Is a contractual provision for a lock-in period in a leave and license agreement illegal?

The result of this discussion, in summary, is that for the purposes of Section 433 of the Companies Act, 1956:

(a) The liability of the respondent-company must be certain. Where the liability is to be adjudged, i.e., where it remains to be decided by a court whether or not the respondent-company is liable in the first place, there can be no 'debt' within the meaning of the section. The liability of a company is its obligation to pay. The debt is the amount that it is liable to pay.

(b) The debt must an ascertained, or definitely ascertainable, amount, not one that requires adjudication. 13 A claim in damages is no debt. 14

(c) The debt must be a debt now due at the time of presentation of the petition. Any contingency contemplated must be one that has come to pass; it cannot be one yet to occur. 15 It is on the happening of a contingency that a company can be said to be 'indebted'. Should the contingency never happen, there can be no debt .24

(d) A contractual provision in a leave and license agreement for a lock-in period is not per se illegal, unlawful, void or even voidable.

(e) Every claim for license fee for the remainder of a lock-in period in a leave and license agreement is not per se a claim for damages, liquidated or unliquidated. In a given case, it may be in the nature of either, or in the nature of a penalty, or it may simply be a component of the contractual consideration and therefore a debt properly so-called when the contingency in contemplation comes to pass. This will depend on an interpretation of the contract in question and an assessment of the conduct of the parties. {Para 64}

 IN THE HIGH COURT OF BOMBAY

Company Petition No. 496 of 2013

Decided On: 28.02.2014

 Indiabulls Properties Pvt. Ltd.  Vs. Treasure World Developers Pvt. Ltd.

Hon'ble Judges/Coram:

G.S. Patel, J.

Citation: MANU/MH/0249/2014,2014 SCCOnLine Bom 4768.

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Landmark Privy Purse Supreme Court Judgment laying down four stages through which a debt or liability to pay money passes

 In his summary of the Law of Contract (p. 124) Langdell remarked that 'a debt according to the popular conception of the term, is a sum of money belonging to one person (the creditor), but in the possession of another (the debtor). He questioned' this approach. Blackstone contrasted property in possession and property in action and held contracts to be within the latter, (See Commentaries Vol. II XXV pp. 396-398). He was in effect thinking of a debt. According to him property in action exists :

Where a man hath not the occupation, but merely a bare right to occupy the thing in question, the possession whereof may, however, be recovered by a suit or action at law.... {Para 60}

61. He was of opinion that till then the thing or its equivalent, remains in suspense, and the injured party has only the right and not the occupation. It being a thing in potentia and not in esse it is only a thing in action and not possession. Sohm (The Institutes) also says that till the fulfilment of the obligations the creditor has right only against the debtor and not against a thing.

62. This old concept of property is no longer held to be true. Mark by, Elements of Law 1871, 6th Edition p. 320) regards the liability of the promisor as itself a thing which is capable of being bought and sold, assigned and transferred and if of money value, may itself be regarded as an object of ownership. An obligation according to him is as much a res as any other property and the only difference is in the mode of enjoyment. The creditor realizes this ownership by compelling the debtor to perform his obligation. As illustration he gives a catalogue of passive rights of ownership. Anson (Principles of Law Contract) supports him by pointing out that an obligation is a right of control exercisable by one person over others for acts which have a money value.

63. The dynamic theory of obligations regards a debt as a claim to 'an equivalent in a value to a floating charge against the generality of things which are the properties of the debtor'. From this is developed the notion of a credit-debt where property rights arise from a promise, express or implied in respect of ascertained or readily ascertained sums of money. Thus a debt or a liability to pay money passes through four stages. First there is a debt not yet due. The debt has not yet become a part of the obligor's 'things' because no net liability has yet arisen. The second stage is when the liability may have arisen but is not either ascertained or admitted. Here again the amount due has not become a part of the obligor's things. The third stage is reached when the liability is both ascertained and admitted. Then it is property proper of the debtor in the creditor's hands. The law begins to recognise such property in insolvency, in dealing with it in fraud of creditors, fraudulent preference of one creditor against another, subrogation, equitable estoppel, stoppage in transitu etc. A credit-debt is then a debt fully provable and which is fixed and absolutely owing. The last stage is when the debt becomes a judgment debt by reason of a decree of a Court. Thus an American Judge held 'outstanding uncollected accounts' as property. Standard Marine Insurance Co. v. Board of Assessors 123 La 717. It is because of this that the French Law includes such obligations in mobiles.

64. Applying these tests to the Privy Purses, it is clear that they would be property. As soon as an Appropriation Act is passed there is established a credit-debt and the outstanding Privy Purse becomes the property of the Ruler in the hands of Government. It is also a sum certain and absolutely payable.

