Petition under Section 482 Cr.P.C. to quash a Section 138 NI Act complaint alleging a time-barred debt. Dismissed: whether the debt is time-barred is a mixed question of law and fact to be decided after evidence; Section 25(3) of the Contract Act can make such a cheque enforceable.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 01ST DAY OF JUNE, 2022 BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.1639 OF 2021
BETWEEN:
SRI KRISHNAPPA S/O LATE MUNIVENKATAPPA, AGED ABOUT 50 YEARS, R/AT MEDIMALASANDRA VILLAGE HOSAMANE ROAD ANUGUNDANAHALLI HOBLI MEDIMALASANDRA POST HOSKOTE TALUK BENGALURU RURAL DISTRICT – 560 067.
... PETITIONER
(BY SRI VIJAYA KUMAR K., ADVOCATE )
AND:
SRI MUNIVENKATAPPA S/O LATE VENKATARAMANNA AGED ABOUT 55 YEARS, RESIDING AT NO. 32, BURAKAYALAKOTE VILLAGE NELAVENKI (HOBLI) SRINIVASPURA TALUK KOLAR DISTRICT - 563 135.
... RESPONDENT
(BY SRI RANGANATH REDDY, ADVOCATE)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN
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C.C.NO.70/2019 REGISTERED FOR THE OFFENCE P/U/S 138 OF N.I. ACT AGAINST THE PETITIONER, PENDING ON THE FILE OF ADDITIONAL CIVIL JUDGE AND J.M.F.C., SRINIVASPUR.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 06.04.2022, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner is before this Court calling in question proceedings in C.C.No.70 of 2019 pending before the Additional Civil Judge and Judicial Magistrate First Class, Srinivaspur arising out of complaint registered for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (‘the Act’ for short).
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The petitioner/accused and the respondent/complainant are relatives. The respondent/complainant has married sister of the petitioner. It is the case of the complainant that the petitioner approached him for a hand loan of Rs.8,45,000/- in the first week of June 2014 for construction of a residential house in his village. It transpires that the petitioner had agreed to repay the aforesaid amount within three years and the respondent had paid the said amount by way of cash on 01-07-2014. When the petitioner failed to repay the amount even after expiry of three years in spite of repeated demands and on acceding to one such demand, later he issued a cheque on 13-01-2019 which when presented for realization returned with a shara ‘account closed’. On the said cheque being dishonoured for the aforesaid reason, the complainant caused a legal notice on 18-02-2019 and the petitioner replied to the same on 02-032019. When the amount did not come about despite notice, a complaint was registered by the respondent invoking Section 200 of the Cr.P.C. in P.C.R.No.35 of 2019. Cognizance having been taken, summons were issued to the petitioner and the case
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is now pending in C.C.No.70 of 2019. Taking of cognizance and registration of crime is what drives the petitioner to this Court in the subject petition.
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issuance of the cheque as per the communication of the Bank.
All these factors would be in the realm of evidence for which a full blown trial which is in progress ought to be permitted to be continued.
‘Whether a time barred debt attracts an offence under
Section 138 of the Act ?
herein below for the purpose of quick reference:
“3. The complainant submits that, accused and complainant are relatives. Complainant got married to accused sister, by taking advantage of relationship accused had approached complainant and his wife i.e., accused sister for an hand loan of Rs.8,45,000/(Rupees eight lakhs forty five thousand only) in the 1st week of June 2014 for accused urgent family necessities, construction of accused posh residential
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house in his village and complainant had agreed to give an hand loan of Rs.8,45,000/- (Rupees eight lakhs forty five thousand only) to accused and accused have agreed to repay the aforesaid amount within three years.
4. The complainant submits that, complainant has agreed to give loan and complainant had withdrawn the amount from his bank account maintained in Canara Bank for a sum of Rs.50,000/(Rupees fifty thousand only) on 10-06-2014 and for a sum of Rs.8,00,000 (Rupees eight lakhs only) on 28-062014 and complainant paid to accused a sum of Rs.8,45,000/- (Rupees eight lakhs forty five thousand only) on 1-07-2014 by way of cash in the presence of accused sister i.e., wife of complainant.
5. The complainant submits that, accused have failed to repay the aforesaid amount even after expiry of three years and in spite of many repeated demands from complainant for the repayment of the above said amount.
6. The complainant submits that, for the said hand loan complainant had demanded innumerous times since from 4 years and finally on 13-01-2019 accused had issued/delivered a cheque bearing NO.053936, drawable on Axis Bank, HAL II Stage Branch,Bengaluru dated 1.02.2019 for a sum of Rs.8,45,000/- (Rupees eight lakhs forty five thousand only) to complainant towards discharge of accused liability and accused have assured to present the said cheque on 01-02-2019 for encashment.
