MADRAS HIGH COURT
G.R. Swaminathan, J.
Senthilkumar – Appellant
versus
P. Swaminatha Pillai – Respondent
Crl. A(MD)No.75 of 2013
Decided on 8.8.2019

IMPORTANT POINT
When a debt has become barred by limitation, a written promise to pay furnishes a fresh cause of action.

Headnote:

Negotiable Instruments Act, 1881 – Section 138 – Indian Contract Act, 1872 – Section 25 – Criminal Procedure Code, 1973 – Section 378 – Dishonour of cheque – Appeal against acquittal – When a debt has become barred by limitation, a written promise to pay furnishes a fresh cause of action – Section 25(3) of Act in substance does is not to revive a dead right, for right is never dead at any time, but to resuscitate remedy to enforce payment by Suit – If payment could be enforced by a Suit, it means that it still has character of legally enforceable debt as contemplated by explanation under Section 138 of Act – A cheque being in nature of a promise even if issued towards a time barred debt would fall within ambit of Section 138 of Negotiable Instruments Act – Cheque directs bank to pay bearer sum mentioned in cheque – As such it becomes a promise in favour of payee within meaning of Section 25(3) of Indian Contract Act – Once it becomes a fresh promise, fresh period of limitation of 3 years would begin to run from date of cheque and liability would certainly be a legally enforceable liability – Issue ought not to be viewed through prism of Section 18 of Limitation Act – Appellant/complainant will give a quietus to issue upon receiving a sum of Rs.10.00 lakhs from respondent.

Held: As rightly pointed out by the learned Senior Counsel appearing for the complainant/appellant, the issue ought not to be viewed through the prism of Section 18 of the Limitation Act. The relevant provision is Section 25 of the Indian Contract Act, 1872. Section 25 of the Indian Contract Act reads as follows:

“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 the 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 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.

– In any of these cases, such an agreement is a contract.

– Explanation 1. Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

– Explanation 2. An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

– Illustrations:

(a) .........

(b) .........

(c) .........

(d) .........

(e) A owes Rs.1,000/- but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs.500/- on account of the debt. This is a contract.”

In the decision reported in 2007 (5) CTC 488 (A.R.M. Nizmathuallah vs. Vadugana-than), a learned Judge of this Court held as follows:

“8. In view of Section 25(3) of the Act, when a debt has become barred by limitation, a written promise to pay, furnishes a fresh cause of action. Section 25(3) of the Act in substance does is not to revive a dead right, for the right is never dead at any time, but to resuscitate the remedy to enforce payment by Suit, and if the payment could be enforced by a Suit, it means that it still has the character of legally enforceable debt as contemplated by the explanation under Section 138 of the Act. In view of the illustration (e), the cheque becomes a promise made in writing, to pay under Section 25(3) of the Act.

9. When a similar question arose, it was answered by the Division Bench of Kerala High Court reported in 2005 STPL (DC) 82 Ker (Dr. K. R. Ramakrishnan v. Dr. K.K. Parthsaradhy), wherein, it is held in paragraph 26 that:

“26. ...It is held that:

(1) When a person issues a cheque, he acknowledges his liability to pay. In the event of the cheque being dishonoured on account of insufficiency of funds he will not be entitled to claim that the debt had become barred by limitation and that the liability was not thus legally enforceable. He would be liable for penalty in case the I must also note that the Bombay High Court in the decision reported in (2008) Crl LJ 657 (Vijay Ganesh Gondhlekar Vs. Indranil Jairaj Damale) observed that the cheque directs the bank to pay the bearer the sum mentioned in the cheque. As such it becomes a promise in favour of the payee within the meaning of Section 25(3) of the Indian Contract Act. Once it becomes a fresh promise, fresh period of limitation of 3 years would begin to run from the date of cheque. Hence the liability would certainly be a legally enforceable liability. The decision of the Hon’ble Calcutta High Court is also on the same lines. (2012(2) CLJ (Cal) 516 Ram Chandra Singh Chouhan Vs. Ram Gopal Sharma).

Applying the ratio laid down by the Hon’ble Supreme Court in the decision reported in (2001) 3 SCC 151 (National Insurance Co. Ltd., vs. Seema Malhotra and others), I have to necessarily hold that the decisions of this Court reported in (2009) (3) MWN (Cr.) DCC 31 (S.Kamatchi v. M/s.Arkaa Medicament) and 2009 (1) MWN (Crl,) DCC 61 (Kumaraguru Finance vs. M.Ganesan) do not represent the correct legal position and that as rightly held by His Lordship Mr.Justice T.Sudanthiram in A.R.Nizmathuallah vs. Vaduganathan (2007 (5) CTC 488), a cheque being in the nature of a promise even if issued towards a time barred debt would fall within the ambit of Section 138 of the Negotiable Instruments Act.

After clarifying the legal position, this Court suggested to the learned counsel on either side to amicably resolve the issue. I am glad to note that the parties to the litigation rose to the occasion and submitted that the appellant/complainant will give a quietus to the issue upon receiving a sum of Rs.10.00 lakhs from the respondent herein. It will be towards full and final settlement of all the claims of the complainant against the accused. The learned counsel for the respondent undertakes that the respondent will pay a sum of Rs.10.00 lakhs. A sum of Rs.6.00 lakhs will be paid within a period of one month from the date of receipt of a copy of this order. The balance amount of Rs.4.00 lakhs will be paid in the month of February, 2020. Upon receiving the said sum of Rs.10.00 lakhs, the complainant undertakes to withdraw the civil suit filed by him in this regard. Since the parties have compounded the matter between themselves, the appeal stands disposed of on the above terms. – (Paras 4, 7, 8, 9 and 10)

Result: Appeal disposed of.