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

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What constitute consideration for passing of compromise decree?

 Section 2(d) of the Indian Contract Act, 1872 defines consideration. It is something done or promised to be done or something not done or something promised not to be done by the promisee at the desire of the promiser. This definition clearly shows that the consideration could be monetary as well as in kind or in the nature of some sacrifice made by the promisee at the desire of the promiser. Having understood the concept of consideration under the Indian Contract Act, now we would have to take a look at the compromise application signed and executed by the parties.

7. It is seen from the compromise application that even though there is no mention in it about payment of price of the suit properly, the deficiency is made up by what is stated in it's paragraph 3(1). Contents of this para disclose that the defendant (applicant-judgment debtor) has shown his readiness to execute the sale deed in respect of 1/4th share out of his 1/3rd share from the property bearing Khasra No. 81/2, RH. No. 46 situated at mouza Isasani. So, this is an act promised to be done by the defendant or the applicant who is the promisee in the instant case. The respondent or the decree holder is the promiser in this case and as seen from the prayer clause, has expressed a desire that in lieu of the promise so given by the promisee, the Court be pleased to grant a compromise judgment and decree as per the terms and conditions mentioned in the application. These mutual acts performed or promised to be performed by both parties from the consideration for what each of the parties to the compromise application has agreed to do in the present case. Therefore, this is not a case wherein one can surely say that the compromise application was devoid of any consideration, as the term is defined in law.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Civil Revision Application No. 86 of 2017

Decided On: 13.09.2017

Suresh Daulatrao Wirulkar Vs.  Ganesh Rajaram Bodkhe

Hon'ble Judges/Coram:

S.B. Shukre, J.

Citation: 2018(3) MHLJ 112

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SHORT NOTES ON LIMITATION ACT PART 3

S 18. Effect of acknowledgment in writing:-

Acknowledgment means a definite, clear admission of existing liability.

It is not necessary that there should be promise to pay. An acknowledgment does not create any new right of action but only enlarges the time and has the effect of making a new period run from the date of acknowledgment. Under this section, an acknowledgment is not limited in respect of a debt only, it may be in respect of “any property or right” which is the subject matter of the suit. There must be an unqualified,or an admission qualified by a condition which is fulfilled.

Ingredients of S 18 and essentials of a valid acknowledgment:-

To constitute a valid acknowledgment and thus to give a fresh period of limitation under this section,the following conditions must be satisfied.

1) The acknowledgment must have been made before the expiration of the period prescribed.

2) The acknowledgment must have been made by the party against whom the right is then claimed or by any person through whom he derives his title or liability.

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What is “Pre-existing duty doctrine”?

 One more doctrine is to be taken into consideration i.e.
“Pre-existing duty doctrine”. It is a principle under the

Contract Act that states that if a party to a contract is under a
pre-existing duty to perform, then no consideration is given for
any modification of the contract and the modification is
therefore voidable. In the 13th edition of the Pollock & Mulla
Indian contract and Specific relief Act in Vol.1, it is mentioned
at page 101 about the Pre-existing obligation under law which
provides that:-
“The performance of what one is already bound to do,
either by general law or by a specific obligation to the
other party, is not a good consideration for a promise;
because such performance is no legal burden to the
promise, but rather relives him of a duty. Neither is
the promise of such performance a consideration,
since it adds nothing to the obligation already
existing.”

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
TRANSFER PETITION (CIVIL) NO. 702 OF 2015
Vennangot Anuradha Samir 
v
Vennangot Mohandas Samir 
Dated;December 02, 2015

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Whether promise to pay time barred debts under Section 25 of Contract Act should be express promise?

The award passed was challenged on the ground that claim sought to be passed since was barred by limitation, the award passed was not correct. The claim forming the base of dispute was based on a promise to pay an amount in writing under Section 25(3) of the Indian Contract Act, 1872 (ICA). The claim was preferred well after three years since it become due. Section 25 deals with Agreement without consideration. Such agreement is void unless in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law. Sub-section (3) of Section 25 provides for a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt.

In the instant matter, promise to pay in writing was stated to be made through a letter which though disputing and denying the payment as claimed (in terms of figures) and it was mentioned that correct figure could be arrived only by way of mutual verification. It was further mentioned that payment legally due is not denied.

The Court observed that whatever was shown as outstanding figure was disputed and denied for want of mutual verification and clarification, but dues per se was not denied. Arbitrator considered this aspect as an admission on the part of the Petitioner and accordingly a promise to pay and since it was in writing the same was an express promise to pay. Unless the Petitioner could show that the demand is illegal, the express promise to pay would have to be performed by payment.

The promise to pay must be express. An implied promise to pay inferred from an acknowledgment could not be made the basis of the suit to recover a debt barred at the time of the acknowledgment and since S. 25(3) relates to promise to pay a debt, already time barred.

In the instant matter, the Petitioner failed to show the Arbitrator and also the  Court how the demand made was not legal and consequently the petition was dismissed.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

M/s. Gem Synth Resins Pvt. Ltd. Vs. M/s. Mahendra Rosin and Turpentine Pvt. Ltd.

ARBITRATION PETITION NO. 168 OF 2012
Coram:
:  MRS. ROSHAN DALVI, J.

:  11   JUNE, 2014.
   th 

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Whether cheque issued for discharge of time barred debt is promise as per S 25 of Contract Act?

 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.

Bombay High Court

Mr. Dinesh B. Chokshi vs Rahul Vasudeo Bhatt on 19 October, 2012

Bench: A.S. Oka, S.S. Jadhav

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