IN THE SUPREME COURT OF INDIA

Writ Petitions Nos. 376 to 383 of 1970.

Decided On: 15.12.1970

Madhav Rao Jivaji Rao Scindia Bahadur and Ors. Vs. Union of India (UOI) and Ors.

Hon'ble Judges/Coram:

M. Hidayatullah, C.J., A.N. Grover, A.N. Ray, C.A. Vaidialingam, G.K. Mitter, I.D. Dua, J.C. Shah, J.M. Shelat, K.S. Hegde, S.M. Sikri and Vashishtha Bhargava, JJ.

Citation: MANU/SC/0050/1970,AIR 1971 SC 530

Read full Judgment here: Click here

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Gujarat HC: Amount of PPF account shall not be liable to any attachment in respect of any debt or liability

It is not in dispute that the respondent Bank have withdrawn/debited the aforesaid amount of Rs. 85,380/- from the PPF Account of the petitioner. It is well settled proposition of law that the amount of Public Provident Fund account shall not be liable to any attachment in respect of any debt or liability incurred by the account holder. Thus, the action of the respondent Bank of withdrawing/debiting the aforesaid amount from the PPF Account of the petitioner is illegal and unjustified.

 {Para 11}

 In the High Court of Gujarat at Ahmedabad

(Before A.S. Supehia, J.)

Rajnikant Punjalal Shah Karta of Rajnikant Punjalal Shah Huf Vs  Manager, Bank of Baroda

R/Special Civil Application No. 10377 of 2020

Decided on June 23, 2022

Citation: 2022 SCC OnLine Guj 772

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Whether an entry of debt made in the balance sheet can amount to an acknowledgement of liability as per S 18 of the Limitation Act?

 Going by the above provisions, a balance sheet is the statement of assets and liabilities of the company as at the end of the financial year, approved by the Board of Directors and authenticated in the manner provided by law. The persons who authenticate the document do so in their capacity as agents of the company. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirements of law for a valid acknowledgement under S. 18 of the Limitation Act, even though the directors by authenticating the balance sheet merely discharge a statutory duty and may not have intended to make an acknowledgement.”

31. In Zest Systems Pvt. Ltd. v. Center for Vocational and Entrepreneurship Studies, 2018 SCC OnLine Del 12116, the Delhi High Court held:

“5. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd. (supra) this court held as follows:— “7. It is hardly necessary to cite authorities in support of the well-established position that an entry made in the company's balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. 

 6. In view of the legal position spelt out in judgments noted above, the acknowledgement of the debt in the balance sheet extends the period of limitation. The acknowledgement is as on 31.3.2015. This suit is filed in 2017. The suit is clearly within limitation. The present application is allowed.”

Supreme Court of India

Asset Reconstruction Company ... vs Bishal Jaiswal on 15 April, 2021

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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 

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Whether court should dismiss complaint for dishonour of cheque if cheque amount is more than amount due?

 However, the learned Trial Court found contradiction in the

number of cartons in the complaint as well as in the statement of

the appellant. It was found that the cheque amount is more than

the amount allegedly due on the date when cheque was

presented, therefore, the complaint was dismissed. It held that

there are three different versions as to the number of apple

cartons, therefore, the alleged amount would have been less than

the amount claimed by the complainant.

Once the agent of the respondent has admitted the settlement of

due amount and in absence of any other evidence the Trial Court

or the High Court could not dismiss the complaint only on account

of discrepancies in the determination of the amount due or oral

evidence in the amount due when the written document

crystalizes the amount due for which the cheque was issued.

28. The accused has failed to lead any evidence to rebut the statutory

presumption, a finding returned by both the Trial Court and the

High Court. Both Courts not only erred in law but also committed

perversity when the due amount is said to be disputed only on

account of discrepancy in the cartons, packing material or the rate

to determine the total liability as if the appellant was proving his

debt before the Civil Court. Therefore, it is presumed that the

cheques in question were drawn for consideration and the holder

of the cheques i.e., the appellant received the same in discharge

of an existing debt. The onus, thereafter, shifts on the accusedappellant

to establish a probable defence so as to rebut such a

presumption, which onus has not been discharged by the

respondent.

29. Learned counsel for the respondent has referred to the judgment

reported in M. S. Narayana Menon v. State of Kerala 9 (2006) 6 SCC 39 that evidence adduced by the complainant can be relied upon to rebut

the presumption of consideration. However, said judgment has no

applicability to the facts of the present case as the Trial Court has

found that the presumption is not rebutted but still the Trial Court

dismissed the complaint for the reason that the appellant has

failed to prove the amount mentioned in the cheque as due

amount. Once the cheque is proved to be issued it carries

statutory presumption of consideration. Then the onus is on the

respondent to disprove the presumption at which the respondent

has miserably failed.

