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TMI Blog2012 (10) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and Smt. M.M. Deshmukh, APP for Respondent No. 2-State in Criminal Application Nos. 2933 of 2007, 2934 of 2007, 2935 of 2007, 2936 of 2007, 779 of 2008, 2391 of 2010 and for the Respondent State in Criminal Application No. 1499 of 2010 JUDGMENT Abhay Shreeniwas Oka, J. 1. On the basis of Judgment and Order dated 23rd December, 2008 passed by learned Single Judge, the Hon'ble the Chief Justice passed an order on the Administrative Side directing that these matters should be placed before a Division Bench. Accordingly, these Applications have been placed before this Court. The reference to Division Bench is for deciding the two questions formulated by the learned Single Judge under his Judgment and Order dated 23rd December, 2008. The said two questions are :- (i) Does 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 Indian Contract Act, 1872 ? (ii) If it amounts to such a promise, does such a promise, by itself, create any legally enforceable debt or other liability as contemplated by Section 138 of the Negotiable Instruments Act, 1881 ? 2. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred debt becomes a promise within the meaning of Section 25(3) of the Contract Act, the fact remains that on the date of the cheque, it is issued towards the discharge of a debt or liability which is not legally recoverable. Learned counsel appearing for the parties have relied upon various decisions in support of their submissions. CONSIDERATION OF THE FIRST QUESTION 4. It will be necessary to make a reference to the relevant provisions of the Contract Act. It will be necessary to make a reference to Section 2 of the Contract Act which is the interpretation clause. It reads thus:- 2. Interpretation clause.--In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:-- (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; (c) The person making the proposal is calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy, the consideration or object of the agreement is unlawful and the agreement is void. Sections 26 to 30 of the Contract Act also provide for different categories of agreements which are void. Therefore, apart from the agreements which cease to be enforceable by reason of bar of limitation, there are other categories of agreements which are void and, therefore, obviously not enforceable by law. 7. Section 25 of the Contract Act reads thus:- 25. Agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.--An agreement made without consideration is void, unless- (1) it is expressed in writing and registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless (3) it is a promise, made in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court in the case of A.V. Murthy v. B.S. Nagabasavanna [(2002) ALL MR. (Cri) 709 (S.C.)]. It will be necessary to make a reference to Paragraphs 5 and 6 of the decision of the Apex Court. The relevant portions of Paragraph 5 and Paragraph 6 read thus:- 5. ... Under Section 118 of the Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. Even under Section 139 of the Act, it is specifically stated that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part, of any debt or other liability. It is also pertinent to note that under sub-section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is valid contract... (emphasis added) 10. A negotiable instrument is defined under Section 13 of the said Act of 1881. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus:- 17. In a contract of insurance when the insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a bill of exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid. (emphasis added) 12. Thus, the Apex Court held that the drawer of a cheque promises to the person in whose favour the cheque is drawn or to whom a cheque is endorsed, that the cheque on presentation would yield the amount in cash. The Apex Court held that a bill of exchange is an instrument which involves a promise that the money payable under the instrument would be paid. Therefore, when a cheque issued towards the premium is returned dishonoured, the insured fails to perform his promise and, therefore, the insurer need not perform the reciprocal part of his promise. 13. The section 13 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orceable. The promise to pay time barred debt becomes a valid contract as held by the Apex Court in the case of A.V. Moorthy (supra). Therefore, the first question will have to be answered in the affirmative. CONSIDERATION OF THE SECOND QUESTION 15. Section 138 of the said Act of 1881 reads thus:- 138. Dishonour of cheque for insufficiency, etc., of funds in the account.-- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to [two year], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is a holder in due course lies upon him. 139. Presumption in favour of holder.--It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. 17. Under Section 118, there is a rebuttable presumption that every negotiable instrument was made or drawn for consideration. Section 139 creates a rebuttable presumption in favour of a holder of a cheque. The presumption is that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part of any debt or liability. Thus, under the aforesaid two Sections, there are rebuttable presumptions which extend to the existence of consideration and to the fact that the cheque was for the discharge of any debt or liability. 18. Under the Explanation to Section 138, the debt or other liability referred to in the main Section has to be a legally enforceable debt or liability. Merely because a cheque is drawn for discharge, in whole or in part of the debt or other liability, Section 138 of the said Act of 1881 will not be attracted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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