7. The complainant submits that, the aforesaid cheque was presented for payment before the Canara Bank, Lakshmipura Branch, Srinivasapura Taluk, Kolar District on 1-02-2019 by complainant but the said cheque was returned
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unpaid to complainant by the aforesaid Bank on 6-02-2019 with the bank endorsement stating that the “ACCOUNT CLOSED” to meet the said demand.”
(Emphasis added)
The narration in the complaint itself is that the accused had taken money on three occasions totally amounting to Rs.8,45,000/- and had issued a cheque on 13-01-2019 which came to be dishonoured on account of ‘account closed’.
is that the debt is time barred for the reason that the amount was advanced even according to the complainant on 1-07-2014 and the cheque was issued in clearance of the aforesaid debt on 13-01-2019. Therefore, the proceedings could not have been initiated by the respondent/complainant against a time barred debt.
as the Apex Court considers the very plea of time barred debt in
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the case of S.NATARAJAN v. SAMA DHARMAN AND ANOTHER1
wherein the Apex Court holds as follows:
“7. In our opinion, the High Court erred in quashing the complaint on the ground that the debt or liability was barred by limitation and, therefore, there was no legally enforceable debt or liability against the accused. The case before the High Court was not of such a nature which could have persuaded the High Court to draw such a definite conclusion at this stage. Whether the debt was time-barred or not can be decided only after the evidence is adduced, it being a mixed question of law and fact.
8. In this connection, we may usefully refer to a judgment of this Court in A.V. Murthy v. B.S. Nagabasavanna [A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642] where the accused had alleged that the cheque issued by him in favour of the complainant in respect of sum advanced to the accused by the complainant four years ago was dishonoured by the bank for the reasons “account closed”. The Magistrate had issued summons to the accused. The Sessions Court quashed the proceedings on the ground that the alleged debt was barred by limitation at the time of issuance of cheque and, therefore, there was no legally enforceable debt or liability against the accused under the Explanation to Section 138 of the NI Act and, therefore, the complaint was not maintainable. While dealing with the challenge to this order, this Court observed that under Section 118 of the NI Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. This Court further observed that Section 139 of the NI Act specifically notes
1 (2021) 6 SCC 413
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that it shall be presumed unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 of the NI Act for discharge, in whole or in part, of any debt or other liability. This Court further observed that under sub-section (3) of Section 25 of the Contract Act, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract. Referring to the facts before it, this Court observed that the complainant therein had submitted his balance sheet, prepared for every year subsequent to the loan advanced by the complainant and had shown the amount as deposits from friends. This Court noticed that the relevant balance sheet is also produced in the Court. This Court observed that if the amount borrowed by the accused therein is shown in the balance sheet, it may amount to acknowledgment and the creditor might have a fresh period of limitation from the date on which the acknowledgment was made. After highlighting further facts of the case, this Court held that at this stage of proceedings, to say that the cheque drawn by the accused was in respect of a debt or liability, which was not legally enforceable, was clearly illegal and erroneous. In the circumstances, this Court set aside the order passed by the High Court upholding the Sessions Court's order quashing the entire proceedings on the ground that the debt or liability is barred by limitation and, hence, the complaint was not maintainable. It is, therefore, clear that the contention urged by the appellant herein can be examined only during trial since it involves examination of facts.
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9. In Rangappa v. Sri Mohan [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] , the legal question before this Court pertained to the proper interpretation of Section 139 of the NI Act which shifts the burden of proof on to the accused in cheque bouncing cases. This Court observed that the presumption mandated by Section 139 of the NI Act includes a presumption that there exists a legally enforceable debt or liability. This is of course in the nature of rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. This Court further observed that Section 139 of the NI Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. This Court clarified that the reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. This Court, then, explained the manner in which this statutory presumption can be rebutted. Thus, in cheque bouncing cases, the initial presumption incorporated in Section 139 of the NI Act favours the complainant and the accused can rebut the said presumption and discharge the reverse onus by adducing evidence.
10. In our opinion, therefore, the High Court could not have quashed the proceedings on the ground that at the time of issuance of cheque, the debt had become time-barred and therefore, the complaint was not maintainable. The High Court, therefore, fell into a grave error in quashing the proceedings.”
(Emphasis supplied)
The Apex Court clearly holds that the High Court was not correct in quashing the complaint on the ground that the debt or
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liability was time barred by limitation and, therefore it did not become a legally enforceable debt. The Apex Court holds that it is a mixed question of law and fact and the High Court exercising its jurisdiction under Section 482 of the Cr.P.C. ought
not to have quashed the complaint or entire proceedings.
