Citation : 2012 Latest Caselaw 224 Bom
Judgement Date : 19 October, 2012
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.2933 OF 2007
CRIMINAL APPLICATION NO.2934 OF 2007
CRIMINAL APPLICATION NO.2935 OF 2007
CRIMINAL APPLICATION NO.2936 OF 2007
CRIMINAL APPLICATION NO.779 OF 2008
CRIMINAL APPLICATION NO.1499 OF 2010
CRIMINAL APPLICATION NO.2391 OF 2010
CRIMINAL APPLICATION NOS. 2933 OF 2007, 2934 of 2007, 2935 of
2007 AND 2936 of 2007
Mr. Dinesh B. Chokshi, )
Aged 72 years, Proprietor of )
M/s. S. Chokshi & Co., )
1, Chetna, 124, Vallabh Bhai Road, )
Vile Parle (W), Mumbai - 400 056. ).. Applicant
(Org. Complainant)
Versus
1. Rahul Vasudeo Bhatt, )
Residing at 3-A, Koteshwar Darshan )
Bhagat Singh Road, Vile Parle (W), )
Mumbai - 400 056. ).. Org. Accused
2. The State of Maharashtra. ).. Respondents
-
CRIMINAL APPLICATION NO.779 OF 2008
Shri Narayan Trimbak Burkule, )
Age 50, Adult, Occupation : Agriculture, )
R/at Flat no.1, Umashankar Society, )
Ganjmaal, Nashik - 1. ). Applicant
Vs
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1. Smt. Usha Devidas Patil, )
Age: Adult, Occupation: Busienss, )
R/at: C/o D.S. Patil, Pearl Palace, )
Flat No.12, Ganagpur Road, )
Nashik - 5. )
2. The State of Maharashtra. ).. Respondents
-
CRIMINAL APPLICATION NO.1499 OF 2010
Mr. Mansingh A. Yadav, )
Aged about 45 years, adult, )
Indian Inhabitant, having shop at
ig )
Rahul Grain Stores, )
Dr. Babasaheb Ambedkar Nagar, )
P.L. Lokhande Marg, Chembur, )
Mumbai - 400 089. ).. Applicant
Vs
1. The State of Maharashtra, )
2. Mr. Avdesh Kumar Agrahari, )
Aged about years, adult, )
Indian Inhabitant, residing at )
R.No.204, 2nd Floor, )
Sai Path Building No.10, )
Yadav Nagar, Badlapur (E), )
Dist : Kalyan - 421504. ).. Respondents
(Org. Accused No.2)
-
CRIMINAL APPLICATION NO.2391 OF 2010
Ichabben Gulabdas Master, )
aged : 80 years, Occ: Housewife, )
R/at : 442, S.V. P. Prarthana Samaj, )
Mumbai, )
(Through her Constituted Attorney - )
Dinesh Damania. ).. Appellant
(Org. Complainant)
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Vs
1. Mr. Sandeep Raghavji Gala, )
Age : 42 years, Occ: Business, )
R/at : 87, Lower Parel, )
Chandbhai Building, )
Mumbai - 400 002. )
2. State of Maharashtra ).. Respondents
(Org.No.1 Org.Accused)
--
Shri A.P. Mundargi, Senior Advocate, appointed as Amicus Curiae, Shri
Prakash Naik along with Shri Ganesh Bhujbal, Shri Pawan P. Mali for the
Applicant in Criminal Application Nos.2933 of 2007, 2934 of 2007,
2935 of 2007 and 2936 of 2007.
Shri Shriram S. Kulkarni for the Applicant in Criminal Application
No.779 of 2008.
Shri Nitin V. Gangal for the Applicant in Criminal Application No.1499
of 2010.
Shri M.D. Mali i/by M/s. M.D. Mali & Co. for the Applicant in Criminal
Application No.2391 of 2010.
Shri S.V. Marwadi for Respondent No.1 in Criminal Application
Nos.2933 of 2007, 2934 of 2007, 2935 of 2007 and 2936 of 2007.
Shri J.H. Kuril i/by Shri Pravin V. Gavle for Respondent No.2 in Criminal
Application No.1499 of 2010.