30. In Kumar Exports evidence to rebut the presumption was led and

accepted by the Court. In these circumstances, it was held that

the burden shifts back to the complainant and the presumption

under the Act will not again come to his rescue. However, in the

present case, the presumption of consideration has not been

rebutted by the respondent even on the basis of the evidence laid

by the appellant. The difference in the number of cartons supplied

or the rate charged is not relevant when the accounts were settled

in writing to rebut the presumption of consideration of issuance of

a cheque.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1545 OF 2019

UTTAM RAM  Vs DEVINDER SINGH HUDAN 

HEMANT GUPTA, J.

Dated:OCTOBER 17, 2019.

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Supreme Court: Non Payment Of Debt After Issuance Of Recovery Certificate Not A Continuing Wrong

 Having heard learned Counsel for both parties, we are of the
view that this is a case covered by our recent judgment in B.K.
Educational Services Private Limited vs. Parag Gupta and
Associates, 2018 (14) Scale 482, para 27 of which reads as
follows:-
“27. It is thus clear that since the Limitation Act
is applicable to applications filed under Sections 7
and 9 of the Code from the inception of the Code,
Article 137 of the Limitation Act gets attracted.
“The right to sue”, therefore, accrues when a
default occurs. If the default has occurred over
three years prior to the date of filing of the
application, the application would be barred under
Article 137 of the Limitation Act, save and except
in those cases where, in the facts of the case,
Section 5 of the Limitation Act may be applied to
condone the delay in filing such application.”

Following this judgment, it is clear that when the Recovery
Certificate dated 24.12.2001 was issued, this Certificate injured
effectively and completely the appellant’s rights as a result of
which limitation would have begun ticking.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11020 OF 2018

VASHDEO R BHOJWANI  Vs ABHYUDAYA CO-OPERATIVE BANK LTD 

Dated:September 02, 2019.
R.F. Nariman, J.

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Whether mesne profits is debt?

The decree-holder in his counter-affidavit contended inter alia that the debtor is not a small farmer as he is cultivating about Ac. 10.00 of land belonging to other also on lease and deriving an income of Rs. 1,200/- per year and that in any case the execution, which relates to recovery of mesne profits does not abate, as to mesne profits are excluded in the definition of 'debt' under the Indebtedness Relief Act. It was also pleased that the liability of the petitioner had arisen out of a tortious liability and was specifically excluded under the definition of 'debt' in S. 3 (i) of the said Act.
A fortiori the liability of a person in wrongful possession for payment of mesne profits must be deemed to have been excluded from the definition of 'debt'. That this was the obvious intention of the Legislature is again plain from item (v) of the liabilities excluded, wherein liability arising out any tortious liability is also not included in the definition of 'debt'. In Wharton's Law Lexicon, "anything done by the wrong; an act involving a forfeiture of property". In Oxford dictionary one of the meanings given for 'tortious' is "wrongful'. In Corpus Juris Secundum 'tortious' has been defined to mean "wrongful ; of the nature of a tort' it is convertible with the term 'unlawful'". It is clear from the definition of 'mesne profits' in S. 2 of the Civil P. c. that the essence of the claim for mesne profits is wrongful possession of the property. There can be no claim for mesne profits if the possession has not been wrongful. Therefore, 'mesne profits' clearly fall within the meaning of the words 'tortious liability' excluded from the definition of 'debt' under item (v). 

IN THE HIGH COURT OF ANDHRA PRADESH

Civil Revn. Petn. Nos. 1966 and 3106 of 1977

Decided On: 19.01.1978

Vijjrapu Sarayya  Vs. Vinnakota Savitramma and Anr.

Hon'ble Judges: 

P. Chennakesav Reddi, J.

Citation: AIR1978AP304

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Whether pawnee has right to file suit for recovery of debt even though he is in possession of pledged Goods?

The Supreme Court in the case of Infrastructure Leasing and Financial Services Ltd. Vs. B.P.L. Ltd., MANU/SC/0018/2015 : (2015) 3 SCC 363, has held that as per Section 176 of the Act when the pawnor makes default in making the payment, the pawnee may bring a suit upon the debt or promise and retain the good(s) pledged as a collateral security. A pawnee has both collateral and concurrent rights and can institute a suit for the purpose of realization of the said debt or promise while retaining the goods as a collateral security. Section 176 also makes it clear that it is the discretion of the pawnee and it gives an option to him and merely because pawnee has filed a suit for recovery, that would not affect or destroy the charge or the right of the pawnee in respect of the pledged goods or the collateral security. Thus, it is within the domain of discretion of pawneee to file a suit for recovery of a debt and yet retain the collateral security or pledged goods.