NANDISHWAR v. PRAKASH PONDE2 wherein it is held as
follows:
“27. The learned counsel also referred to the recent judgment of the Apex Court in the case of Basalingappa v. Mudibasappa reported in (2019) 5 Supreme Court cases 418, and referring to this Judgment, the learned counsel would submit that the Apex Court in this judgment, held that, the complainant will have to initially lead evidence under Section 139 of the NI Act and rebut the presumption, which is lacking in the present case. The learned counsel would submit that the issuance of summons is wholly without jurisdiction. The learned counsel vehemently contends that it is necessary that when a sworn statement be recorded it should also contain the ingredients of Section 139 of the NI Act when the same has not been stated in the affidavit and also there is an admission that the loan was allegedly received during 2013, there
2 Criminal Petition No.3991 of 2020 disposed of on 28-01-2021
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is clearly lack of application of mind on part of the Magistrate in the matter of issual of summons, therefore, the judgments relied on in S.Natarajan ’s case (supra) that only after the accused rebuts the presumption during a trial the matter can be disposed off is far-fetched.
28. The learned counsel would submit that it is apparent from the complaint that the claim was barred and thus the complaint ought to have been rejected in view of the fact and law laid down in The Bidar Urban Co-operative Bank Ltd, ’s case, wherein there is no legally recoverable debt and that the cheque in question does not amount to acknowledgement of a debt as has been held in the very same judgment placing reliance on Krishna Janardhan Bhat v. Dattatrey. The learned counsel also would submit that the Trial Court has committed an error in not considering the fact that the cheque did not bear any endorsement at the back to pay amount to the bearer. It was neither an endorsement in Blank or in full.
29. Per contra, learned counsel appearing for the respondent would vehemently contend that this petition is filed under Section 482 of Cr.P.C, and the same has been used sparingly. It is also contended that no grounds was urged in the Revision regarding the same as time barred and for the first time in this petition the said new ground has been urged.
30. The learned counsel also would submit that it is not in dispute that a cheque issued is self-cheque and the word “bearer” is not struck off. The complaint averments clearly constitute an offence invoking under Section 138 of the NI Act. The cheque which was returned with an endorsement ‘Account was closed’. Hence, it attracts Section 138 of the NI Act.
31. The learned counsel in support of his arguments, he relied upon the four judgments with
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regard to the issue of not struck off the word ‘bearer’. He relied upon the Judgment of this Court in the case of B.Sarvothama v. S.M. Haneef reported in 2013 SCC OnLine KAR 5328 . The learned counsel brought to the notice of this Court paragraph Nos.4, 8 and 9 and would contend that the material discloses that the complainant had received a bearer cheque for consideration and in discharge of a legal liability and was a holder in due course, of the same. The dishonour of the cheque was for the reason that the account of the petitioner did not carry sufficient funds. But in the case on hand “the account was closed”. The burden was heavy on the petitioner to establish that the cheque was not issued in discharge of a legal liability. The learned counsel also would contend that this Court in detail discussed with regard to when the word “bearer” is not struck off he would become holder in due course.
32. The learned counsel also relied upon the Judgment of Delhi High Court in Adigear International ’s case (supra), and brought to the notice of this Court that in paragraph No.13 discussed with regard to the holder in due course and also brought to the notice of this Court in paragraph Nos.23 and 25 that, once the issuance of the cheques is admitted and as the words “or bearer” have not been struck off, the complainant is held to the holder of the said cheques in due course though it was written as self and thus he is entitled to receive the cash and on dishonouring of the said cheques, he can very well file the complaint.
33. The learned counsel also relied upon the Judgment of the Kerala High Court passed in the case of Sarafudheen v. T. Muhammed Ashraf reported in 2016 SCC OnLine Ker 9538 ( Criminal Appeal No.1870 of 2009) , and brought to the notice of this Court that the paragraph No.12 of the Judgment with regard to the term “or bearer” has not been scored off. The learned counsel in respect of time barred cheque is concerned, referred the Judgment of the Apex Court
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reported in M.M.T.C. Ltd. ’s case (supra), the Apex Court in paragraph Nos.13 to 17, discussed in detail and held that the complaint need not allege existing of a subsisting debt or liability against which cheque issued. Burden of proving non-existence of any debt or liability is on the accused, to be discharged at the trial. Prior to that complaint cannot be quashed by High Court under Section 482 of Cr.P.C.
34. The learned counsel also relied upon the judgment of the Apex Court in S. Natarajan ’s case (supra), in this Judgment, the Apex Court held that with regard to legally enforceable debt, the very contention that complaint alleging time barred cheque, it is held, merely because at time of issuance of cheque, debt had become time barred, complaint cannot be quashed. Whether debt was time barred or not can be decided only after evidence is adduced, it being mixed question of law and fact.
