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2014 (7) TMI 1330 - SC - Indian LawsDishonor of Cheque - insufficiency of funds - legally enforceable debt or not - Section 25(3) of the Indian Contract Act, 1872 - HELD THAT - 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. 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. Appeal allowed.
Issues:
1. Dishonored cheque for a time-barred debt. 2. Quashing of complaint under Section 138 of the Negotiable Instruments Act, 1881. 3. Interpretation of Section 25(3) of the Indian Contract Act, 1872. 4. Applicability of Section 139 of the Negotiable Instruments Act in cheque bouncing cases. Analysis: 1. The appellant filed a complaint under Section 138 of the Negotiable Instruments Act, alleging that the respondents received a total sum of Rs. 3,00,000 and issued a cheque dated 1/2/2011, which was dishonored. The High Court quashed the proceedings, citing the debt as time-barred. However, the Supreme Court held that determining if the debt was time-barred required evidence and was a mixed question of law and fact. The court referred to a previous case where a similar issue was resolved during trial, emphasizing that the legality of the debt should be examined during proceedings. 2. The accused contended that the complaint was time-barred and lacked a legally enforceable debt. The High Court quashed the complaint based on the time-barred debt. The Supreme Court disagreed, stating that the High Court erred in quashing the proceedings solely on the grounds of the debt being time-barred at the issuance of the cheque. The court emphasized that the complaint should proceed to trial for a thorough examination of the facts. 3. The High Court referenced Section 25(3) of the Indian Contract Act, requiring a distinct promise to pay a time-barred debt. However, the Supreme Court disagreed with the High Court's interpretation, stating that the legality of the debt should be determined during trial with the presentation of evidence. The court highlighted the need for a detailed examination of facts to establish the enforceability of the debt. 4. The Supreme Court discussed the applicability of Section 139 of the Negotiable Instruments Act, which shifts the burden of proof onto the accused in cheque bouncing cases. The court clarified that the presumption of a legally enforceable debt under Section 139 is rebuttable, allowing the accused to contest the existence of such a debt. The court emphasized that the presumption favors the complainant initially, and the accused can discharge the burden by presenting evidence. The court concluded that the High Court's decision to quash the proceedings based on the time-barred debt was erroneous, and the trial court should continue with the case for a thorough examination of the facts.
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