Wednesday, 22, Apr, 2026
 
 
 
Expand O P Jindal Global University
 
  
  
 
 
 

Mr. Dinesh B. Chokshi vs Rahul Vasudeo Bhatt
2012 Latest Caselaw 224 Bom

Citation : 2012 Latest Caselaw 224 Bom
Judgement Date : 19 October, 2012

Bombay High Court
Mr. Dinesh B. Chokshi vs Rahul Vasudeo Bhatt on 19 October, 2012
Bench: A.S. Oka, S.S. Jadhav
     ash                                         1               crappln-2933.07-grp

                                           

                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



                                                 ::: Downloaded on - 09/06/2013 19:18:17 :::
      ash                                         2               crappln-2933.07-grp

     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)

                                                 ::: Downloaded on - 09/06/2013 19:18:17 :::
      ash                                                 3              crappln-2933.07-grp

            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.
            --




                                                        ::: Downloaded on - 09/06/2013 19:18:17 :::
      ash                                                4               crappln-2933.07-grp

                                  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 ?

ash 5 crappln-2933.07-grp

(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

ash 6 crappln-2933.07-grp

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

ash 7 crappln-2933.07-grp

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;

      ash                                                     8              crappln-2933.07-grp

                     (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 



      ash                                                   9              crappln-2933.07-grp

     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

ash 10 crappln-2933.07-grp

(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

ash 11 crappln-2933.07-grp

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

ash 12 crappln-2933.07-grp

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,

ash 13 crappln-2933.07-grp

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:-

ash 14 crappln-2933.07-grp

"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:

ash 15 crappln-2933.07-grp

"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.

ash 16 crappln-2933.07-grp

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

ash 17 crappln-2933.07-grp

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;

      ash                                            18              crappln-2933.07-grp

                  (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

ash 19 crappln-2933.07-grp

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

ash 20 crappln-2933.07-grp

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.

ash 21 crappln-2933.07-grp

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 ) 




                                    
                      
                     
      
   







 

 
Download the LatestLaws.com Mobile App
 
 
Latestlaws Newsletter
 

Publish Your Article

 

Campus Ambassador

 

Media Partner

 

Campus Buzz

 

LatestLaws Guest Court Correspondent

LatestLaws Guest Court Correspondent Apply Now!
 

LatestLaws.com presents: Lexidem Offline Internship Program, 2026

 

LatestLaws.com presents 'Lexidem Online Internship, 2026', Apply Now!

 
 

LatestLaws Partner Event : IDRC

 
 
Latestlaws Newsletter