Loan Taken in 2006, Cheque Issued in 2020: Is a Section 138 Complaint Maintainable on a Time-Barred Debt?

Imagine a debtor who borrowed money in 2006, signed some agreement in 2014, and then handed over a cheque in 2020 — fourteen years after the original borrowing. When that cheque bounces and the payee files a complaint under Section 138 of the Negotiable Instruments Act, 1881, the accused's first defence is obvious: the debt was barred by limitation long before the cheque was drawn, so there was no legally enforceable debt to discharge. This scenario raises two intertwined questions: whether the complaint is maintainable at all, and whether a time-barred debt can ever sustain a prosecution under Section 138. The answers, drawn from a substantial body of judicial authority, are more nuanced than either side typically assumes.

What Section 138 Actually Requires

Section 138 criminalises the dishonour of a cheque, but only if the cheque was drawn for the discharge, in whole or in part, of any debt or other liability. The Explanation to the section makes clear that debt or other liability means a legally enforceable debt or other liability. As the Supreme Court has observed, to attract an offence under Section 138, there should be a legally enforceable debt or other liability subsisting on the date of drawal of the cheque 2023 0 Supreme(Ker) 486.

The Court has also clarified that for post-dated cheques, what matters is whether a legally enforceable debt exists at the time of maturity or encashment, not merely when the cheque was drawn 2023 0 Supreme(Ker) 486.

The Conflict on Time-Barred Debts

Indian courts have taken two positions on whether a time-barred debt qualifies:

The restrictive view. Several High Court decisions hold squarely that it cannot be said that a time barred debt is a legally enforceable debt 2023 0 Supreme(Guj) 1277 and 2010 0 Supreme(Mad) 5297. In one case, a cheque admittedly issued in discharge of a time-barred debt was held incapable of attracting Section 138, and proceedings were quashed 2010 0 Supreme(Mad) 5297. Similarly, a complaint where cheques issued in 2011 related to a debt incurred in 2007 was held unsustainable absent proper appreciation of the law of limitation 2022 0 Supreme(Mad) 3457, and the Madras High Court noted that a cheque issued in 2020 for a debt roughly six and a half years old was clearly time-barred 2022 Supreme(Online)(MAD) 30081.

The permissive view. Other decisions hold that the issuance of a cheque itself constitutes an acknowledgment or promise to pay, reviving the obligation: A promise to pay a time barred debt is valid and enforceable under law, creating liability upon dishonour of cheque 2025 0 Supreme(Ker) 96. Under Section 25(3) of the Indian Contract Act, 1872, a written and signed promise to pay a time-barred debt is valid without fresh consideration — a principle courts have applied where cheques followed a written acknowledgment of the old debt 2022 0 Supreme(Mad) 3457.

How the Dispute Is Typically Resolved in Practice

Even where courts accept that a time-barred debt is not, by itself, enforceable, most are reluctant to quash complaints at the threshold because of the presumption under Section 139 of the NI Act. That provision presumes the cheque was drawn for a legally enforceable debt, and the Supreme Court has emphasised that this presumption is rebuttable — the accused's defence of time-barred debt has to be proved during the course of trial and ordinarily cannot be used to quash proceedings under Section 482 CrPC 2022 0 Supreme(AP) 227. Other High Courts have taken the same route, holding that the existence and enforceability of the debt should be determined based on evidence during the trial, with the burden on the accused to establish that no legally enforceable debt existed 2023 0 Supreme(Gau) 972 and 2022 0 Supreme(Mad) 1056.

The complainant, correspondingly, is not required to plead the details of the original transaction in the complaint; it is sufficient to allege that the cheque was issued in discharge of a debt, and the question of enforceability is tested at trial 2023 0 Supreme(Ker) 971.

Applying This to the 2006 Borrowing and the 2020 Cheque

For the fact pattern in question — borrowing in 2006, an agreement in 2014, and a cheque in 2020 — the following considerations generally determine the outcome:

• Was the 2014 agreement an acknowledgment or promise to pay? If the agreement contained a written, signed acknowledgment of the debt or an express promise to pay it, Section 25(3) of the Contract Act may keep the debt enforceable notwithstanding limitation 2022 0 Supreme(Mad) 3457.
• Was the liability otherwise renewed? Partial repayment or issuance of cheques towards the debt has been treated as renewing liability and preventing limitation from running 2023 0 Supreme(Kar) 70

  Prasad Raykar VS B. T. Dinesh

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• Was the liability discharged in the interim? If intervening events — such as settlement, withdrawal of a prior complaint, or cancellation — discharged the debt, no legally enforceable liability subsists and Section 138 fails 2025 0 Supreme(Ker) 1583.
• Nature of the cheque: A cheque given merely as security, rather than in discharge of an enforceable debt, will not sustain a Section 138 complaint 2022 0 Supreme(Guj) 161.

If the 2006 debt was never acknowledged in writing within the limitation period, the restrictive line of authority suggests the complaint may be quashed or the accused acquitted 2023 0 Supreme(Guj) 1277 and 2010 0 Supreme(Mad) 5297. But if the 2014 agreement or the 2020 cheque itself operates as a written promise under Section 25(3), the permissive line — reinforced by the Section 139 presumption — generally keeps the complaint alive for trial 2025 0 Supreme(Ker) 96 and 2022 0 Supreme(AP) 227.

Key Takeaways

1. A complaint under Section 138 is maintainable only if a legally enforceable debt existed when the cheque was drawn and presented 2023 0 Supreme(Ker) 486.
2. There is genuine judicial divergence on whether a time-barred debt qualifies; the restrictive view holds it does not 2023 0 Supreme(Guj) 1277, while the permissive view treats cheque issuance or written acknowledgment as reviving enforceability 2025 0 Supreme(Ker) 96.
3. In most contested cases, the time-bar defence is decided at trial on evidence, since the Section 139 presumption favours the complainant and can only be rebutted by the accused 2022 0 Supreme(AP) 227 and 2023 0 Supreme(Gau) 972.
4. A written acknowledgment or promise to pay a time-barred debt under Section 25(3) of the Contract Act can be decisive 2022 0 Supreme(Mad) 3457.

The facts of each case — particularly the content of the 2014 agreement — will usually decide the result. This discussion is general information based on reported decisions and not a substitute for advice tailored to a specific case.