( 1 ) SHORT question which requires consideration by this Full Bench as referred to by a Learned Single Judge of this Court as per oral judgment dated 14/10/1999 [coram : K. R. Vyas, J. ] is : Whether the payment by cheque which is dishonoured amounts to acknowledgement of a debt and a liability ?

( 2 ) FOR the purpose of answering the Reference, let there be a brief resume of the facts and reasons for Reference. THE plaintiff sued to recover Rs. 61,886-16 plus Rs. 11,124. 00 by way of interest at the rate of 9% p. a. from 4/3/1974 from the defendant (The parties were respectively the appellant and the respondent in the First Appeal proceedings ). The trial Court decreed the suit for Rs. 26,371=86 with running interest at the rate of 6% p. a. from the date of the suit till payment holding that that much claim was within the time, whereas the rest of the claim was barred by law of limitation. It was contended in the appeal that the cheques Exhs. 117 and 119 dated 15/4/1974 and 27/3/1974 each for a sum of Rs. 5,000/issued in favour of the plaintiff on account of the dues amounted to acknowledgement of liability by the defendant in as much as the original transactions for purchase of goods of Rs. 98,428-50 ran between 7/1/1972 and 9/1/1973 and the issuance of the aforesaid cheques was quite before the expiry of period of limitation and by virtue of provisions of section 18 of the Limitation Act, 1963 (for short the Act) fresh period of limitation should start from the date of issuance of the cheque. Reference was made on behalf of the plaintiff to the decisions in the case of Prafulla Chandra V/s. Jatindra Nath reported in AIR 1938 Calcutta 538, Subrahmanyam V/s. Venkataratnam reported in AIR 1956 Andhra Pradesh 105 and Rajpatiprasad V/s. Kaushlya Kuer reported in AIR 1981 Patna 187. Ld. Single Judge has referred to decision of the Patna High Court in Rajpatiprasads case (supra) expressing the view that all the post dated cheques in satisfaction of dues would amount to acknowledgement of liability irrespective of the fact whether the cheques were subsequently dishonoured. A reference has also been made to the decision of Andhra Pradesh High Court in Subrahmanyams case (supra) which has held that a cheque is not only evidence of payment, but it ex-facie contains the recitals admitting the payment and would satisfy the requirements of section 20 of the Limitation Act (previous ). Thus, a cheque together with subsequent receipt of money by payee would amount to acknowledgement of payment within the meaning of proviso to the said section. The Ld. Single Judge has observed that by issuing a cheque, a person is admitting debt owing by him to the person to whom he is making payment by cheque. The admission of debt has to be determined with reference to the point of time at which the purported admission was made, that is to say, when the cheque was issued. An admission did not cease to be an admission merely because it is subsequently retracted. For any reason, if the cheque is not honoured subsequently, it will not change the intention of the party of accepting the debt at the time of issuance of cheque. The Ld. Single Judge has finally observed that justice and equity would demand such a construction of the provision contained in section 18 of the Act.

( 3 ) HOWEVER, in view of the fact that there was a binding decision of Bombay High Court rendered during the period prior to reorganisation of States of Maharashtra and Gujarat, rendered in Chintaman Dhundiraj V/s. Sadguru Narayan Maharaj Datta Sansthan reported in AIR 1956 Bombay 553, the Ld. Single Judge has proposed reference as aforesaid.

( 4 ) THE matter went before a Division Bench in the first place and bearing in mind the fact that the question required consideration at the hands of Full Bench in view of the fact that validity of Division Bench decision of Bombay High Court in Chintamans case (supra) was in essence involved, by order dated 6/12/1999 the Bench (Cor