35. The learned counsel also relied upon the Judgment in the case of Pulsive Technologies Private Limited ’s case (supra), referring to this Judgment, he brought to the notice of this Court that paragraph No.10 of the judgment, the Apex Court in this Judgment has held that, when the High Court was dealing with a petition filed under Section 482 of Cr.P.C, for quashing the complaint, considered the factual issue as to whether the complainant had discharged its obligations or not, the High Court could not have given its final verdict at this stage. It is a matter of evidence. This is exactly what this Court said in M.M.T.C. Ltd ’s case (supra). Though the High Court referred M.M.T.C. Ltd ’s case (supra), it failed to note the most vital caution sounded therein. Whether any money is paid by the accused to the complainant is a matter of evidence. The accused has ample opportunity to probabilise his defense. On that count, in the facts of the case, the complaint cannot be quashed.
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36. The learned counsel also relied upon the judgment in the case of HMT Watches Limited ’s case (supra), in this Judgment, the Apex Court held that, if complaint was with ulterior motive then power under Section 482 can be exercised to prevent abuse of process. Where complaint filed was genuine then High Court cannot travel beyond prescribed limits. It was made clear that sometimes on same set of facts, civil and criminal proceedings are maintainable. Exercise of powers under Section 482 of Cr.P.C. based on disputed question of fact, impermissible, only trial Court can determine disputed questions of fact. The learned counsel referred to these judgments relied upon paragraph Nos.10 and 12 and in paragraph No.13, the Apex Court observed that the High Court exceeded its jurisdiction by giving its opinion on disputed questions of fact.
37. Having heard the arguments of the respective learned counsel and also on perusal of the grounds of the petition, the following points that would arise for the consideration of this Court are:
(i) Whether this Court can quash the proceedings in coming to the conclusion that the issuance of self cheque in respect of the time barred debt?
(ii) Whether the self cheque issued by the petitioner attracts Section 138 of the Negotiable Instruments Act, 1881?
(iii) Whether both the Courts have committed an error in taking the cognizance and confirming the cognizance by the Revisional Court and it requires an interference of this court exercising the powers under Section 482 of Cr.P.C.?
(iv) What order?
Point No.(i):
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38. The first count of argument of the petitioner’s Counsel is that the issuance of self cheque is in respect of the time barred debt. It is contended that the transaction according to the complainant was taken place four years prior to the issuance of alleged self cheque and the same is barred by limitation.
39. The learned counsel in the synopsis filed by him relied upon several judgments of different High Courts and also the Judgment of the Apex Court and mainly argued that there cannot be any valid acknowledgement of liability within the three years period of limitation and also contend that Section 25(3) of the Contract Act and the law laid down by the Division Bench referring to Section 25(3) of the Contract Act is direct conflict in the law laid down by the full bench. It is also contended that when the transaction was taken place four years prior to the issuance of the cheque and by issuing the self cheque it will not be a valid acknowledgement of debt.
40. The learned counsel vehemently contends that a cheque given in discharge of a time barred debt will not constitute a promise in writing not even an implied promise but will under Section 30 of the NI Act on dishonour give rise to a Civil liability and not a Criminal liability under Section 138 of the NI Act.
41. It is pertinent to note that the learned Counsel appearing for the respondent relied upon the Judgment of the Apex Court. The Apex Court in S. Natarajan ’s case (supra), categorically held that the very contention that the complaint is time barred cheque cannot be quashed. Whether debt was time barred or not can be decided only after evidence is adduced, it being mixed question of law and fact. This Judgment is aptly applicable to the case on hand.
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42. The very contention of the petitioner is that it is a time barred transaction; the same has to be decided only after recording the evidence not at the preliminary stage of taking the cognizance. It is settled law that whether it is time barred or not involves disputed facts and the same cannot be determined in a proceeding under Section 482 of Cr.P.C. since it involves mixed question of law and fact. Hence, the very contention that the transaction is time barred cannot be decided while taking the cognizance. The Apex Court also in M.M.T.C. Ltd.’ s case (supra), has categorically held that complaint need not allege existing of a subsisting debt or liability against which cheque issued. Burden of proving non-existence of any debt or liability is on the accused, to be discharged at the trial. Prior to that complaint cannot be quashed by High Court under Section 482 of Cr.P.C. In the case on hand also, the Court has only after considering the evidence has to decide whether the liability is in existence or not and the same cannot be decided without recording the evidence. Hence, Section 482 of Cr.P.C. cannot be invoked to quash the proceedings.
