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BOMBAY HIGH COURT
A.S. Oka and Sadhana S. Jadhav, JJ.
Dinesh B. Chokshi —Applicant
versus
Rahul Vasudeo Bhatt —Respondent
Crl. Appeal Nos. 2933 to 2936 of 2007, 779 of 2008 and 1499, 2391 of 2010
Decided on 19.10.2012
For the Applicants in Criminal Application Nos. 2933, 2934, 2935 and 2936 of 2007:A.P. Mundargi, Senior Advocate, appointed as Amicus Curiae with Prakash Naik, Ganesh Bhujbal and Pawan P. Mali Advocates.
For the Applicant in Criminal Application No. 779 of 2008:Sriram S. Kulkarni, Advocate.
For the Applicant in Criminal Application No. 1499 of 2010:Nitin V. Gangal, Advocate.
For the Applicant in Criminal Application No. 2391 of 2010:M.D. Mali i/by M.D. Mali and Co. Advocates.
For the Respondent No. 1 in Criminal Application Nos. 2933 of 2007, 2935 and 2936 of 2007:S.V. Marwadi, Advocate.
For the Respondent No. 2 in Criminal Application No. 1944 of 2010:J.H. Kuril i/by and Pravin V. Gavle, Advocate.
For the Respondent No. 1 in Criminal Application No. 2391 of 2010:Ranvir Shekhawat, Advocate.
For the Respondent No. 2-State in Criminal Application Nos. 2933, 2934, 2935, 2936, of 2007, 779 of 2008, 2391 of 2010 and Criminal Application No. 1499 of 2010: M.M. Deshmukh, A.P.P.
IMPORTANT POINT
Cheque issued for repayment of time-barred debt amounts to a written promise to pay said debt and cheque would be taken to have been issued to discharge legally enforceable debt and dishonour of such cheque could attract prosecution u/s 138 of N.I. Act.
Headnote:Negotiable Instruments Act, 1881—Section 138—Indian Contract Act, 1872—Section 25(3) —Cheque issued in repayment of time-barred debt—Prosecution for dishonour of cheque—Whether such cheque amounts to a written promise to pay the debt within the meaning of Section 25(3) of Indian Contract Act? Yes—Whether such cheque would be taken to have been issued for discharge of legally enforceable debt or liability? Yes.
Held: Thus, Section 138 will not apply to a cheque drawn in discharge of a debt or liability which is not legally enforceable. There may be several categories of debts or other liabilities which are not legally enforceable. A debt or liability is legally enforceable if the same can be lawfully recovered by adopting due process of law. The emphasis is on the fact that the debt or other liability must be a legally enforceable liability. A debt or liability ceases to be legally enforceable after expiry of the period of limitation provided in the law of limitation for filing a suit for recovery of the amount. Thus, a time-barred debt by no stretch of imagination can be said to be a legally enforceable debt within the meaning of the explanation to Section 138.
While recording our answer to the first question, we have already held that a cheque issued for discharge of a debt which is barred by law of limitation is itself a promise within the meaning of sub-section (3) of Section 25 of the Contract Act. A promise is an agreement and such promise which is covered by Section 25(3) of the Contract Act becomes enforceable contract provided that the same is not otherwise void under the Contract Act.
Therefore, while answering second question, we are specifically dealing with a case of promise created by a cheque issued for discharge of a time-barred debt or liability. Once it is held that a cheque drawn for discharge of a time-barred debt creates a promise which becomes enforceable contract, it cannot be said that the cheque is drawn in discharge of debt or liability which is not legally enforceable. The promise in the form of a cheque drawn in discharge of a time-barred debt or liability becomes enforceable by virtue of sub-section (3) of Section 25 of the Contract Act. Thus, such cheque becomes a cheque drawn in discharge of a legally enforceable debt as contemplated by the explanation to Section 138 of the said Act of 1881. Therefore, even the second question will have to be answered in the affirmative. (Paras 19 to 21)
A.S. Oka, J.— 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.
2. 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?”
3. We have heard Shri A.P. Mundargi, learned Senior Counsel who was appointed as amicus curiae to assist the Court, Shri Prakash Naik, Shri S.S. Kulkarni, Shri M.D. Mali, Shri Nitin V. Gangal and Shri S.V. Marwadi, the learned counsel representing the various parties.
Submissions:
4. Mr. Mundargi, learned Senior Counsel appointed as Amicus Curiae has assisted the Court. He pointed out the decision of the Apex Court in the case of National Insurance Company Limited v. Seema Malhotra and Others1. His submission is that in view of what is held by the Apex Court, a cheque issued towards the discharge of time-barred debt will be a promise within the meaning of Section 25(3) of the Indian Contract Act, 1872 (hereinafter referred to as “the Contract Act”). He submitted that the answer to the question whether a cheque is issued in discharge of any legally enforceable debt or liability or not depends on factual matrix of every case and no hard and fast rule can be laid down. Learned counsel appearing for the original Complainants in the Complaints alleging offences under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the said Act of 1881”) have relied upon various decisions of the learned Single Judges of this Court holding that a cheque issued amounts to promise within the meaning of Section 25(3) of the Contract Act and submitted that a complaint under the provisions of Section 138 of the said Act of 1881 on account of dishonour of such a cheque will be maintainable inasmuch as by virtue of promise contained in the cheque, the time-barred debt or liability ceases to be time-barred. The submission of the learned counsel appearing for the Accused is that a cheque issued in discharge of liability of payment of a time barred debt or liability cannot be said to be a cheque issued in discharge of a legally enforceable debt or other liability. The submission is that on the date on which the cheque is issued, there does not exist any legally recovered debt or liability inasmuch as the same is already barred by law of limitation. It is urged that a time-barred debt cannot be said to be a legally recoverable debt, and therefore, even assuming that the first question will have to be answered in the affirmative, the second question will have to be answered in the negative. It is urged that even assuming that a cheque issued towards time-barred 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
5. 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
