2019 (8) TMI 310 - HC - Indian Laws

Dishonor of cheque - insufficiency of funds - acquittal of offence u/s 138 of the Negotiable Instruments Act 1881 - legally enforceable debt as contemplated under Section 138 of the NI Act or not - limitation of a liability beyond a period of three years - HELD THAT - A perusal of the record reveals that in the instant case the last business transaction between the parties took place on 26.7.2005 and thereafter no other business transaction took place between the parties. The Appellate Court has hence rightly held that in these circumstances the cause of action to enforce the said liability as per law against the respondent No.2 remained in existence only up to July 2008. Further it has also been correctly held by the Appellate Court that the Trial Court has although acknowledged the handwritten copy of the account statement which had not been disputed by the respondent No. 2 to arrive at the conclusion that the cheque dated 12.6.2009 was not against the time-barred liability but a perusal of the material placed on record reveals that the said document pertains to the account being maintained by the respondent No.2 (appellant therein) and is about the balance which got forwarded on 1.4.2009 and cash entry of 5000/- dated 2.6.2009 and even if the said document is deemed to be correct the said payment of 5000/- on 2.6.2009 does not extend the period of limitation since the cash payment was made after the expiry of the period of limitation - Though it is correct that once the signatures are admitted on the cheque existence of legally enforceable debt or liability has to be presumed but it is to be noted that the said presumption is rebuttable and in the instant matter the respondent No.2 has been able to rebut the said presumption by showing that the liability for payment against the goods supplied arose in July 2005 and the limitation to file the case on the said liability expired in July 2008. It is well settled that the presumption which is contained in Section 139 of the NI Act only raises the presumption that the cheque has been issued for the discharge of a debt or liability and existence of legally recoverable debt is not a matter of presumption. The Appellate Court has rightly held that the alleged responsibility of the respondent No.2 if any had already become time-barred as on the date of the issuance of cheque and therefore the same cannot be said to be in discharge of a legally enforceable debt or liability - Petition dismissed.

Summary

Issues Involved:
1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act, 1881.
2. Time-barred debt and its implications under the Limitation Act, 1963.
3. Presumption under Section 139 of the NI Act and its rebuttal.

Issue-wise Detailed Analysis:

1. Legally enforceable debt under Section 138 of the Negotiable Instruments Act, 1881:
The petitioners challenged the Appellate Court's order that acquitted respondent No.2 of the offence under Section 138 of the NI Act. The Trial Court had convicted respondent No.2, stating that the signatures on the cheque were admitted, thus presuming the existence of a legally enforceable debt. However, the Appellate Court overturned this, holding that the cheque was issued for a time-barred debt, which does not qualify as a legally enforceable debt under Section 138 of the NI Act.

2. Time-barred debt and its implications under the Limitation Act, 1963:
The Appellate Court observed that the liability for the goods supplied in 2005 became time-barred by July 2008, while the cheque was issued on 12.06.2009. The court noted that mere issuance of a cheque does not revive a time-barred debt, as per Section 18 of the Limitation Act, which requires an acknowledgment of liability within the prescribed period. The Appellate Court cited various judgments, including Sasseriyil Joseph v. Devassia, to support the view that a cheque issued for a time-barred debt does not attract the penal provisions of Section 138 of the NI Act.

3. Presumption under Section 139 of the NI Act and its rebuttal:
The Appellate Court acknowledged that while the presumption under Section 139 of the NI Act assumes the cheque was issued for a debt or liability, this presumption is rebuttable. In this case, respondent No.2 successfully rebutted the presumption by showing that the debt was time-barred. The court emphasized that the existence of a legally recoverable debt is not presumed under Section 139, aligning with the Supreme Court's ruling in Krishna Janardhan Bhat vs. Dattatraya G. Hedge.

Conclusion:
The High Court upheld the Appellate Court's decision, agreeing that the debt was time-barred and thus not legally enforceable under Section 138 of the NI Act. The court dismissed the petition, finding no merit in the arguments presented by the petitioners. The judgment underscores the importance of the limitation period in determining the enforceability of debts under the NI Act and clarifies the rebuttable nature of the presumption under Section 139.