Shri Ranvir Shekhawat for the Respondent No.1 in Criminal Application
No.2391 of 2010.
Smt. M.M. Deshmukh, APP for Respondent No.2-State in Criminal
Application Nos. 2933 of 2007, 2934 of 2007, 2935 of 2007, 2936 of
2007, 779 of 2008, 2391 of 2010 and for the Respondent State in
Criminal Application No.1499 of 2010.
--
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CORAM : A.S. OKA &
SMT. SADHANA S. JADHAV, JJ
DATE ON WHICH SUBMISSIONS WERE HEARD : 28TH AUGUST, 2012
DATE ON WHICH JUDGMENT IS PRONOUNCED: 19TH OCTOBER, 2012
JUDGMENT (PER A.S. OKA, J )
1.
On the basis of Judgment and Order dated 23 rd December,
2008 passed by learned Single Judge, the Hon'ble the Chief Justice
passed an order on the Administrative Side directing that these matters
should be placed before a Division Bench. Accordingly, these
Applications have been placed before this Court.
2. The reference to Division Bench is for deciding the two
questions formulated by the learned Single Judge under his Judgment
and Order dated 23rd December, 2008. The said two questions are :-
"(i) Does the issuance of a cheque in repayment of a time barred debt amounts to a written promise to pay the said debt within the meaning of Section 25(3) of the Indian Contract Act, 1872 ?
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(ii) If it amounts to such a promise, does such a promise, by itself, create any legally
enforceable debt or other liability as contemplated by Section 138 of the
Negotiable Instruments Act, 1881 ?
3. We have heard Shri A.P. Mundargi, learned Senior Counsel
who was appointed as Amicus Curiae to assist the Court, Shri Prakash
Naik, Shri S.S. Kulkarni, Shri M.D. Mali, Shri Nitin V. Gangal and Shri
S.V. Marwadi, the learned counsel representing the various parties.
SUBMISSIONS:
4. Shri Mundargi, learned Senior Counsel appointed as
Amicus Curiae has assisted the Court. He pointed out the decision of
the Apex Court in the case of National Insurance Company Limited Vs.
Seema Malhotra and Others [(2001)3 SCC 151]. His submission is
that in view of what is held by the Apex Court, a cheque issued towards
the discharge of time barred debt will be a promise within the meaning
of Section 25(3) of the Indian Contract Act, 1872 ( hereinafter referred
to as "the Contract Act"). He submitted that the answer to the question
whether a cheque is issued in discharge of any legally enforceable debt
or liability or not depends on factual matrix of every case and no hard
and fast rule can be laid down. Learned counsel appearing for the
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original Complainants in the Complaints alleging offences under
Section 138 of the Negotiable Instruments Act, 1881 ( hereinafter
referred to as "the said Act of 1881") have relied upon various decisions
of the learned Single Judges of this Court holding that a cheque issued
amounts to promise within the meaning of Section 25(3) of the
Contract Act and submitted that a complaint under the provisions of
Section 138 of the said Act of 1881 on account of dishonour of such a
cheque will be maintainable inasmuch as by virtue of promise contained
in the cheque, the time barred debt or liability ceases to be time barred.
The submission of the learned counsel appearing for the Accused is that
a cheuque issued in discharge of liability of payment of a time barred
debt or liability cannot be said to be a cheque issued in discharge of a
legally enforceable debt or other liability. The submission is that on the
date on which the cheque is issued, there does not exist any legally
recovered debt or liability inasmuch as the same is already barred by
law of limitation. It is urged that a time barred debt cannot be said to
be a legally recoverable debt, and therefore, even assuming that the
first question will have to be answered in the affirmative, the second
question will have to be answered in the negative. It is urged that even
assuming that a cheque issued towards time barred debt becomes a
promise within the meaning of Section 25(3) of the Contract Act, the
fact remains that on the date of the cheque, it is issued towards the
discharge of a debt or liability which is not legally recoverable. Learned
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counsel appearing for the parties have relied upon various decisions in
support of their submissions.
