2021 (9) TMI 1424 - HC - Indian Laws

Dishonor of Cheque - legally enforceable debt or not - legal notice under Section 138 of the Negotiable Instruments Act duly served upon the petitioner 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 is a promise within the meaning of Section 25(3) of the Contract Act. Such a promise is an agreement and is an exception to the general rule that an agreement without consideration is void. Thus although on the date of making such a promise by issuing a cheque the debt which is promised to be paid may already be time barred but keeping in view the provisions of Section 25(3) of the Contract Act the promise/agreement will be valid and would be enforceable. It was thus held that issuance of a cheque in repayment of time barred debt would amount to a written promise to pay the said debt within the meaning of Section 25(3) of the Contract Act. Even a perusal of Section 18 of the Limitation Act would show that neither there is a non obstante clause in the same nor there is any negative terminology used so as to oust the provision of the Section 25(3) of the Contract Act - The provisions of the Negotiable Instruments Act more so Sections 118 and 139 raise a presumption though rebuttable in favour of the Negotiable Instrument itself as to several factors including the factor of consideration etc. and also the fact that the holder of the cheque is a holder in due course and holds the cheque for the discharge of any debt or other liability in whole or in part. To hold in favour of a person who has consciously issued a cheque after the debt has become time barred would amount to doing injustice to the person in whose favour the cheque has been issued and would also defeat/frustrate the intent and object of the provisions of the Negotiable Instruments Act and the Contract Act. After a debt has become time barred any person issuing a cheque subsequent to that makes a promise to the person in whose favour the cheque is issued that the said cheque would be honoured. On dishonor the person to whom the cheque has been issued would then have the right to pursue the remedy under Section 138 of the Negotiable Instruments Act - in case the proceedings under Sections 138 of the Negotiable Instruments Act are quashed then the same would result in undue enrichment of the accused person who has managed to linger on the matter on a false promise by issuing the said cheque. This Court conclusively holds that the issuance of a cheque in repayment of a time barred debt amounts to a written promise to pay the said debt within the meaning of Section 25(3) of the Contract Act and the said promise by itself would create a legally enforceable debt or liability as contemplated by Section 138 of the Negotiable Instruments Act. Thus issue No. (i) and (ii) are hereby answered in favour of the person in whose favour the cheque has been issued. Whether in the facts and circumstances of the present case the present petition under Section 482 CrPC would be maintainable? - HELD THAT - The plea of time barred debt can only be gone into by the trial Court after the parties have led their evidence with regard to their respective pleas. No judgment has been cited by learned counsel for the petitioner in the present case in which on the basis of said plea of time barred debt a petition under Section 482 Cr.P.C. has been entertained much less allowed. Thus this issue is also decided against the petitioner. Whether in the present case the petitioner has been able to prove as to what would be the starting point of the period of limitation so as to establish that the cheque was issued after the expiry of the period of limitation? - HELD THAT - In the present case learned counsel for the petitioner has not been able to state as to what would be the starting point of the period of limitation. No meaningful argument has been raised by the learned counsel for the petitioner and even as per his argument it is not clear as to what was the last date of repayment. In the present case the legal notice and the other relevant documents have not even been produced on record. The Hon ble Supreme Court as well as Delhi High Court have observed that the presumption of service of notice would arise when address mentioned in the statutory notice is correct. It is not even argued by learned counsel for the petitioner that address on the legal notice was not correct. At any rate the said issue would be one of a disputed question of fact and on this basis the present petition under Section 482 Cr.P.C. cannot be allowed and the same point can be agitated before the trial Court after the evidence have been led. Thus the second argument of learned counsel for the petitioner also stands rejected. Petition dismissed.

Summary

Issues Involved:
1. Legally enforceable debt on the date of cheque issuance.
2. Service of legal notice under Section 138 of the Negotiable Instruments Act.
3. Maintainability of the petition under Section 482 CrPC.
4. Starting point of the period of limitation for the debt.

Issue-wise Detailed Analysis:

1. Legally Enforceable Debt on the Date of Cheque Issuance:

The primary argument raised by the petitioner was that the cheque in question was issued for a debt that was time-barred, and hence, there was no "legally enforceable debt" on the date of issuance. The petitioner relied on several judgments to support this claim.

The court addressed this by analyzing Sections 2, 10, 23, and 25 of the Indian Contract Act, 1872, along with Sections 6, 13, 118, 138, and 139 of the Negotiable Instruments Act, 1881. It was concluded that a cheque issued for a time-barred debt amounts to a written promise to pay the said debt within the meaning of Section 25(3) of the Contract Act. Such a promise creates a legally enforceable debt as contemplated by Section 138 of the Negotiable Instruments Act.

The court cited the Division Bench judgment of the Bombay High Court in Dinesh B. Chokshi Vs. Rahul Vasudeo Bhat and the Kerala High Court in Ramakrishnan vs. Parthasardhy, which held that a cheque issued for a time-barred debt is a valid promise under Section 25(3) of the Contract Act and creates an enforceable contract. The court also referenced the Hon'ble Supreme Court's judgment in A.V. Murthy v. B.S. Nagabasavanna, which supported this view. Thus, the court rejected the petitioner's first argument.

2. Service of Legal Notice under Section 138 of the Negotiable Instruments Act:

The petitioner argued that the legal notice under Section 138 of the Negotiable Instruments Act was not duly served. The court noted that the petitioner did not produce all relevant documents, including the legal notice, making it impossible to ascertain whether the notice was correctly addressed and served.

The court referred to the complaint, which stated that the legal notice was served on the petitioner and that the petitioner had refused to make the payment despite being informed about the dishonor of the cheque. The court emphasized that the address mentioned in the complaint matched the petitioner's address in the present petition.

The court concluded that the issue of whether the legal notice was served is a disputed question of fact that can only be resolved during the trial. The court cited the judgment of the Delhi High Court in R.L. Verma & Sons (HUF) vs. PC Sharma, which held that the presumption of service of notice arises only if the notice is correctly addressed. As the address was not disputed and the documents were not produced, the court rejected the petitioner's second argument.

3. Maintainability of the Petition under Section 482 CrPC:

The court addressed whether the petition under Section 482 CrPC was maintainable, given that the issue of a time-barred debt is a mixed question of law and fact. The court referred to the Hon'ble Supreme Court's judgment in S. Natarajan vs. Sama Dharman and Anr. and a coordinate bench judgment in Som Nath vs. Mukesh Kumar, which held that whether a debt was time-barred can only be decided after evidence is adduced.

The court concluded that the plea of a time-barred debt cannot be a ground for quashing the proceedings under Section 482 CrPC at the initial stage. Thus, the petition was deemed not maintainable on this ground.

4. Starting Point of the Period of Limitation for the Debt:

The court noted that the petitioner failed to provide a clear starting point for the period of limitation. The court did not delve deeply into this issue, as the other issues were decided against the petitioner.

Conclusion:

The court dismissed the petition, holding that the issuance of a cheque for a time-barred debt amounts to a written promise to pay the debt, creating a legally enforceable debt under Section 25(3) of the Contract Act. The court also held that the issue of service of legal notice and the plea of a time-barred debt are disputed questions of fact that can only be resolved during the trial. The petition under Section 482 CrPC was deemed not maintainable.