IN THE HIGH COURT OF MADHYA PRADESH (GWALIOR BENCH)

First Appeal Nos. 144/2007, 444, 166 and 167/2006

Decided On: 21.04.2016

 Vijay & Sons and Ors.

Vs.

Shivpuri Guna Kshetriya Gramin Bank and Ors.

Hon'ble Judges/Coram:

Alok Aradhe and Vivek Agarwal, JJ.

Citation: AIR 2017(NOC)56 MP

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Whether insolvency petition is maintainable if debt is denied by debtor?

This contention of Mr. Bhandari that if the debt is denied by the debtor then no petition would be maintainable under Section 9 of the Act, cannot be accepted, because if the expression "debt is a liquidated sum" is interpreted in the manner in which Mr. Bhandari wants this Court to interpret it, then it would provide an easy handle to every debtor to escape the consequences under the provisions of the Act by simply raising a plea of dental about the existence of the debt. In order to debar a creditor from presenting an insolvency petition against a debtor under Section 9 it is necessary for the debtor to show that the debt is of such a nature which is not capable of being easily ascertained within the mischief of Section 9 of the Act. In P.N.V. Ratnasami Naidu v. K.S.P.A. Subba Reddiar, MANU/TN/0146/1943 : AIR 1943 Mad 766 the learned Judge while defining the expression "debt is a liquidated sum" observed as follows:--

"It is not always easy in a claim on an account to say definitely whether it is for a liquidated sum or for an unliquidated sum. It does not cease to be a, liquidated sum, because it can be arrived at only after making some simple calculation; but if it is not readily ascertainable without enquiry, then it is an unliquidated claim."

13. In Madhya Bharat case Ramchandra Narayanji v. Rameshwar Bhagwandas AIR 1951 MP 115 there was a claim for damages for breach of contract of sale and it was in that context that the learned Judge observed that,--

"An essential condition for the foundation of a creditor's petition is that the debt must 'be a liquidated sum. There must, therefore, be a certain sum admittedly due and payable to the person who presents the petition. A claim for damages for non-performance of a contract of a sale cannot ordinarily be within the meaning of a liquidated sum, especially where the alleged contract and its validity or the need of its performance are in question."

This authority, in my opinion, cannot be of any avail to the appellant, because the facts of that case showed that the claim for damages for the non-performance of the contract of a sale could not be accepted as a "debt" of the creditor, unless such a claim was determined by a competent authority. In my opinion this ruling cannot help the court to find out the correct interpretation of the expression "the debt is a liquidated sum", as used by the Legislature in Clause (b) of Sub-section (1) of Section 9 of the Act.

14. In Allahabad case Balak Ram v. Kaley 1966 All LJ 476, the learned Judge held that a claim for damages before passing of the decree could not be termed as a liquidated sum. but in his opinion once a decree is passed, it becomes a liquidated sum payable immediately. This authority is distinguishable on : the point that in that suit the debt claimed depended upon " the adjudication about the quantum of damages and unless it was done that debt could not be said to be of a liquidated sum. In my opinion this authority of Allahabad High Court hardly throws any light on the question that has been posed for this court to answer.

15. In Subramonia Iyer Saradam-bal v. K. R. Ramchandra Iyer AIR 1956 TC 88, the learned Judges, while examining the scope of Section 9 of the Act, observed that.-

"A debt on which the insolvency petition can be based must be one provable in insolvency or in other words it must be a subsisting debt due from the debtor on the date of the presentation of the petition. It must also be a liquidated sum payable either immediately or at some future time."

According to these observations of the learned Judges, if the debt, even though denied by the party, can be proved easily in the insolvency court, then it can act as a base or foundation for submitting a petition under the provisions of the Act.

 Citation : AIR 1976 Raj 4

IN THE HIGH COURT OF RAJASTHAN

Civil Misc. First Appeal No. 60 of 1973

Decided On: 09.10.1975

Mohanlal
Vs.
Rameshwar Dayal and Ors.

Hon'ble Judges/Coram:
V.P. Tyagi, J.

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What is basic concept of legal necessity?