CONSIDERATION OF THE FIRST QUESTION
5. It will be necessary to make a reference to the relevant
provisions of the Contract Act. It will be necessary to make a reference
to Section 2 of the Contract Act which is the interpretation clause. It
reads thus:-
"2. Interpretation clause.--In this Act the following
words and expressions are used in the following senses, unless a contrary intention appears from the context:--
(a) When one person signifies to another his willingness
to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal;
(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted. A proposal, when accepted, becomes a promise;
(c) The person making the proposal is called the "promisor", and the person accepting the proposal is
called the "promisee";
(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;
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(f) Promises which form the consideration or part of the
consideration for each other, are called reciprocal promises;
(g) An agreement not enforceable by law is said to be
void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;
(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable."
6. Clauses (a) and (b) of Section 2 of the Contract Act, if read
together, show that when a proposal is accepted, it becomes a promise.
In view of clause (e) of Section 2 of the Contract Act , a promise is an
agreement. By virtue of Clauses (g) and (h) of Section 2 of the
Contract Act, an agreement which is not enforceable by law is said to be
void and an agreement which is enforceable by law is a contract.
Clause (j) provides that a contract which ceases to be enforceable by
law becomes void when it ceases to be enforceable.
7. If there is a promise to pay an amount and if a breach
thereof is committed, a suit for recovery is required to be filed within
stipulated period of limitation provided under the law of Limitation.
After the time provided for filing a suit for recovery expires, the
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promise ceases to be enforceable. Section 10 of the Contract Act
provides that all agreements are contracts if they are made by free
consent of the parties competent to contract for a lawful consideration
and with a lawful object and which are not expressly declared to be
void under the Contract Act. Section 20 of the Contract Act
incorporates a category of void agreements. Sections 19 and 19A
provide for categories of agreements which are voidable. Section 23
provides that if the consideration or the object of an agreement is
forbidden by law or is immoral or is opposed to public policy, the
consideration or object of the agreement is unlawful and the agreement
is void. Sections 26 to 30 of the Contract Act also provide for
different categories of agreements which are void. Therefore, apart
from the agreements which cease to be enforceable by reason of bar of
limitation, there are other categories of agreements which are void and,
therefore, obviously not enforceable by law.
8. Section 25 of the Contract Act reads thus:-
"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 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
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(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 authorised 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."
9.
Thus, Sub-section (3) of Section 25 of the Contract Act is
an exception to the general rule that an agreement made without
consideration is void. Sub-section (3) of Section 25 of the Contract Act
applies to a case where there is a promise made in writing and signed
by a person to be charged therewith to pay wholly or in part a debt
which is barred by law of limitation. A promise covered by Sub-section
(3) becomes enforceable agreement notwithstanding the fact that it is a
promise to pay a debt which is already barred by limitation. Thus,
Sub-section (3) of Section 25 of the Contract Act applies to a promise
made in writing which is signed by a person to pay a debt which cannot
be recovered by reason of expiry of period of limitation for filing a suit
for recovery. Therefore, if a debtor after expiry of the period of
limitation provided for recovery of debt makes a promise in writing
signed by him to pay the debt wholly or in part, the said promise being
governed by Sub-section (3) of Section 25 of the Contract Act becomes
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an agreement which is enforceable in law. By virtue of the promise
governed by Sub-section (3) of Section 25 of the Contract Act, the time
barred debt becomes enforceable. The Sub-section (3) of Section 25 of
the Contract Act does not apply to promise to pay all categories of debts
which are not enforceable in law. It applies only to a debt which is
not recoverable in law only on the ground of bar created by the law of
limitation. Thus, the promise under Sub-section (3) of Section 25 of
the Contract Act will not validate a debt which is not enforceable on a
ground other than the ground of bar of limitation. For example, if
there is a promise to pay an amount advanced for immoral purposes
which is hit by Section 23 of the Contract Act, it will not attract Sub-
section (3) of Section 25 of the Contract Act and the said provision will
be attracted only when a promise is made in writing and signed by the
promisor to pay a debt which is barred by limitation.
10. At this stage, it will be necessary to make a reference to the
decision of the Apex Court in the case of A.V. Murthy v. B.S.