43. The learned counsel relied upon the Judgment of this Hon’ble Court rendered in Criminal Appeal No.200057/2016 in the case of The Bidar Urban Co-operative Bank Ltd., v. Mr. Girish, he would contend that, regarding time barred transaction is concerned, the said Judgment is delivered on merits not at the stage of taking cognizance. Hence, the same is not applicable to the case on hand.
44. The Apex Court also in the case of Pulsive Technologies Private Limited ’s case (supra), has categorically held that the High Court was dealing with a petition filed under Section 482 of Cr.P.C. for quashing the complaint. Take note of the factual issue, as to whether the complainant had discharged its obligations or not, the High Court would not have given its final verdict at this stage. It is a matter of evidence. The
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Apex Court reiterating the principles laid down in the Judgment of M.M.T.C. ’s case (supra), has observed that the High Court failed to take note of the most vital caution sounded therein. Whether any money is paid by the accused to the complainant is a matter of evidence. In this case also it is the case of the complainant that he lent an amount of Rs.35,00,000/- and in part payment towards the liability, two self-cheques are issued and the one was honoured and the present one is the subject matter of the cheque, which is in dispute and the petitioner also did not dispute issuance of two cheques whether the same is towards the liability or not has to be decided only after recording the evidence.
45. The Apex Court also in the case of HMT Watches Limited ’s case (supra), categorically held that Section 482 of Cr.P.C, can be exercised only to prevent abuse of process and further observed that sometimes on same set of facts, civil and criminal proceedings are also maintainable and further held that the sitting under Section 482 of Cr.P.C, while exercising the powers disputed question of fact cannot be disabled. Only the Trial Court can determine the disputed questions of fact. Having considered the principles laid down in the Judgments referred supra, though the petitioner’s counsel referred several judgments of different High Courts, it is settled law that whether the transaction is time barred or not has to be considered only after the trial not at the preliminary stage or at the time of taking cognizance. Hence, point No.(i) raised by this Court is answered as ‘negative’.
Point No.(ii):
46. The second count of argument of petitioner’s counsel is that the self cheque issued by the petitioner without the endorsement does not attract Section 138 of the NI Act. The learned counsel in support of his argument he relied upon several judgments, particularly, the Judgment of Gauhati High
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Court in the case of Dr. Jiten Barkakoti v. Subrata Patangia & anr. reported in 2006(1) DCR 278 , referring to this Judgment, the learned counsel would contend that the dishonour of self-drawn cheque does not tantamount to penal offence.
47. The learned counsel also regarding the question whether self-cheque issued by the drawer without the endorsement attracts Section 138 of the NI Act or not vehemently contend that there is no endorsement in the self-cheque. Hence, the same does not attract Section 138 of the NI Act.
48. Per contra, the learned counsel appearing for the respondent relied upon the Judgment of this Court in B.Sarvothama ’s case (supra), and submits that this Court dealt with the similar issue and discussed in para No.5 and relied upon Section 9 of the NI Act and so also the Judgment in the case of Mahesh Goyal v. S.K. Sharma reported in 1997 Cri.L.J. 2868 and Rama Shetty ’s case. Referring to these judgments would come to a conclusion that when the word in the self cheque is “or bearer”, normally found on a cheque leaf, were intact or were scored off. The opinion expressed therein is with reference to the tenor of Section 138 of the NI Act. It is also observed that the cheque in question was drawn on self or bearer. It is further observed that several High Courts have taken a view that a bearer cheque, if dishonoured, would attract the rigour of Section 138 of the NI Act. In paragraph No.8 discussed with regard to ‘holder in due course’ and in paragraph No.9, it is held that if word “bearer” has not been deleted and even if it is not scored off, if the same was in possession and presented before the bank, but it was dishonoured. It is clear that it was ‘holder in due course’. If the word “bearer” is not scored off, he becomes the ‘holder in due course’ and it attracts Section 138 of the NI Act. The Delhi High Court also in its judgment in Adigear International ’s case (supra), reiterates the same and discussed the same in
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paragraph No.13 with regard to ‘holder in due course’ and so also in paragraphs Nos.23 and 25 discussed in detail and comes to a conclusion that once the issuance of the cheques is admitted and as the words “or bearer” have not been struck off, the complainant is held to be the holder of the said cheques in due course though it was written as self and thus he is entitled to receive the cash and dishonouring of the said cheques, he can very well file the complaint.
49. The Kerala High Court in Sarafudheen ’s case (supra), discussing the same in paragraph No.11 and in paragraph No.12 held that the cheque is styled as a self cheque and over and above it, the term “or bearer” has not been scored off. The holder of the cheque could be a ‘holder in due course’, who could maintain a complainant under Section 142 of the NI Act.