Meaning of legal necessity is given in para 241
of the Hindu Law by Mulla. This para shows that legal
necessity includes family debts incurred for family
business or other necessary purpose. It is mentioned that
in case of manager, who is other than the father, it is not
enough to show merely that the debt is pre-existing debt.
It is also made clear that seven instances mentioned in
this paragraph are not the only indices of legal necessity
and it is duty of Court to ascertain as to whether there
was legal necessity from the facts of that case. One
illustration shows that for maintenance of coparceners

and of the members of their family the property can be
sold. Under Hindu law, Karta of joint Hindu family has the
power to make alienation of the joint Hindu family
property for legal necessity. Father, Karta, has such power
and it can be said that in view of the meaning of legal
necessity given in para 241 his powers are larger than the
powers of other Karta. As the Karta is required to take
care of all the members of the Hindu joint family, Hindu
law has given him discretion and he is to arrive at decision
as to whether there is legal necessity. He is also having
jurisdiction to decide in what way such legal necessity can
be fulfilled, either by mortgage or sale. Such use of
discretion is however subject to the scrutiny of the Courts.
Para 243 from the same book shows that the purchaser is
expected to make inquiry with regard to legal necessity
but he is not expected to keep follow up to ascertain as to
whether the proceeds were really applied for legal
necessity.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
Second Appeal No. 125 of 1992

 Shridhar s/o Bajirao Pawar,

V
 Bajirao s/o Dhondiba Pawar,

 CORAM: T.V. NALAWADE, J.

 DATE : 22 JULY 2016
Citation: 2016(6) ALLMR 280

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Whether offence of dishonour of cheque is made out if debt amount is less than cheque amount?

 The indorsement for part payment of the cheque

was explained under Section 56 of the N.I. Act. According

to Section 56 of the Negotiable Instruments Act, "no

writing on a negotiable instrument is valid for the purpose

of negotiation, if such writing purports to transfer only a

part of the amount appearing to be due on the

instrument; but where such amount has been partly paid



a note to that effect may be indorsed on the instrument,

which may then be negotiated for the balance."         The

sections prohibit the transfer of an instrument for a

portion of the amount due under it. But the last portion

says that if the amount has been paid in part, the fact of

the part payment may be endorsed on the instrument and

negotiated for the balance amount. When the maker of

the payment makes a part payment, but that amount is

not endorsed and the note is fraudulently negotiated by

the payee without admitting the part payment, the maker

has to pay the full amount of the instrument to the holder.

When court considers part payment due under a cheque

and if drawee makes an endorsement regarding the part

payment on the instrument and he claims the balance

amount by presenting the cheque for encashment through

a bank and if it is dishonoured, then an offence under

Section 138 of the N.I. Act will be made out. Both the

courts below failed to appreciate the admission made by

PW1 and the documentary evidences which resulted in



miscarriage of justice. Therefore, this is a fit case to

exercise revisional jurisdiction. While invoking revisional

jurisdiction,    this   court     can   rectify    the   illegalities

committed by the inferior courts. The object of conferring

such power is to correct grave miscarriage of justice

arising from erroneous orders.

      12. In Angu Parameswari Textiles (P) Ltd. and

Others V. Sri. Rajam and Co. 2001 Company Cases

Vol.(105) 186, Madras High Court held that;

         "For the purposes of Section 138 of the Negotiable

         Instruments Act, 1881, the cheque should be

         towards the discharge of either the whole debt or

         part of the debt. If the cheque is for more than the

         amount of the debt due, Section 138 cannot be

         attracted."



Here the      portion of the cheque was repaid and such

payment is admitted by PW1 and no endorsement was

made on the back of the cheque or face thereof and on

prosecution complainant claimed cheque amount, no

offence under Section 138 of the N.I. Act is made out. The


evidence adduced in this case is not sufficient to convict

the accused under Section 138 of the N.I. Act.

IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                                      PRESENT:

                              MR. JUSTICE P.D.RAJAN

          26TH DAY OF NOVEMBER 2015

                                       Crl.Rev.Pet.No. 1251 of 2005 
            SHIJU K.
           V

         NALINI,
          

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Whether son is liable to pay father's debt if father is discharged insolvent?

  As regards the first contention, there can be no doubt that if the decree was against Nandji alone, the effect of the order of discharge was to extinguish the debt. Section 44(2), Provincial Insolvency Act, is decisive on the point. It lays down that "save as otherwise provided by Sub-section (1) an order of discharge shall release the insolvent from debts provable under the Act." For the present purpose the provisions of Sub-section (1) are not relevant and need not be referred to. Mr. Mukherji on behalf of the respondent suggests that though by virtue of the provisions of Section 44(2), Provincial Insolvency Act, the debt payable by Nandji might be extinguished, the sons' pious obligation nevertheless remained. This is a proposition which it is difficult to understand.

6. The sons' pious obligation arises on account of the existence of the father's debt. If the debt itself is extinguished, the very foundation of the pious obligation is gone.

Citation : AIR 1940 Pat 149

IN THE HIGH COURT OF PATNA

Decided On: 29.08.1939

Nathuni Prasad and Ors.
Vs.
Firm Radha Kishun Dutt Rai

Coram:
Chatterji and Rowland, JJ.

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Whether unliquidated damages are debt?