Nagabasavanna [(2002)ALL MR (Cri) 709 (S.C.)]. It will be necessary
to make a reference to Paragraphs 5 and 6 of the decision of the Apex
Court. The relevant portions of Paragraph 5 and Paragraph 6 read
thus:-
"5. ..... 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
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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 valid contract. ....."
(emphasis added)
11.
A negotiable instrument is defined under Section 13 of the
said Act of 1881. A negotiable instrument includes a cheque. A
cheque is defined by Section 6 which reads thus:-
"6. "Cheque".--A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic
form.
Explanation I.--For the purposes of this section, the expressions--
(a) "a cheque in the electronic form" means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;
(b) "a truncated cheque" means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment,
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immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.
Explanation II.--For the purposes of this section, the
expression "clearing house" means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India."
12. The decision of the Apex Court in the case of A.V. Murthy v.
B.S. Nagabasavanna (supra) holds that a promise to pay a time barred
debt is a valid contract. Now, the question is when a cheque is drawn in
discharge of a debt or monetary liability which is already barred by law
of limitation, whether it will amount to a promise within the meaning
of Sub-section (3) of Section 25 of the Contract Act? We find that the
issue is no more res integra. The issue has been dealt with by the
Apex Court in the case of National Insurance Company Limited v.
Seema Malhotra and Others (supra). This was a case which arose out
of a contract of insurance. The insured of the Appellant Company
before the Apex Court entered into an insurance contract on 21 st
December, 1993 for insuring a Maruti Car. On the same day, a cheque
representing the premium was issued by the insured against which a
Cover Note was issued by the Appellant Company. In an accident which
occurred on 31st December, 1993, the insured died and the car was also
damaged. While dealing with the contract of insurance, in Paragraph
17 of the decision, the Apex Court held thus:-
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"17. In a contract of insurance when the
insured gives a cheque towards payment of premium or part of the premium, such
a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque
is a bill of exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain
person to pay a certain sum of money to a certain person. It involves a promise
that such money would be paid.
(emphasis added)
13. Thus, the Apex Court held that the drawer of a cheque
promises to the person in whose favour the cheque is drawn or to
whom a cheque is endorsed, that the cheque on presentation would
yield the amount in cash. The Apex Court held that a bill of exchange
is an instrument which involves a promise that the money payable
under the instrument would be paid. Therefore, when a cheque issued
towards the premium is returned dishonoured, the insured fails to
perform his promise and, therefore, the insurer need not perform the
reciprocal part of his promise.
14. The section 13 of the said Act of 1881 which defines
negotiable instrument reads thus:
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"13. "Negotiable instrument".-- 1[(1) A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer.]
Explanation (i).--A promissory note, bill of exchange or
cheque is payable to the order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words, prohibiting transfer or indicating an intention that it shall not be transferable.
Explanation (ii).--A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.
Explanation (iii).--Where a promissory note, bill of
exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him
or his order at his option.
2[(2) A negotiable instrument may be payable to two or
more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several
payees]."
15. On plain reading of Section 13 of the said Act of 1881, a
negotiable instrument does contain a promise to pay the amount
mentioned therein. The promise is given by the drawer . Under Section
6 of the said Act of 1881, a cheque is a bill of exchange drawn on a
specified banker. The drawer of a cheque promises to the person in
whose name the cheque is drawn or to whom the cheque is endorsed,
that the cheque on its presentation, would yield the amount specified
therein. Hence, it will have to be held that a cheque is a promise
within the meaning of Sub-section (3) of Section 25 of the Contract Act.
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What follows is that when a cheque is drawn to pay wholly or in part, a
debt which is not enforceable only by reason of bar of limitation, the
cheque amounts to a promise governed by the Sub-section (3) of
Section 25 of the Contract Act. Such promise which is an agreement
becomes exception to the general rule that an agreement without
consideration is void. Though on the date of making such promise by
issuing a cheque, the debt which is promised to be paid may be already
time barred, in view of Sub-section(3) of Section 25 of the Contract Act,
the promise/agreement is valid and, therefore, the same is enforceable.
