2018 (7) TMI 443 - HC - Indian Laws

Suit for recovery of loan amount - Dishonor of Cheque due to insufficiency of funds - repayment of money lent by the applicant to his neighbor - Section 138 of the NI Act - the complaint filed by the present appellant under Section 138 of the NI Act was dismissed by the learned trial Court on the ground that as on the date when the cheque in issue i.e. cheque which was dishonoured by the bank concerned, was issued by the accused in favour of the complainant, there was no legally enforceable debt. Held that - In the present case, undoubtedly the alleged loan was lent to the accused on 31.08.1999 but it is a matter of record that in lieu of discharge of the said debt, accused had handed over a cheque to the complainant on 28.02.2006. In fact, in my considered view, when in lieu of the loan which was so advanced by the complainant to the accused in the year 1999, as cheque was issued by the accused to the complainant in the year 2006, the same amounted to the accused having acknowledged the said debt and in fact, a fresh cause of action accrued from that particular date in favour of the complainant to recover the said amount from the accused - This very important aspect of the matter has not been correctly appreciated by the learned trial Court because it is not understandable as to how issuance of cheque in lieu of that debt was not to be construed as acknowledgment of debt. It is evident and apparent from the material on record that there was a legal and enforceable debt or liability in favour of the complainant, in lieu of which, the cheque in question was issued by the accused to the complainant, dishonouring of which led to filing of the complaint under Section 138 of the Negotiable Instruments Act. Findings to the contrary returned by learned trial Court are perverse being contrary to the records and further being based on conjectures and surmises. The case is remanded back to the learned trial Court with a direction that the same be adjudicated afresh on merit - appeal allowed.

Summary

Issues involved:
Challenge to judgment under Section 138 of the Negotiable Instruments Act by the appellant against the respondent/accused.

Analysis:

Issue 1: Dismissal of complaint by the learned trial Court
The complainant filed a complaint under Section 138 of the NI Act against the accused for dishonoring a cheque issued in lieu of a loan. The trial Court dismissed the complaint, stating that there was no legally enforceable debt or liability at the time of issuing the cheque, as the loan was advanced in 1999, and the cheque was issued in 2006, beyond the limitation period for civil recovery.

Issue 2: Appellant's challenge to the judgment
The appellant challenged the trial Court's judgment, arguing that the issuance of the cheque in 2006 amounted to an acknowledgment of the debt by the accused, creating a fresh cause of action for recovery. The appellant cited legal precedents where courts held that the act of drawing and delivering a cheque for a time-barred debt constitutes a valid promise to pay, making the debt legally enforceable.

Issue 3: Appellate Court's decision
The High Court found the trial Court's judgment perverse and unsustainable. It held that the trial Court failed to appreciate that the issuance of the cheque in 2006 acknowledged the debt, creating a new cause of action for recovery. The High Court referred to legal precedents supporting the validity of such acknowledgments through cheque issuance, emphasizing the enforceability of the debt.

Conclusion:
The High Court allowed the appeal, quashed the trial Court's judgment, and remanded the case for fresh adjudication. The High Court directed the parties to appear before the trial Court for further proceedings, emphasizing the legal enforceability of the debt acknowledged through the issuance of the cheque.