Judgment:
K. Bhakthavatsala, J.
1. The short question that arises for consideration in this appeal is:
Whether the dishonoured cheques issued towards repayment of time barred debt does not constitute an offence under Section 138 of the N.I. Act?
2. Heard Sri H.T. Nataraja, learned Counsel for the appellant/complainant and Sri B.C. Rajanna, learned Counsel for the respondent/accused.
3. For the purpose of convenience, the appellant and the respondent herein are referred to as 'the complainant' and 'the accused', respectively.
4. The complainant and the accused were friends and colleagues in the then Karnataka Electricity Board. When the accused was about to retire, he approached the complainant for a loan of Rs. 60,0007 and agreed to repay the same within a short period. The complainant advanced a sum of Rs. 60,0007 to the accused in this way that a sum of Rs. 2007 was paid in cash and the balance amount of Rs. 59,8007- was paid by three cheques. The accused has encashed the cheques. Though the loan amount was repayable within a short period, the accused took undue advantage of friendship with the complainant and agreed to repay the loan within six months with interest at the rate of 8% p.a., but the accused failed to keep up his promise. On complainant's persistent demand, the accused issued two cheques, one bearing No. 152400 dated 15.5.1999 for a sum of Rs. 50,000/- and another cheque bearing No. 152921 dated 25.5.1999 for a sum of Rs. 10,0007- both drawn on the Bangalore City Co-operative Bank Limited, Bangalore, in favour of the complainant towards discharge of the loan amount stating that the cheques would be honoured on presentation to the Banker. But when the cheques were presented, they were bounced and returned on 1.6.1999 with an endorsement 'funds insufficient'. The complainant issued a demand notice dated 10.6.1999 calling upon the accused to pay the amount of dishonoured cheques within 15 days. The accused acknowledged the receipt of the same but sent an untenable reply dated 24.6.1999. Therefore, the complainant filed a private complaint against the accused for the offence under Section 138 of the Negotiable Instruments Act (in short, 'the Act'). The accused denied the accusation. The complainant has got him examined as P.W-1 and got marked Exs. P-1 to P-10. In rebuttal, the accused has got him examined as D.W-1 besides examining one Khalandar Baigh as D.W-2.
5. The Learned Magistrate has accepted the evidence of the complainant and held that in the year 1994, the complainant gave loan of Rs. 60,0007- to the accused, but rejected the complainant on the ground that the accused had issued the cheques in the month of May 1999 as against time barred debt, and there was no evidence to show that the accused had acknowledged the debt within 3 years of loan. Therefore, the Trial Court recorded an order of acquittal in favour of the accused. This is impugned in this appeal.
6. The learned Counsel for the complainant submitted that the Learned Magistrate committed an error in dismissing the complaint. He cited the following decisions reported in:
(i) A.V. MURTHY v. B.S. NAGABASAVANNA 2002 AIR SCW 694
(ii) RAMAKRISHNAN v. PARTHASARADHT 2003 (3) Indian Civil Cases 662
7. The learned Counsel for the respondent/accused submitted that there is no illegality or infirmity in the impugned judgment.
8. The complainant has produced pass books at Exs. P-8 and P-9. As per Exs. P-8 and P-9, the pass books of the complainant, issued by Union Bank of India and Syndicate Bank, it is crystal clear that the accused has drawn in all amounting to Rs. 59,800/- between 31.5.1994 and 12.6.1994. A sum of Rs. 200/ - was paid in cash by complainant to the accused. The learned Trial Judge rejected the contention of the accused that he drew the amounts and paid the complainant and held that the complainant had advanced hand loan of Rs. 60,000/- to the accused in the year 1994.
9. Section 138 of the Act, which was inserted by Amendment Act, 1988, and came into force form 1.4.1989 reads as under:
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 punished with imprisonment for a term which may extend to one 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 fifteen 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 purpose of this section, 'debt or other liability' means a legally enforceable debt or other liability.
12. Admittedly, the loan transaction took place in the month of May, 1994. The accused issued two cheques one cheque dated 15.5.1999 for a sum of Rs. 50,000/- and another cheque dated 25.5.1999 for a sum of Rs. 10,000/-(both drawn on Bangalore City Co-operative Bank Limited, Bangalore,) in favour of the complainant towards discharge of the loan amount. As on 12.6.1997, the entire debt of Rs. 60,000/- had become time barred, but there is no legal bar for the debtor agreeing to pay the time barred debt. No fresh consideration is required for debtor's promise to pay the time barred debt. There is moral obligation on the accused, who is none other than the friend of the complainant, to refund the loan amount. It would be useful to refer to the observation made by Lord Mansfield, in Hawkers v. Saunders (1782) 98 ER 1091 which reads as under:
Where a man is under a legal or equitable obligation to pay, the law implies a promise, though none was ever actually made. A fortiori, a legal or equitable duty is a sufficient consideration for an actual promise. Where a man is under a moral obligation, which no Court of Law or Equity can enforce, and promises, the honesty and rectitude of the thing is a consideration. As if a man promises, to pay a just debt, the recovery of which is barred by the Statute of Limitations; or, if a man, after he comes of age, promises to pay a meritorious debt contracted during his minority, but not for necessaries; or if a bankrupt, in affluent circumstances after his certificate, promises to pay the whole of his debts; or if a man promises to perform a secret trust, or a trust void for want of writing, by the Statute of Frauds.
In such and many other instances, though the promise gives a compulsory remedy, where there was none before either in law or equity; yet as the promise is only to do what an honest man ought to do, the ties of conscience upon an upright mind are a sufficient consideration.
11. The Hon'ble Apex Court in A.V. Murthy v. B.S. Nagabasavanna, supra, has made an observation in para-5 of the judgment as under:.Under Section 118 of the Act, there is a presumption (hat until the contrary is proved, every negotiable instruments 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 of 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, 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....
12. The Division Bench of the Kerala High Court in Ramakrishnan case, supra, following the ratio laid down in the A. V. Murthy's case, supra, held that when a person writes, signs and delivers a cheque to another it is an acknowledgement of a legally enforceable liability and therefore, if the cheque is dishonoured such a person shall not be entitled to plead that at the time of his writing the cheque the claim had become barred by limitation and thus, he is not liable to be punished under Section 138 of the Act.
13. The complainant has not disputed his signature on the dishonoured cheques in question. Therefore, they constitute an agreement or promise by the debtor to pay the time barred debt, Since the accused has not paid the cheque amounts inspite of demand made by the complainant the accused has committed an offence under Section 138 of the Act. The learned Magistrate has committed an error in dismissing the complaint and recording and order of acquittal in favour of the accused.
14. For the foregoing reaons, I answer the point formulated for my consideration in the negative.
In the result, the Appeal is allowed and the impugned judgment dated 20.11.2001 made in C.C.No. 35100/1999 on the file of XVI Addl. Chief Metropolitan Magistrate at Bangalore, is set aside and the respondent/accused is convicted for the offence under Section 138 of the Act and sentenced to pay a sum of Rs 1,00,000/-, failing which the accused shall undergo S1 for six months. If the fine amount is recovered, the appellant/complainant shall be paid a sum of Rs. 90,000/-, as compensation.