It would be profitable in, this connection to refer to the concept of a 'debt', for a sum due is the same thing as a debt due. The classical definition of 'debt' is to be found in Webb v. Stenton (1) where Lindley, L. J., said : "a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation". There must be debitum in praesenti; solvendum maybe in praesenti or in future that is immaterial. There must be an existing obligation to pay a sum, of money now or in future. The following passage from the judgment of the Supreme Court of California in People v. Arguello. [1869] 37 Calif. 524 (1) [1883] 11 Q.B.D. 518. which, was approved by this Court inKesoram Industries v. Commissione of Wealth Tax  [1966] 2 S.C.R. 688. clearly brings out the essential characteristics of a debt "Standing alone, the word 'debt,' is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is. a debt 'owing, and of the latter that it is debt due."

This passage indicates, that when there is an obligation to pay a sum of money at a future date, it is a debt owing but when the obligation, is to pay a sum of money in praesenti, it is a debt due. A sum due would, therefore, mean a sum for which there is an existing obligation to pay in praesenti or in other words, which is presently payable.. 

 Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not in actionable claim and this position is made amply clear by the amendment in s. 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we, find it stated by Wightman, J., in Jones v. Thompson (1) "Exparte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has. been signed".

Supreme Court of India

Union Of India vs Raman Iron Foundry on 12 March, 1974

Equivalent citations: 1974 AIR 1265, 1974 SCR (3) 556

Bench: Bhagwati, P.N.

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What is meaning of debt?

 The term 'liability' has been defined as obligation, debt, etc. In First National Bank v. Sant Lal, MANU/PH/0102/1959 : AIR 1959 Punjab 328 it is said that term 'liability' is of large and comprehensive significance, and when construed in its usual and ordinary sense, it expresses a state of being under obligation in law or in justice.

 In Hindustan Laminators (P) Ltd. v. Central Bank of India, 2000 (27) SCL 571Calcutta High Court has observed that word 'liability' obviously means obligation. Then it should be a liability which is alleged as 'due'.

The term 'due' has different meanings. In State of Kerala v. V.S. Kalliyanikutty, MANU/SC/0226/1999 : JT 1999 (2) SC 540 the Supreme Court observed that 'due' means anything owing; that which one contracts to pay to another. It was in the context of Kerala Revenue Recovery Act, 1968.

In the context of Companies Act, 1956, in Raymond Synthetics Ltd. v. Union of India, MANU/SC/0162/1992 : JT 1992 (1) SC 463 the Court said that a debt is often said to be 'due' from a person where he is the party owing it; or primarily bound to pay, whether the time for payment has or has not arrived.

 In the context of Income Tax Act, 1961, in CIT v. Southern Roadways Ltd., MANU/TN/1843/2003 : 2004 (266) ITR 135 the Madras High Court said that the word 'due' is used to refer to the debt or obligation which has become immediately payable. In CIT v. United Provinces Electric Supply Co., MANU/SC/3005/2000 : 2000 (244) ITR 764 the Apex Court while affirming above view of Madras High Court observed that the initial determination is a pre-requisite for regarding that amount as having become 'due'.

 In Harshad Shantilal Mehta v. Custodian, MANU/SC/0368/1998 : 1998 (231) ITR 871 the Apex Court observed that 'due' means "payable, justly owed".

 In Munsif Jahan v. Rajendra Prasad, MANU/OU/0099/1946 : AIR 1946 Oudh 226 the terms 'due' and 'payable' came to be considered. The Court said that they are not convertible terms. A 'debt' is said to be 'due' as soon as it has existence as a debt, though it may be payable on a future date.

Therefore, a liability so as to become due it must exist in presenti to be the immediate obligation of petitioners so as to satisfy the definition of 'debt' under section 2(g) of Act, 1993.
IN THE HIGH COURT OF ALLAHABAD

C.M.W.P. No. 49062 of 2009

Decided On: 06.08.2014

Appellants: B.K. Jewellers
Vs.
Respondent: State Bank of India and Ors.

Hon'ble Judges/Coram:Sudhir Agarwal, J.
Citation:2016 (116) ALR 791.

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When debt will not be loan for purposes of money lenders Act?