50. Having perused the principles laid down in the Judgment, the very contention that there is no endorsement and the self cheque does not attract Section 138 of the NI Act, cannot be accepted at this juncture. The respondent made out the prima facie case. In view of the principles laid down in the Judgments referred above, point No.(ii) raised by this Court is answered as ‘affirmative’.
Point No.(iii):
51. The other count of the argument of the petitioner’s counsel is that the Magistrate has committed an error in taking cognizance and the Revisional Court also committed an error in taking cognizance. The said contention also cannot be accepted for the reason that when this Court answered point No.(ii) as affirmative, it attracts Section 138 of the NI Act. The contention that it does not attract Section 138 of the NI Act cannot be accepted. The learned Magistrate having taken note of the material available on record rightly took the cognizance. The other
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contention is that it is a time barred debt cannot be decided at the time of taking the cognizance. The Revisional Court also while dismissing the revision discussed in detail in paragraph No.14 that admittedly the signature of the cheque in question is not in dispute and also comes to the conclusion that the complainant is a holder in due course of the said cheque. It is further observed that the petitioner herein himself admitted in his reply to the demand notice dated 03.05.2019 that the petitioner handed over two self cheques each for Rs.5 Lakhs. It is also clear that the word “bearer” has not been struck off. It is further observed that the scope of revision is very limited and the merits of the case cannot be decided in a revision petition. Further observed that the truth or falsity cannot be entered into by the Revisional Court, that too, in the initial stage of the case. I do not find any error committed by the Revisional Court also in confirming the taking of cognizance. The matter needs a full-fledged trial to decide the issue involved between the parties and the grounds which have been urged before this Court by the petitioner can be raised before the Trial Court during the course of the trial and the sitting under Section 482 of Cr.P.C, the Court cannot quash the same. Hence, there is no merit in the petition.”
In the light of judgment rendered by the Apex Court and that of this Court as afore-quoted, the contention of the learned counsel appearing for the petitioner that it was admittedly a time barred debt and the proceedings ought to be quashed is unacceptable. This submission is accordingly rejected.
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petitioner is that the loan admittedly was advanced on 01-07-2014 and the cheque was issued on 13-01-2019 and even
as per Section 25(3) of the Indian Contract Act, 1872, the complainant having not taken any action for close to 5 years, the transaction becomes time barred and the cheque so issued on a time barred debt becomes unenforceable. The learned counsel to buttress this submission places reliance upon a judgment rendered by a learned single Judge of the Kerala High Court reported in 2001 Cri.L.J. 24.
unacceptable, in the light of the very provision of law. Section 25 of the Indian Contract Act, 1872 reads as follows:
“ 25. Agreement without consideration void, unless it is 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 .—An agreement made without consideration is void, unless—
(1) it is expressed in writing and registered under the law for the time being in force for registration of documents, and is made on account of natural love and
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affection between parties standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2.—An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent to the promisor was freely given.
(Emphasis supplied)
In terms of sub-section (3) of Section 25 of the Indian
Contract Act, 1872, a promise made in writing and signed by the
person to be charged with, becomes a new contract on to itself. Interpretation of Section 25, particularly of sub-section (3) of Section 25 need not detain this Court for long or again delve
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deep into the matter, in the light of the fact that a Co-ordinate Bench of this Court in the case of K.R. SUDHEER v. K.R. SUNDAR RAJU3 after considering entire spectrum of law including the judgment of the Kerala High Court relied on by the learned counsel for the petitioner holds that, once the cheque is issued even in respect of a time barred debt, the same would constitute a promise in writing as per Section 25(3) of the Indian Contract Act. The new agreement would come into existence in terms of the said provision of the Contract Act. Therefore, the debt would not become time barred, unless otherwise proved by such evidence in a full blown trial. This Court in the case of K.R.
