2012 (7) TMI 1114 - HC - Indian Laws

Dishonor of Cheque u/s 138 r/w section 142 of the Negotiable Instruments Act, 1881 (Act) - legally enforceable debt or not - issuance of a cheque for repayment of a time barred debt would amount to a written promise to pay the said debt within the meaning of Section 25(3) of the Indian Contract Act, 1872 or not - HELD THAT - A Cheque means a draft signed by the maker or drawer drawn on a bank, payable on demand and unlimited in negotiability. Therefore, it goes without saying that a cheque is not a promise. It is nothing but an instrument which enables a person in whose favour the same has been drawn to draw money mentioned therein from the concerned bank. Therefore, a cheque cannot be equated with a promise. It has been pointed out that the respondent/complainant cannot take umbrage u/s 25(3) of the Indian Contract Act, 1872 and further issuance of cheque in question on 01.02.2011 is not a promise. Therefore, viewing from any angle, on the date of issuance of the cheque in question that is, on 01.02.2011, all the debts mentioned in the complaint have become time barred and the cheque in question has not been issued in respect of enforceable debt or other liability. Under the said circumstances, the complaint in question under section 138 r/w section 142 of the Act, is not legally maintainable and this Court by invoking inherent powers can very well quash the entire proceeding in C.C. In the instant case, it has already been pointed out that at the time of issuance of cheque that is, on 01.02.2011, the debts alleged to have been received by the petitioners have become time barred. Therefore, viewing from any angle, the contention put forth on the side of the petitioners is really having subsisting force. The learned counsel appearing for the respondent has drawn the attention of the Court to the decision reported in A.R.M. Nizmathullah V. Vaduganathan 2007 (8) TMI 808 - MADRAS HIGH COURT , held that the cheque in question has been issued in view of the fact that the debtor has acknowledged his liability. Under the said circumstances, he should not be entitled to claim that the debt has become barred by limitation. It has already been pointed out that for invoking Section 25(3) of the Indian Contract Act, 1872 there must be a separate and distinct promise. Unless a separate and distinct promise, novation of contract does not arise. In the instant case, no such distinct or separate promise has been in existence in writing between the parties and therefore, viewing from any angle, the contention put forth on the side of the respondent/complainant does not hold good. In fine, this petition is allowed and the proceeding in C.C pending on the file of the Judicial Magistrate Court, Musiri is quashed. Connected Miscellaneous Petitions are closed.

Summary

Issues:
Quashing of proceeding in C.C.No.250 of 2011 under section 138 r/w section 142 of the Negotiable Instruments Act, 1881.

Analysis:

1. Debt Time-Barred: The complaint alleged that the respondents/accused received various sums on specific dates, which became time-barred before the issuance of the cheque in question. The debts were stated to have become time-barred on specific dates, making them unenforceable at the time of issuing the cheque on 01.02.2011.

2. Legal Provisions - Section 138 and 25(3): Section 138 of the Negotiable Instruments Act, 1881 requires a cheque to be issued concerning an enforceable debt or liability. The respondent argued that the cheque was valid under Section 25(3) of the Indian Contract Act, 1872, as it was for past consideration. However, for Section 25(3) to apply, there must be a distinct promise in writing to pay the time-barred debt, which was lacking in this case.

3. Promise and Acknowledgement: The court distinguished between a promise under Section 25(3) and an acknowledgement under the Limitation Act. While both must be in writing and signed, a promise under Section 25(3) must specifically address the time-barred debt, which was absent in this scenario.

4. Cheque Issuance and Debt: The issuance of a cheque does not equate to a promise to pay a time-barred debt. A cheque is a negotiable instrument for payment, not a promise to settle a debt. The complaint could not be sustained under Section 138 r/w Section 142 of the Negotiable Instruments Act, 1881 due to the time-barred nature of the debts.

5. Precedent and Legal Interpretation: Previous judgments highlighted that a time-barred debt cannot be considered legally enforceable. The court emphasized that for Section 138 r/w Section 142 of the Negotiable Instruments Act, 1881 to apply, the cheque must be related to a legally enforceable debt or liability, which was not the case here.

6. Final Decision: The court allowed the petition to quash the proceeding in C.C.No.250 of 2011, emphasizing that the complaint was not legally maintainable due to the time-barred nature of the debts and the absence of a distinct promise to pay in writing. The decision was based on the legal provisions and precedents discussed in the judgment.