2023 (9) TMI 349 - SC - Indian Laws

Dishonour of Cheque - legally recoverable debt or not - rebuttal of presumption as incorporated under Section 139 of the NI Act - HELD THAT - This Court keeping in perspective the nature of the proceedings arising under the NI Act and also keeping in view that the cheque itself is a promise to pay even if the debt is barred by time has in that circumstance kept in view the provision contained in Section 25(3) of the Contract Act and has indicated that if the question as to whether the debt or liability being barred by limitation was an issue to be considered in such proceedings, the same is to be decided based on the evidence to be adduced by the parties since the question of limitation is a mixed question of law and fact - this Court was of the view that entertaining a petition under Section 482 CrPC to quash the proceedings at the stage earlier to the evidence would not be justified. The provision would indicate that in respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires. Therefore, in the instant case, the time would begin to run from the month of December, 2016 and the period of limitation would expire at the end of three years thereto i.e. during December, 2019. In that light, the cheque issued for Rs.10,00,000/- which is the subject matter herein is dated 28.04.2017 which is well within the period of limitation. The complaint in CC No.681 of 2017 was filed in the Court of the Chief Metropolitan Magistrate on 11.07.2017. So is the case in the analogous complaints. Therefore, in the instant case not only the amount was a legally recoverable debt which is evident on the face of it, the complaint was also filed within time. Hence there was no occasion whatsoever in the instant case to exercise the power under Section 482 to quash the complaint. The order impugned is accordingly set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the complaint under Section 138 of the NI Act was maintainable despite the debt being time-barred.
2. Whether the High Court was justified in quashing the criminal proceedings under Section 482 CrPC.

Issue 1: Maintainability of Complaint under Section 138 of NI Act

The appellant argued that the promissory note executed by respondent No.2 has the binding effect of a contract and hence the complaint under Section 138 of NI Act is maintainable. The appellant contended that the cheque amounts to a promise governed by Section 25(3) of the Indian Contract Act, 1872, which allows for the enforcement of a time-barred debt if promised in writing. The appellant relied on the decisions in S. Natarajan v. Sama Dharman and A.V. Murthy v. B.S. Nagabasavanna, which held that whether a debt is time-barred is a mixed question of law and fact and should be decided based on evidence.

Issue 2: Justification of High Court's Quashing of Proceedings

The High Court quashed the criminal proceedings under Section 482 CrPC, noting that the limitation for enforcing the promissory notes had expired before the issuance of the cheques. The High Court concluded that the complaint was not in respect of a legally recoverable debt. However, the Supreme Court found that the High Court misdirected itself by not considering that the promissory note indicated repayment by December 2016, making the debt recoverable within three years from that date, i.e., until December 2019. The cheque issued on 28.04.2017 was within this limitation period.

Judgment Summary:

The Supreme Court held that the High Court erred in quashing the complaint on the ground that the debt was time-barred. The Court emphasized that the limitation period for the promissory note began in December 2016, making the cheque issued in April 2017 within the limitation period. The complaint filed in July 2017 was therefore timely and the debt legally recoverable.

The Supreme Court set aside the High Court's order and restored the complaints to the file of the Chief Metropolitan Magistrate, Visakhapatnam, directing the trial to proceed expeditiously and be disposed of within six months. The appeals were allowed with no order as to costs.