SUDHEER has held as follows:
“10. Now it is pertinent to refer to section 25 of the Contract Act and section 29(1) of the Limitation Act. Section 25 of the Contract Act states that a contract without consideration is void, but there are three exceptions found in clauses 1 to 3 of the said section. Section 25 (3) is relevant here for discussion. Its requirement is that there must be a promise made in writing and signed by the person to be charged therewith (promissor) or his agent generally or specifically authorized on his behalf to pay wholly or in part a debt of which the creditor might have enforced payment, but for the law of limitation of suits. That means, section 25(3) applies to a situation where
3 Criminal Petition No.243 of 2021 disposed of on 7-12-2021
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there was a past valid contract and if the debt payable under that contract cannot be recovered on account of expiry of limitation period to file a suit, if the debtor or his duly authorized agent makes a promise in writing, it constitutes a lawful contract which can be enforced. Section 29(1) of the Limitation Act clearly states that nothing in this Act (Limitation Act) shall affect section 25 of the Indian Contract Act. Thus by virtue of a new contract coming into force under section 25, it becomes enforceable and it has nothing to do with the past contract which has become unenforceable due to lapse of time. This is the legal position that can be deduced from this analysis. In this context two judgments may be referred here. The High Court of Madras in the case of Sri.Kapaleeswarar Temple Vs. T.Tirunavukarasu [AIR 1957 Madras 164] has held as below:
“6. It is thus clear that there are a catena of decisions and plethora of authority for holding that though a debt might have become timebarred on the date a debtor entered into a fresh obligation with the creditor to pay the liability, the said obligation, if it satisfies the conditions laid down in Section 25(3) of the Indian Contract Act, will amount to a fresh contract in the eye of law and can certainly be made the basis of an action for recovering the amount promised and acknowledged therein by the debtor. While Section 18 of the Limitation Act (Section 19 of the old Act) deals with an acknowledgment made by a debtor within the period of limitation, the contractual obligation which a debtor enters into under the terms of Section 25(3) has no reference whatsoever to the acknowledged debt being within time or not. In that sense, the provision contained in Section 25(3) is far wider in scope than the acknowledgment contemplated in Section 18 of the Limitation
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Act. The contract entered into under Section 25(3) is an independent and enforceable contract and has no reference to the debt acknowledged under the contract being a live one in the sense that it had not become barred under the law of limitation. This aspect of the matter has been totally lost sight of by the lower Courts. As already stated, the respondent has categorically stated under Ex. P-1 that he was indebted to the plaintiff in a sum of Rs. 312/- till 31-101968 and consequently his undertaking under the terms of Ex. P-1 to discharge this amount at the rate of Rs. 10/- per mensem is an independent contract and is clearly enforceable by the plaintiff. Both the lower Courts were, therefore, clearly in error in holding that the plaintiff was entitled to maintain his action only in respect of a portion of the claim. Consequently the orders of both the lower Courts are set aside and the revision petition will stand allowed. The plaintiff will be entitled to sustain his action for the total amount claimed by him in the plaint on the basis of Ex. P-1. There will be no order as to costs.”
11. In the case of Dinesh B. Chokshi Vs.Rahul Vasudeo Bhatt and Another [2013 (2) Mh.L.J. 130], it is held that even issuance of cheque in respect of a time barred debt amounts to entering into a fresh contract in accordance with section 25(3) of the Indian Contract Act; and elaborating on the section 25(3) of the Contract Act, the following observations are made:
“9. Thus, Sub-section (3) of Section 25 of the Contract Act is an exception to the general rule that an agreement made without consideration is void. Sub-section (3) of Section 25 of the Contract Act applies to a case where there is a promise made in writing and signed by a
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person to be charged therewith to pay wholly or in part a debt which is barred by law of limitation. A promise covered by Sub-section (3) becomes an enforceable agreement notwithstanding the fact that it is a promise to pay a debt which is already barred by limitation. Thus, Sub-section (3) of Section 25 of the Contract Act applies to a promise made in writing which is signed by a person to pay a debt which cannot be recovered by reason of expiry of period of limitation for filing a suit for recovery. Therefore, if a debtor after expiry of the period of limitation provided for recovery of debt makes a promise in writing signed by him to pay the debt wholly or in part, the said promise being governed by Subsection (3) of Section 25 of the Contract Act becomes an agreement which is enforceable in law. By virtue of the promise governed by Subsection (3) of Section 25 of the Contract Act, the time barred debt becomes enforceable. The Subsection (3) of Section 25 of the Contract Act does not apply to promise to pay all categories of debts which are not enforceable in law. It applies only to a debt which is not recoverable in law only on the ground of bar created by the law of limitation. Thus, the promise under Sub-section (3) of Section 25 of the Contract Act will not validate a debt which is not enforceable on a ground other than the ground of bar of limitation. For example, if there is a promise to pay an amount advanced for immoral purposes which is hit by Section 23 of the Contract Act, it will not attract Sub-section (3) of Section 25 of the Contract Act and the said provision will be attracted only when a promise is made in writing and signed by the promisor to pay a debt which is barred by limitation.”
12. Therefore it is now clear that the meaning that can be ascribed to the expression legally enforceable debt or liability found in
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explanation to section 138 of N.I.Act is a debt or liability arising out of legally enforceable contract. Even if in respect of a time barred debt, an agreement comes into existence subsequently according to section 25(3) of the Contract Act, it becomes a new contract which is enforceable. Sections 18 and 19 of the Limitation Act only extend the period of limitation if there is acknowledgment of debt before the limitation period expires. Even if there is no acknowledgment of debt or liability in terms of section 18 or 19 of the Limitation Act, if a new agreement comes into existence according to section 25(3), it is a valid contract and thus a cheque issued in this connection, if dishonoured, attracts penal action under section 138 of N.I.Act.