The promise to pay time barred debt becomes a valid contract as held
by the Apex Court in the case of A.V.Moorthy (supra). Therefore, the
first question will have to be answered in the affirmative.
CONSIDERATION OF THE SECOND QUESTION
16. Section 138 of the said Act of 1881 reads thus:-
"138. Dishonour of cheque for insufficiency, etc., of funds in the account.-- Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be
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punished with imprisonment for a term which may extend to [two year], or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply
unless--
(a) the cheque has been presented to the bank within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the
payment of the said amount of money by giving a notice in writing, to the drawer of the cheque,
within [thirty] days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course
of the cheque within fifteen days of the receipt of the said notice.
Explanation.--For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.
17. Sections 118 and 139 of the said Act of 1881 read thus:-
"118. Presumptions as to negotiable instruments.--
Until the contrary is proved, the following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
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(b) as to date: that every negotiable instrument
bearing a date was made or drawn on such date;
(c) as to time of acceptance: that every accepted bill of exchange was accepted within a
reasonable time after its date and before its maturity;
(d) as to time of transfer: that every transfer of
negotiable instrument was made before its maturity;
(e) as to order of indorsement: that the indorsements appearing upon a negotiable
instrument were made in the order in which they igappear thereon;
(f) as to stamp: that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course: that the holder of a negotiable instrument is a holder in due course:
Provided that, where the instrument has been obtained
from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud or for unlawful
consideration, the burden of proving that the holder is a holder in due course lies upon him."
"139. Presumption in favour of holder.--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 the discharge, in whole or in part, of any debt or other liability."
'
18. Under Section 118, there is a rebuttable presumption that
every negotiable instrument was made or drawn for consideration.
Section 139 creates a rebuttable presumption in favour of a holder of a
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cheque. The presumption is 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 liability. Thus, under the aforesaid two
Sections, there are rebuttable presumptions which extend to the
existence of consideration and to the fact that the cheque was for the
discharge of any debt or liability.
19. Under the Explanation to Section 138, the debt or other
liability referred to in the main Section has to be a legally enforceable
debt or liability. Merely because a cheque is drawn for discharge, in
whole or in part of the debt or other liability, Section 138 of the said Act
of 1881 will not be attracted. The provision will apply provided the debt
or other liability is legally enforceable. Thus, Section 138 will not apply
to a cheque drawn in discharge of a debt or liability which is not legally
enforceable. There may be several categories of debts or other
liabilities which are not legally enforceable. A debt or liability is legally
enforceable if the same can be lawfully recovered by adopting due
process of law. The emphasis is on the fact that the debt or other
liability must be a legally enforceable liability. A debt or liability ceases
to be legally enforceable after expiry of the period of limitation
provided in the law of limitation for filing a suit for recovery of the
amount. Thus, a time barred debt by no stretch of imagination can be
said to be a legally enforceable debt within the meaning of the
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explanation to Section 138.
20. While recording our answer to the first Question, we have
already held that a cheque issued for discharge of a debt which is
barred by law of limitation is itself a promise within the meaning of
Sub-section (3) of Section 25 of the Contract Act. A promise is an
agreement and such promise which is covered by Section 25(3) of the
Contract Act becomes enforceable contract provided that the same is
not otherwise void under the Contract Act.
21. Therefore, while answering second Question, we are
specifically dealing with a case of promise created by a cheque issued
for discharge of a time barred debt or liability. Once it is held that a
cheque drawn for discharge of a time barred debt creates a promise
which becomes enforceable contract, it cannot be said that the cheque
is drawn in discharge of debt or liability which is not legally
enforceable. The promise in the form of a cheque drawn in discharge
of a time barred debt or liability becomes enforceable by virtue of Sub-
section (3) of Section 25 of the Contract Act. Thus, such cheque
becomes a cheque drawn in discharge of a legally enforceable debt as
contemplated by the explanation to Section 138 of the said Act of 1881.
Therefore, even the second question will have to be answered in the
affirmative.
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22. Therefore, we answer both the questions in the affirmative.
We direct that these Applications/Petitions shall be placed before the
appropriate Court for disposal in accordance with law.
( SMT. SADHANA S.JADHAV, J ) ( A.S. OKA, J )
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