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Arjunlal Dhanji Rathod v. Dayaram Premji Padhiar .
Factual and Procedural Background
This appeal by the defendant arises from a money suit filed by the plaintiff for recovery of Rs. 2,000. The plaintiff alleged that he advanced a loan of Rs. 6,250 to the defendant on 20-12-1959 and that the defendant promised to return the entire loan in June 1960. No handnote supported the advance; instead, on 20-12-1959 the defendant issued four post-dated cheques in favour of the plaintiff, to be presented in June 1960 (with liberty to present earlier if necessary). Those cheques were dishonoured. The plaintiff repeatedly sought repayment; the defendant paid Rs. 4,250 in November or December 1962 and promised to pay the remaining Rs. 2,000 within one month, which was not paid. The plaintiff instituted the suit on 19-4-1963.
The defendant's pleaded case was that he paid Rs. 4,250 on 29-11-1962, Rs. 1,500 by cheque No. 143257 dated 28-2-1961 (paid on 3-3-1961), and Rs. 500 in cash on 17-12-1962, leaving nothing due; he also pleaded that the suit was barred by limitation.
At trial the learned Munsif held that the defendant's plea of payment was correct and that the plaintiff's claim was barred by limitation, and dismissed the suit. On first appeal the learned Subordinate Judge held that payment of Rs. 1,500 was proved but payment of Rs. 500 was not; the Subordinate Judge allowed the appeal in part and decreed Rs. 500 in favour of the plaintiff. The defendant filed this second appeal challenging that decree.
Legal Issues Presented
- Whether the plaintiff's suit for Rs. 2,000 was barred by limitation.
- Whether issuance (and subsequent dishonour) of a post-dated cheque dated 20-4-1960 (issued 20-12-1959) operated as an acknowledgment or part payment so as to extend or save the period of limitation under Section 20 of the Limitation Act.
- Whether the alleged payment of Rs. 1,500 by cheque dated 28-2-1961 (purportedly cashed on 3 or 8 March 1961) constituted a payment/acknowledgment within the meaning of Section 20 and thereby extended the period of limitation.
Arguments of the Parties
Appellant's (Defendant's) Arguments
- The suit ought to have been dismissed as barred by limitation; the finding by the Subordinate Judge that Rs. 500 payment plea was incorrect could not be challenged in this second appeal, so the appellant relied on the limitation plea.
- The learned Subordinate Judge erred in holding that a cheque (Ext. 1) dated 20-4-1960 saved the period of limitation by creating a new cause of action on dishonour date; the cheque having been dishonoured, there was no payment and the period of limitation could not be counted from 20-4-1960.
- Counsel relied on Chintaman Dhundiraj v. Sadguru Narayan Maharaj Datta Sansthan (AIR 1956 Bom 553) to argue that a dishonoured cheque is not an acknowledgment of liability or part payment under Section 20.
- Counsel also relied on Jiwanlal Achariya v. Rameshwarlal Agarwalla (AIR 1967 SC 1118) for the proposition that where a post-dated cheque is accepted conditionally and is honoured, payment for the purposes of Section 20 can only be the date on the cheque (though he accepted that Jiwanlal dealt with an honoured cheque and not a dishonoured one).
- An alternate contention (not pressed eventually) was that because Ext. 1 was made over on 20-12-1959, limitation ought to be counted from that date; but this was not pursued in view of the reliance on the other authorities.
Respondent's (Plaintiff's) Arguments
- Even if Ext. 1 (the post-dated cheque) did not save the period of limitation, the defendant issued another cheque dated 28-2-1961 for Rs. 1,500 which was cashed on 3rd or 8th March 1961; that payment reduced the debt and thus the suit was within three years from that payment.
- Although the physical cheque for Rs. 1,500 was not produced, counsel relied on a letter (Ext. A) dated 6-7-1966 from the Manager, Bank of Bihar Ltd., addressed to the defendant, indicating that cheque No. 143257 of 28-2-1961 for Rs. 1,500 was credited in favour of P.S. Padhiar & Co., as evidence of payment by the defendant.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Chintaman Dhundiraj v. Sadguru Narayan Maharaj Datta Sansthan, AIR 1956 Bom 553 | Held that there is no acknowledgment of liability merely by giving a cheque which is dishonoured; a dishonoured cheque cannot be regarded as part payment within the meaning of Section 20 of the Limitation Act. | The court relied on this authority to support the proposition that the post-dated cheque (Ext. 1), being dishonoured, could not be treated as an acknowledgment or part payment to save or restart limitation. |
| Jiwanlal Achariya v. Rameshwarlal Agarwalla, AIR 1967 SC 1118 (1967 BLJR 189) | Where a post-dated cheque is accepted conditionally and it is honoured, the payment for purposes of Section 20 is the date on the cheque (not the date when the cheque was handed over). | The court cited this decision to explain that if a post-dated cheque is honoured, the operative date of payment is the cheque-date; but it distinguished that decision because Jiwanlal concerned an honoured cheque, whereas Ext. 1 was dishonoured, so no payment arose to affect limitation. |
| Sant Lal Mahton v. Kamla Prasad, AIR 1951 SC 477 | Interpreted Section 20: to attract its operation, payment must be made within the prescribed period and must be acknowledged in writing in the handwriting of or signed by the person making the payment; oral testimony is excluded. | The court applied Sant Lal Mahton to hold that the alleged Rs. 1,500 payment (for which the cheque was not produced) did not extend limitation because there was no written acknowledgment by the defendant in the required form; the bank letter (Ext. A) was insufficient to satisfy Section 20's requirement. |
Court's Reasoning and Analysis
The court proceeded in two analytical stages corresponding to two alternative bases relied on to save limitation.