The matter seems to be concluded by the decision of the Supreme Court in Radha Kissen vs. Keshardeo (MANU/SC/0135/1957 : A.I.R. 1957 SC 743) where the approach to the question such as the one arising in this case has been indicated The Supreme Court affirmed the decision of the Calcutta High Court in Radha Kissen vs. Keshar Deo (MANU/WB/0041/1954 : A.I.R. 1954 Cal 105). In that case when the purchasers failed to complete the agreement for sale of certain property, the vendor instituted a suit against them for specific performance of the agreement. The suit was compromised and a decree was passed in terms of the agreement arrived at between the parties under which the vendor was to accept payment of a portion of the money payable under the agreement for sale immediately and the balance in certain instalments with interest. The compromise decree vested the property agreed to be sold in one of the purchasers and created a charge on it for the purchase-money unpaid for the time being. Later on the purchasers contended that they were borrowers within the meaning of S. 3 of the Bengal Money Lenders Act and that, therefore, they could not be made to pay an amount in excess of the amount prescribed by S. 30 of the Act in respect of a loan. The Supreme Court negatived this contention pointing out that the fact that under the compromise decree the moneys were payable in a number of instalments instead of at once did not show that the price due had become a loan and that the compromise decree did not alter the intrinsic nature of the money due to the vendor. It was also emphasized that in such cases there must be evidence to show that subsequent to the sale and purchase transaction there was an agreement between the parties to treat the unpaid price as a loan, an agreement to convert the outstanding purchase-money into a loan by the vendor to the purchaser, The Supreme Court referred to the decisions of the Calcutta High Court in Nirode Barani vs. (sic) Kumar (MANU/WB/0187/1942 : A.I.R. 1942 Cal 616) and Fatch Chand vs. Akimuddin (MANU/WB/0048/1942 : A.I.R. 1943 Cal 108) and after discussing the facts of those cases pointed out that in both those cases the parties had agreed to treat the purchase-money as paid off in entirety and the amount equivalent to the unpaid purchase money as being due by the purchaser to the vendor by way of loan. In the instant case, there is no evidence of such an agreement.

Property - Suit for recovery of amount - Suit decreed by lower Court - Hence, present petition - Held, a loan contracted no doubt created a debt - But there might be a debt contracted without contracting a loan - A dividend declared by a company was after its due date a debt of company to shareholder; moneys due from an insurance company under a policy were debts; arrears of rent were debts but none of them was a loan - Petition dismissed.

Equivalent Citation: 1959JLJ742

IN THE HIGH COURT OF MADHYA PRADESH (INDORE BENCH)

C. Rev. No. 81 of 1959

Decided On: 17.03.1959

 Mangilal
Vs.
 R.R. Contractor & Company

Hon'ble Judges/Coram:
P.V. Dixit, J.

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Whether Directors of company are liable to pay debt taken by company?

 As per the case made out in the Original Application, the petitioner is neither a Borrower nor a Guarantor. The defendant No. 1 being a Company incorporated is a separate legal entity and unless a Director of the said Company is a surety or a guarantor, he cannot be fastened with liability to repay the loan advanced to the defendant No. 1 Company. Even assuming that the petitioner is a shareholder of the defendant No. 1 Company, his liability will be only to the extent of balance amount due on the shares held by him and that liability will arise only when call is duly made. 

Bombay High Court

Jaikisan S/O Jaynarayan Bhaiyya vs United Western Bank Ltd. on 12 February, 2004

Equivalent citations: 2004 (5) BomCR 705, 2004 (2) MhLj 755

Bench: A Oka

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Whether offence of dishonour of cheque is made out if cheque amount is more than actual debt?

 Based on the entire evidence on record the learned trial court has come to the conclusion that the complainant could not prove his case beyond doubt and the accused could rebut the presumption. Considering the case of the accused and testing the same on the touchstone of entire evidence on record, I am of the view that by preponderance of probabilities, the accused has been able to prove that the cheque amount is more than the actual debt. In such circumstances, it cannot be said that the trial Court committed an error in holding that the complainant could not prove his case. The accused has therefore, been rightly acquitted of the offence punishable under Section 138 of the Act. No interference with the impugned judgment and order is called for, even if it is felt that another view is possible. In the result, the appeal is dismissed.

IN THE HIGH COURT OF BOMBAY (PANJI BENCH)

Criminal Miscellaneous Application No. 54 of 2013 in Stamp Number Main No. 292 of 2013

Decided On: 04.12.2013

Appellants: Mr. Anant Bondre
Vs.
Respondent: Mr. Alfred David Fernandes and Anr.

Hon'ble Judges/Coram:U.V. Bakre, J.

Citation;2014(2)Crimes 33 Bom

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Whether creditor of father can claim priority in payment of his debt in case of insolvency of son?

