IMPORTANT POINT
Promise is made under Section 25(3) of the Contract Act when cheque is issued, and its delivery creates a right to recover money. Execution of cheque is an acknowledgement of a legally enforceable liability.

Jawahar Lal Gupta, C.J.—Is the plea of limitation available to the accused in a case under Section 138 of the Negotiable Instruments Act, 1881? This is the short question that arises for consideration in this Revision Petition, which has been referred to a Division Bench. A few facts may be noticed.

2. On May 31, 1991, the petitioner-accused had given a cheque for an amount of Rs. 75,000/- to the 1st respondent-complainant. It was presented to the Bank. It was returned with the remarks—‘funds insufficient’. The position was conveyed to the 1st respondent by a letter dated June 6, 1991. On June 17, 1991, the 1st respondent issued a notice to the petitioner. It was accepted by him. However, the amount was not paid. Thus, the 1st respondent filed the complaint against the petitioner in the Court of Chief Judicial Magistrate, Kottayam.

3. After trial, the Court vide its Judgment dated April 26, 1995, held that the petitioner- accused was guilty of the offence under Section 138 of the Negotiable Instruments Act. He was awarded a punishment of fine of Rs. 1,50,000/-. In default of payment, he was sentenced to undergo imprisonment for three months. Out of the fine, Rs. 75,000/- was Ordered to be paid to the 1st respondent-complainant

4. The accused felt aggrieved. He filed an appeal. It was dismissed by the Sessions Judge vide Judgment dated January 23, 1996. Undaunted, he filed a Criminal Revision Petition in this Court.

5. The matter was posted before a learned single Judge. It was contended that on the date of issue of the cheque, the accused was not under a “legally enforceable debt or liability;” Even if there was any claim for recovery of money it was barred by limitation. Thus, he could not have been found guilty of an offence punishable under Section 138 of the Act. In support of this contention, reliance was placed on a single Bench decision of this Court in Joseph v. Devassia.1

6. The learned single Judge considered the matter. He expressed reservation about the view taken by the learned Judge in Joseph’s case. Hence, this reference to the Division Bench.

7. Mr. Benny Gervacis, learned Counsel for the petitioner has contended that the provisions of Section 138 of the Negotiable Instruments Act can be invoked only when there is a legally enforceable liability against the accused. In a case where the claim is completely barred by limitation, it cannot be said that there was a legal liability so as to attract the provisions of Section 138. The claim as made by Mr. Benny Gervacis has been controverted by Mr. Mathew John, learned Counsel for the 1st respondent. He has submitted that there is a presumption in favour of the complainant under Section 139. A liberal meaning to the explanation may defeat the very object with which Section 138 was enacted. He has also pointed out that when a cheque is handed over to a party, there is a concluded contract and the liability becomes legally enforceable. Thus, the accused should not be entitled to raise the defence of limitation. The Counsel for both sides have referred to various decisions.

8. A cheque is a bill of exchange. It is drawn on a specified Banker. It is a negotiable instrument under Section 6 of the Act. Section 118 raises a presumption of consideration unless the contrary is proved. Section 138 provides a penalty when a cheque is dishonoured for insufficiency of funds in the account. The explanation provides that the cheque should have been issued for “a legally enforceable debt or other liability.”

9. The primary question that arises for consideration is—Does the delivery of a cheque in favour of a drawee not create a legally enforceable liability?

10. Mr. Mathew John, learned Counsel for the first respondent refers to the provisions contained in Section 25(3) of the Indian Contract Act, 1872. By this provision, an agreement made without consideration is void unless “it is a promise, made in writing and signed by the person to be charged therewith, or by his agent