13. In the judgment of the Kerala High Court in Sessariyil Joseph, section 25(3) of the Contract Act is referred to, but as the facts in that case disclose, a new contract in terms of section 25(3) did not come into existence. Even in the case of Giridhar Lal Rathi decided by Andhra Pradesh High Court, no agreement under section 25(3) came into existence between the parties. It is true that the co-ordinate bench of this court in Bidar Urban Co-operative Society (supra) has taken the view that a cheque given in discharge of a time barred debt does not constitute a promise in writing to attract a criminal liability under section 138 of N.I.Act. It is very important to note here that view was taken in the background of the facts therein. The father of the accused obtained loan from Bidar Urban Co-operative Bank. The father died without repaying the loan to the bank. When the bank issued notice, the accused issued a cheque for discharging the liability of his father. By that time the debt had become time barred. When the bank initiated proceeding under section 138 of N.I.Act against the accused for the dishonour of cheque issued by him, he took up contentions that the debt had become time barred and that there was no legally
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enforceable debt between him and the bank. There is a clear observation in para 27 of the judgment that loan was neither borrowed by the accused as contended in the complaint and the legal notice, nor the accused gave any express undertaking to pay any time barred debt of his father. Therefore the facts make it very clear that as between the bank and the accused there was no privity of contract even though he issued cheque. But the facts in the case on hand are different and hence the said judgment is distinguishable.
14. It was argued by Sri. Dhyan Chinnappa that the judgment of the Kerala High Court in Sessariyil Joseph was confirmed by the Hon’ble Supreme Court in Spl. Leave petition (Criminal) No.1785/2001, and therefore the law is now settled. The observations made by the Hon’ble Supreme Court in Spl. Leave Petition No.1785/2001 are extracted in the judgment of the co-ordinate Bench of this Court in the Bidar Urban Co-operative Bank. Perusal of the same shows that Sessariyil Joseph has been affirmed by the Supreme Court, but I fail to see any law being laid down. The order in the Special Leave petition only shows the confirmation of the order of the Kerala High Court on the facts of that particular case. As has been observed already, in Sessariyil Joseph, there was no fresh contract in accordance with Section 25 (3) of the Contract Act.
15. In the case on hand, the petitioner bought the property from respondent and others under a registered sale deed dated 15.12.2011. He made advance payment of Rs.40,00,000/- in the initial stage, and for the balance he issued four cheques which were not presented to the bank by the respondent because of a request made by the petitioner. On 20.12.2016, the petitioner executed a memorandum of understanding (MoU) acknowledging the past transaction of sale and issued two cheques for the consideration he was due to pay. The MoU dated 20.12.2016 is a new contract in
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writing that came into existence according to section 25(3) of the Indian Contract Act. It was in this connection that the cheques in question were issued and when they were dishonoured, the respondent had to initiate action under section 138 of N.I.Act. Therefore the cheques were issued in connection with legally enforceable debt, and it was not a time barred debt. Argument of Sri. Dhyan Chinnappa, for these reasons cannot be accepted and therefore this petition fails and it is dismissed.”
(Emphasis supplied)
contentions of the learned counsel appearing for the petitioner standing covered on all fours, against him, I do not find any
warrant to interfere with the impugned proceedings.
The Criminal Petition lacking in merit, stands dismissed.
Sd/JUDGE
bkp
CT:MJ
2 issues framed by the court
Whether a time-barred debt attracts an offence under Section 138 of the Negotiable Instruments Act, 1881?
Whether a cheque issued in discharge of a time-barred debt constitutes a promise in writing under Section 25(3) of the Indian Contract Act, 1872?
Colour shows how this judgement treated each authority
S. Natarajan v. Sama Dharman and AnotherFollowed¶9
(2021) 6 SCC 413 · Who else cites this
Shreeyansh Rayappa Nandishwar v. Prakash PondeFollowed¶10
Criminal Petition No.3991 of 2020 disposed of on 28-01-2021
K.R. Sudheer v. K.R. Sundar RajuFollowed¶12
Criminal Petition No.243 of 2021 disposed of on 7-12-2021
2001 Cri.L.J. 24Distinguished¶11
3 provisions across 3 enactments
Sri Krishnappa S/o Late Munivenkatappa
Sri Munivenkatappa S/o Late Venkataramanna
M. Nagaprasanna
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
