at the earliest for payment. As in the present case the cheque was honoured it must be held that the payment was made on February 25, 1954. It is not in dispute that the proviso to Section 20 is complied with in this case, for the cheque itself is an acknowledgment of the payment in the handwriting of the person giving the cheque. We are therefore of opinion that a fresh period of limitation began on February 25, 1954 which was the date of the post-dated cheque which was eventually honoured.

16. The judgment of this Court in Jiwanlal Achariya (supra)does not lay down that even without pleading all facts for claiming start of fresh period of limitation, the Plaintiff is entitled for the benefit of Section 19.

  The function of Section 19 is to provide a later date to count the period of limitation afresh, and that fresh period of limitation will be computed from the time when the acknowledgement is signed. Nothing turns on whether the acknowledgement is itself registered or not. The office of Section 19 being to postpone the date of reckoning limitation and not to create a different substantive period of limitation, the latter depends upon the appropriate Article of the Limitation Act which applies to the suit. 


IN THE SUPREME COURT OF INDIA

Review Petition (C) Nos. 786-787 of 2019 in Civil Appeal Nos. 8442-8443 of 2016, 

Decided On: 18.12.2019

Shanti Conductors (P) Ltd. Vs.  Assam State Electricity Board 


Hon'ble Judges/Coram:
Ashok Bhushan, S. Abdul Nazeer and Navin Sinha, JJ.

Citation: (2020) 2 SCC 677.
Read full judgment here; Click here

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