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HIGH COURT OF KERALA
A. Muhamed Mustaque, Shoba Annamma Eapen, JJ
HARBOUR VIEW RESIDENCY (P) LTD. – Appellant
Versus
SREE GOKULAM CHIT AND FINANCE CO. (P) LTD. – Respondent
RFA/459/2019
Cheque - Issuance of Dishonoured Cheque - Chit Funds Act, 1982 Section 64; Indian Contract Act, 1872 Section 25(3); Negotiable Instruments Act, Section 118 - The court evaluated the enforceability of cheques issued towards a time-barred debt while considering relevant legal principles from statutory provisions on contracts and negotiable instruments, concluding that such cheques can be enforced.
Fact of the Case:
The plaintiff claimed dishonoured cheques issued by the defendants to cover a time-barred debt related to chit subscriptions. The suits were filed after the limitation period had expired, raising questions regarding the enforceability of the issued cheques.
Finding of the Court:
The court found that the cheques were indeed issued in 2015 to discharge the debt and supported by adequate consideration, thus ruling against the defendants' claims of misuse and lack of jurisdiction under chit fund regulations.
Issues: The main issues were whether the dishonoured cheques validly discharged a time-barred debt, and whether those cheques were supported by consideration.
Ratio Decidendi: The court asserted that cheques issued for time-barred debts could be enforced if they fulfill the requirements of Section 25(3) of the Contract Act, and that the presumption under Section 118 of the Negotiable Instruments Act favors the legitimacy of the cheques.
Final Decision: The appeal was dismissed, ruling in favor of the plaintiff.
JUDGMENT
A.Muhamed Mustaque, J.
The question involved in the suit and this appeal is whether the defendants had issued dishonoured cheques to discharge a time-barred debt. The suit was decreed to realise Rs.1,53,68,581/- together with interest, holding that defendants 2 and 3 had issued cheques to discharge the debt owed by the first defendant to the plaintiff.
2. The plaintiff is a Private Limited Company engaged in the chit-fund business. The first respondent is another Private Limited Company subscribed to the chit of the plaintiff company. According to the plaintiff, the first defendant is having liability in respect of five chits subscribed to on 12.12.2008. The first defendant had bid five chits on 12.12.2008. Admittedly, these chits were terminated on 12.07.2010. The plaintiff's case is that towards discharging the liability, the third and fourth defendants issued a cheque for Rs.70 lakhs each on 02.11.2015. These cheques were dishonoured on presentation. Defendants 2 to 5, were the guarantors of the chit amount obtained by the first defendant.
3. It appears that an equitable mortgage of the properties belonging to the second defendant was obtained as security. The plaintiff initially filed a suit before the Sub Court, North Paravoor as the mortgage properties are located within the jurisdiction of the above court. The plaint was presented on 20.09.2016. Thereafter, the plaint was returned, noting that the suit was only a suit for the realisation of the money. The suit was, thereafter, tried by the Sub Court, Ernakulam. 4. This was a simple suit based on dishonoured cheques. The cheques were dated
02.11.2015. The cheques were issued, according to the plaintiff, towards the liability of the chits terminated on 12.07.2010. The period of limitation to recover the liability for the chits admittedly got over on 11.07.2013, as per the Limitation Act.
5. We note the defendants specifically raised a contention in the written statement that those cheques were issued as security for other chits subscribed during the period 2005-2006 and the entire liability of the chits subscribed for the above transaction has been discharged by them. It is pertinent to refer to paragraph-4 of the written statement:
“The alleged two blank cheques were obtained by the plaintiff at the time of bidding other chitties Nos. J2J/118/JMM/5,6,7,8 and J2G/119/JMM/4,5,6,7 AND J2J/120/JMM/8,9 and at the time of receiving the amount as a security from the defendants No.3 & 4 in the year 2005-06 periods. After clearing aforesaid chitties, said two blank cheques were not returned. The said two blank cheques were misused to file this suit to over come the limitation of chitty transaction. Even the dishonour of the cheques were also outside the jurisdiction of the court. Besides these cheques were also out side the jurisdiction of the court. Besides these alleged two cheques would prove that the same were not MICR cheques. This itself proves the period of issuance of cheques. The MICR cheques were issued by Banks only in the year
2013 as per the RBI regulations.”
6. There are issues raised based on Section 64 of the Chit Funds Act, 1982 . of the said Act confers jurisdiction on the Registrar to adjudicate the disputes in connection with chitties. Sub Section 3 of of the said Act states that no Civil Court shall have jurisdiction to entertain any suit or other proceeding in respect of dispute touching the management of a chit business, a claim by or against a foreman for any debt or demand etc. This is not a case based on a chitty transaction. The cheques, according to the plaintiff, were issued by defendants 3 and 4 to discharge the liability of the first defendant. The suit was a suit based on the dishonoured cheques and nothing else.
7. The court below failed to frame the issues in the proper perspective to decide the matter. The issue ought to have been addressed with reference to Section 25 (3) of the Indian Contract Act, 1872 (for short, the 'Contract Act
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