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CASE NO.:

Appeal (crl.) 206 of 2002

PETITIONER:

A.V. MURTHY

Vs.

RESPONDENT:

B.S. NAGABASAVANNA

DATE OF JUDGMENT: 08/02/2002

BENCH:

R.P. Sethi & K.G. Balakrishnan

JUDGMENT:

K.G. BALAKRISHNAN, J.

Leave granted.

This appeal is directed against the order passed by a learned

Single Judge of the High Court of Karnataka. The appellant herein

filed a complaint before the Magistrate alleging that the respondent

herein had committed an offence punishable under Section 138 of

the Negotiable Instruments Act, 1881 [for short, "the Act"]. The

appellant alleged that he and his two friends had advanced a sum

of Rs.7.5 lakhs to the respondent about four years back

to enable him to start a petrol pump and that the

respondent did not pay back the said amount despite

repeated demands and finally at the request of the

appellant, on 30.3.1998 the respondent issued a cheque in

favour of the appellant. The appellant presented the cheque for

payment, but the cheque was dishonoured by the bank for the

reason "Account closed". Thereafter, the appellant issued a

statutory demand notice and as the respondent failed to pay the

amount, a complaint was filed before the Magistrate by the

appellant. In the complaint, it was alleged that the appellant and

his two friends advanced the said sum of Rs. 7.5 lakhs to the

respondent about four years prior to the date of issue of the

cheque by the respondent. The learned Magistrate issued

summons to the respondent. The respondent filed a Criminal

Revision before the IInd Addl. Sessions Judge, Mysore, alleging that

the complaint was not maintainable as the amount advanced by the

appellant to him was about four years prior to the date of

issue of the cheque, and in view of the 'Explanation' appended

to Section 138 of the Act, there was no legally enforceable

debt or liability as against the respondent. The Addl. Sessions

Judge accepted this plea and held that even on the basis of the

averments in the complaint and the sworn statement of the

complainant, the alleged borrowing was four years prior to the

issuance of the cheque and hence that debt was not legally

enforceable in view of the bar of limitation and, therefore, the

Magistrate was in error in taking cognizance of the alleged offence

under Section 138 of the Act. As a result, the Addl. Sessions Judge

quashed the entire proceedings and aggrieved thereby, the

appellant filed a Criminal Revision before the High Court of

Karnataka but the learned Single Judge upheld the view of the Addl.

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Sessions Judge. The appeal has now come up before us.

We heard learned counsel for the appellant. Learned counsel

contended that it was incorrect on the part of the Sessions Judge to

hold that there was no legally enforceable debt or liability on the part

of the respondent. He also contended that when a cheque is

issued, under Section 118 of the Act, it has to be presumed that it

was drawn for consideration. It was further contended that even

though the appellant and his friends advanced the loan about four

years back, the respondent had acknowledged this liability in his

balance sheet and that even for the purpose of a civil suit, such debt

or liability is not barred by limitation.

The respondent refused to accept notice and we did not have

the advantage of hearing him. The respondent seems to have

contended that as the loan was advanced four years prior to the

issuance of the cheque, the debt or the liability for which the cheque

was drawn by him had ceased to be legally enforceable and,

therefore, no complaint could have been filed by the complainant

under Section 138 of the Act.

As the complaint has been rejected at the threshold, we do not

propose to express any opinion on this question as the matter is yet

to be agitated by the parties. But, we are of the view that the

learned Sessions Judge and the learned Single Judge of the High

Court were clearly in error in quashing the complaint proceedings.

Under Section 118 of the Act, there is a presumption that until the

contrary is proved, every negotiable instrument was drawn for

consideration. Even under Section 139 of the Act, it is specifically

stated that it shall be presumed, unless the contrary is proved, that

the holder of a cheque received the cheque of the nature referred to

in Section 138 for discharge, in whole or in part, of any debt or other

liability. It is also pertinent to note that under sub-section (3) of

Section 25 of the Indian Contract Act, 1872, 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, is a valid contract.

Moreover, in the instant, the appellant has submitted before us that

the respondent, in his balance sheet prepared for every year

subsequent to the loan advanced by the appellant, had shown the

amount as deposits from friends. A copy of the balance sheet as on

31st March 1997 is also produced before us. If the amount borrowed

by the respondent is shown in the balance sheet, it may amount to

acknowledgement and the creditor might have a fresh period of

limitation from the date on which the acknowledgement was made.

However, we do not express any final opinion on all these aspects,

as these are matters to be agitated before the Magistrate by way of

defence of the respondent.

This is not a case where the cheque was drawn in respect of a

debt or liability, which was completely barred from being enforced

under law. If for example, the cheque was drawn in respect of a

debt or liability payable under a wagering contract, it could have

been said that that debt or liability is not legally enforceable as it is a

claim, which is prohibited under law. This case is not a case of that

type. But we are certain that at this stage of the proceedings, to say

that the cheque drawn by the respondent was in respect of a debt or

liability, which was not legally enforceable, was clearly illegal and

erroneous.

Therefore, we set aside the order passed by the learned

Single Judge of the High Court, allow this appeal and remand the

matter to the Magistrate to proceed with the complaint in accordance

with law. We make it clear that whatever has been stated by us

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regarding enforceability of the debt or liability is for the purpose of

these proceedings and the respondent would be at liberty to set up

all legally available defences.

There will be no order as to costs.

..J

[ R.P. Sethi ]

..J

[ K.G. Balakrishnan ]

February 8, 2002.