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K.G.BALAKRISHNAN, R.P.SETHI
A. V. Murthy – Appellant
Versus
B. S. Nagabasavanna – Respondent
Key Points: - The appeal held that the Sessions Judge and High Court erred in quashing the Section 138 complaint, and the cheques can be for discharge of debt despite long lapse (!) . - Section 118 creates a presumption that negotiable instruments were drawn for consideration; Section 139 presumes the cheque is for discharge of debt or liability, unless proved otherwise (!) . - A promise to pay a debt under Section 25(3) of the Indian Contract Act, 1872 can be valid even if the debt is subject to limitation, potentially restarting or extending enforceability in certain contexts (!) . - The burden remains for the respondent to raise legally available defenses; the matter is remanded to the Magistrate to proceed with the complaint in accordance with law (!) . - The debt being four years old does not automatically render the debt legally unenforceable for purposes of a Section 138 complaint, and an express finding on enforceability is left to the Magistrate’s defence stage (!) , with notes on potential acknowledgments in balance sheets (!) . - The term "account closed" as a reason for dishonour does not by itself bar the complaint if legally enforceable debt or liability exists (!) .
JUDGMENT
K.G. Balakrishnan, J.-Leave granted.
2. This appeal is directed against the order passed by a learned Single Judge of the High Court of Karnataka. The appellant herein filed a complaint before the Magistrate alleging that the respondent herein had committed an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 [for short, "the Act"]. The appellant alleged that he and his two friends had advanced a sum of Rs. 7.5 lakhs to the respondent about four years back to enable him to start a petrol pump and that the respondent did not pay back the said amount despite repeated demands and finally at the request of the appellant, on 30-3-1998 the respondent issued a cheque in favour of the appellant. The appellant presented the cheque for payment, but the cheque was dishonoured by the bank for the reason "Account closed". Thereafter, the appellant issued a statutory demand notice and as the respondent failed to pay the amount, a complaint was filed before the Magistrate by the appellant. In the complaint, it was alleged that the appellant and his two friends advanced the said sum of Rs. 7.5 lakhs to the respondent about four years prior to the date of issue of
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