It is in this sense of obligation that the word 'charge' is used in the passage in Mayne's Hindu Law and not in the sense of the properties being hypothecated for the debt. It is one thing to say that before partition the debts of the father shall be provided for and it is another thing to say that when the son becomes the sole owner on the father's death entitled to dispose of the property as his own, there is any restriction imposed on his powers for disposing it for his own debts though he is equally under an obligation to satisfy the demand of his father's creditors. Again the obligation imposed by the Hindu Law being incidental to the property so long as the property remains in the hands of the son the property cannot escape liability, whether there is a charge or No. But once the property has been alienated to a bona fide alienee, the obligation cannot be pursued against the property. It seems to us that the same principle would apply where the son is divested of his ownership therein by operation of law. Bankruptcy is an involuntary alienation and by the provisions of the insolvency law there is a statutory conveyance or alienation of the said property in favour of the Official Assignee in trust for the creditors for distribution among them according to the provisions of the said law. Having regard to these principles the question of priority has to be viewed. Under Section 52(2) of the Presidency Towns Insolvency Act all property as may belong to or be vested in the insolvent at the commencement of the insolvency will vest in the Official Assignee. The principle is the same under the Provincial Insolvency Act and under the English Law. It cannot be denied that the separate property of the father devolving on the son and the joint family property owned by the son at the date of the insolvency, which has been augmented by the father's share devolving upon the son by survivorship on account of the father's death before the date of the insolvency, will be property which belonged to the insolvent. But once that property vests in the Official Assignee, "it would have to be governed by the provisions of the Insolvency law. One of the provisions of that law is Section 49(5) which provides that subject to the provisions of the Act all debts proved in insolvency shall be paid rateably according to the mounts of such debts respectively and without any preference. Of course under Section 49 certain unsecured debts have to be paid in priority and it is in respect of them that a preference is accorded by the Act. The insolvency law is a special law having for its object the distribution of the insolvent's available assets among his creditors pro rata. The father's debt is not one to which a right of priority is given by the Act. The Official Assignee can only administer the assets and distribute them in accordance with the provisions of the Act. If a father's creditor chooses to prove in the insolvency of the, son as a provable debt of the son, he must submit himself to the provisions of the Act which does not recognise any priority in his favour. In a recent decision reported in Thimmiah v. Official Receiver, Bellary (1939) 1 M.L.J. 158, our learned brother Abdur Rahman, J,, took this view and held that the unrealised debts of the father and the debts of the son stood on the same footing and that a father's creditor would not got priority over the son's creditor. In the course of the judgment the learned Judge observed thus: If one looks to the provisions contained in Section 61 of the Provincial Insolvency Act, it would be found to provide in Sub-clause 5 that all debts entered in the schedule have to be paid rateably according to the an fount of such debts without any preference except to those which have been otherwise specified by the Provinc Insolvency Act...The learned counsel for the petitioner has not been able to point to any provision in the Provincial Insolvency Act under which he could claim priority for the debt in question and so far as proceedings in insolvency are concerned, the petitioner, as provided in Sub- 5, share rateably without any preference. It is obviously the policy of the insolvency law to distribute the estate among the creditors fairly and unless a preference was given by the Act to any particular debt, it must necessarily be held to fall within the sub-and no priority can legitimately be claimed in regard to the same. Viewed in the light of this section the unrealised simple debts of the father and that of the son would stand on the same footing.

Madras High Court

Pr. N. Sm. Chokkalingam Chettiar vs The Official Assignee Of Madras on 16 October, 1939

Equivalent citations: (1940) 2 MLJ 621

Venkataramana Rao, J.

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Compensation awarded under Land Acquisition Act is not a debt- claimants are not required to furnish a succession certificate

Ramkali W/o Jagmal, Vs. State of U.P. through Collector and New Okhla Industrial Development Authority (NOIDA) through its Chairman

Court : Allahabad

Reported in : AIR2007All8; 2006(4)AWC3875

Judge : Tarun Agarwala, J.

Decided On : Sep-01-2006

Acts : Land Acquisition Act - Sections 18; Indian Succession Act - Sections 214; Administrator-General's Act, 1913 - Sections 31 and 32; Succession Certificate Act, 1889; Motor Vehicles Act

Case Number : Civil Misc. Application No. 227 of 2006

Code of Civil Procedure, 1908 - Order XXII, Rules 3 and 4--Land Acquisition Act, 1894--Section 18--Indian Succession Act, 1925--Section 214--Succession certificate--Necessity--Compensation awarded under Section 18 of Land Acquisition Act--Not recovery of debt--Nor execution proceedings initiated by claimants--Are for recovery of debt as contemplated by Section 214 of Succession Act--Hence, claimants not required to furnish succession certificate--Direction of court below unsustainable and quashed--Court below to decide legal representatives of original claimant on basis of evidence led by parties.

 In view of the aforesaid, it can clearly be held that the compensation awarded under the Land Acquisition Act is not a debt as contemplated under Section 214 of the Indian Succession Act and therefore, the claimants are not required to furnish a succession certificate. 10. The court below will decide as to who are the legal representatives of the original claimant on the basis of the evidence led by the parties and if the court below is satisfied that the petitioners are the legal representatives of the deceased claimant, in that event, their names would be substituted.

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