2024 (8) TMI 706 - HC - Indian Laws

Dishonour of Cheque - Time-barred debt and its acknowledgment - whether cheques were issued for a legally enforceable debt or other liability should be decided only at the time of trial and not at this stage? - HELD THAT - The issue as to whether by subsequent conduct did the Petitioner promise the Respondent to pay the amount or not is a question of fact which can be decided only in trial. The Apex Court in Yogesh Jain vs. Sumesh Chadha, 2022 (10) TMI 1198 - SUPREME COURT has held that the issue as to whether the debt is time barred or is legally enforceable or not ought not to be considered at the initial stage. The object of the NI Act is to enhance the acceptability of cheques and inculcate faith in the efficiency of negotiable instruments for transaction of business. In the opinion of this Court, the true purport of Section 138 of the NI Act would not be fulfilled if the debt or other liability is interpreted to include only a debt that exists as on the date of drawing of the cheque. The Parliament has used the expression debt or other liability and the explanation appended to Section 138 of the NI Act states that the debt would mean a legally enforceable debt, however, the expression also uses the word other liability. In the opinion of this Court, the word other liability would have to be something other than a legally enforceable debt and must be given a meaning of its own. The legislature has purposely used two distinct phrases i.e., legally enforceable debt and other liability. The issue as to whether the debt is time barred or is legally enforceable or not or as to whether the cheques were deposited after an understanding was reached between the parties regarding payment of liability or as to whether the cheques could have been deposited at any time for repayment of liability or whether it was a part discharge of liability etc. cannot be decided at the time of issuing of summons and the same can be considered only in the trial and not at this stage. This Court is not inclined to quash the present complaint at this juncture. The Ld. Trial Court is requested to proceed with the complaint in accordance with law - Petition disposed off.

Summary

Issues Involved:
1. Legally enforceable debt under Section 138 of the NI Act.
2. Time-barred debt and its acknowledgment.
3. Interpretation of "debt or other liability" under Section 138 of the NI Act.
4. Stage of deciding the enforceability of the debt.

Issue-wise Detailed Analysis:

1. Legally Enforceable Debt under Section 138 of the NI Act:
The Petitioner sought quashing of the Complaint Case CT Case No. 2001/2020 and the Order dated 01.08.2022, which issued summons to the Petitioner. The Respondent alleged that a sum of Rs. 60,000/- was lent in cash in 2009, and Rs. 4,40,000/- was lent through cheques in 2012, with a promissory note executed for a total of Rs. 5,00,000/-. The Petitioner issued 12 cheques of Rs. 24,000/- each, of which 3 were honoured, and 9 were dishonoured. A legal notice under Section 138 of the NI Act was issued for Rs. 8,23,000/-. The Petitioner contended that the debt was not legally enforceable as the loans were given in 2012, and the cheques were deposited in 2019. The Respondent argued that the issue of enforceability should be decided at trial.

2. Time-Barred Debt and Its Acknowledgment:
The Court referenced Section 25(3) of the Indian Contract Act, 1872, which considers a written promise to pay a debt, enforceable despite the law of limitation. The Apex Court in Yogesh Jain vs. Sumesh Chadha held that whether a debt is time-barred or legally enforceable should not be considered at the initial stage but during the trial. The Court noted that the acknowledgment of debt within the limitation period is a matter of fact to be determined at trial.

3. Interpretation of "Debt or Other Liability" under Section 138 of the NI Act:
Section 138 of the NI Act criminalizes the dishonour of cheques issued for discharging any debt or other liability. The Court emphasized that the term "other liability" should be interpreted broadly, not limited to legally enforceable debt at the time of drawing the cheque. The Apex Court in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel clarified that a post-dated cheque issued after incurring the debt falls within the scope of Section 138, and the debt or liability can be incurred before the cheque's encashment.

4. Stage of Deciding the Enforceability of the Debt:
The Court concluded that issues such as whether the debt is time-barred, the enforceability of the debt, and the circumstances under which the cheques were deposited should be decided at trial, not at the stage of issuing summons. The Court reiterated that the true purpose of Section 138 of the NI Act is to enhance the acceptability of cheques and to inculcate faith in the efficiency of negotiable instruments.

Conclusion:
The Court declined to quash the complaint at this stage and directed the Trial Court to proceed with the complaint in accordance with the law. The petition was disposed of, and it was clarified that no opinion on the merits of the case was expressed.