-
Analysis of the post-dated cheque (Ext. 1) dated 20-4-1960 (issued 20-12-1959):
- The Subordinate Judge had taken the view that Ext. 1 saved the period of limitation because the cause of action arose on the dishonour of that cheque on 20-4-1960. The appellant contended that a dishonoured cheque cannot operate as payment or acknowledgment under Section 20.
- The court reviewed authorities. It noted that Jiwanlal Achariya establishes that, when a post-dated cheque is accepted conditionally and is honoured, the date on the cheque is the date of payment for Section 20. However, the court emphasised that Jiwanlal did not address the effect of a dishonoured cheque.
- The court accepted the principle from Chintaman Dhundiraj that a cheque which is dishonoured is not an acknowledgment of liability and cannot be regarded as part payment under Section 20. The court reasoned that dishonour means there was no payment either in part or whole, so the underlying debt continues to exist.
- The court observed that Section 20's opening words require that there must be a payment for its operation; thus, in the absence of actual payment (because Ext. 1 was dishonoured), Ext. 1 could not be used to compute limitation from 20-4-1960. Consequently, the Subordinate Judge erred in relying on Ext. 1 to save limitation.
-
Analysis of the alleged Rs. 1,500 payment by cheque dated 28-2-1961:
- The respondent relied on a bank manager's letter (Ext. A) indicating that cheque No. 143257 (28-2-1961) for Rs. 1,500 was credited in favour of P.S. Padhiar & Co., and argued that the cheque was cashed on 3rd or 8th March 1961, which would make the suit timely if limitation were computed from that payment.
- The court examined Section 20's proviso, which requires that an acknowledgment of payment appear in the handwriting of, or in a writing signed by, the person making the payment (the payer). The court relied on Sant Lal Mahton v. Kamla Prasad to stress that both payment within the prescribed period and written acknowledgment by the payer are essential to attract Section 20.
- The court found no writing in the defendant's handwriting or signed by him that amounted to the required acknowledgment. The bank letter (Ext. A) did not satisfy Section 20's requirement that the acknowledgment be in the payer's handwriting or signed by the payer. Therefore the alleged Rs. 1,500 payment could not be treated as extending the period of limitation.
In view of the above, the court concluded that neither Ext. 1 (the dishonoured post-dated cheque) nor the purported Rs. 1,500 payment operated to save or restart the limitation period under Section 20; accordingly the suit was barred by limitation.
Holding and Implications
Holding: Appeal allowed. The court set aside the judgment and decree of the lower appellate court to the extent that the plaintiff was held entitled to Rs. 500, and restored the trial court's judgment and decree dismissing the suit on the ground of limitation.
Implications:
- Direct effect on the parties: the plaintiff's suit is dismissed as barred by limitation; the plaintiff is not entitled even to the partial decree of Rs. 500 previously granted on appeal. The trial court's dismissal is restored.
- Costs: the court directed that, in the circumstances of the case, the parties will bear their own costs throughout.
- Broader precedent: the opinion applies and follows existing authorities on the effect of dishonoured cheques and on the strict requirements of Section 20 of the Limitation Act; the decision does not purport to create a new legal principle beyond those applications.
1. This appeal by the defendant arises out of a suit for recovery of a sum of Rs. 2000. The case of the plaintiff was that he advanced a loan of Rs. 6250 to the defendant on 20-12-1959 and the latter promised to return the entire amount of loan in the month of June 1960. The said advance of loan was, however, not supported by any handnote, but the defendant in token of the receipt of the said sum issued four, post-dated cheques on the same date 20-12-19591 in favour of the plaintiff. It was mutually agreed between the plaintiff and the defendant that the former would present those four cheques to his bankers for encashment in the month of June 1960 with the condition that in case of necessity the former could present the cheques on the dates mentioned in those four cheques. Those cheques were, however, dishonoured and then the plaintiff approached the defendant several times for the repayment of the loan, but the defendant did not pay any heed to it Later on, the defendant paid a sum of Rs. 4250 to the plaintiff in the month of November or December 1962 and promised to pay the balance of Rs. 2000 within one month. The said balance was never paid by the defendant, and hence the plaintiff instituted the money suit on 19-4-1963 for the relief indicated above. The case of the defendant, on the other hand, was that he paid a sum of Rs. 4250 to the plaintiff on 29-11-1962 and a sum of Rs. 1500 on 3-3-1961 through cheque No. 143257 dated 28-2-1961 and a further sum of Rs. 500 in cash on 17-12-1962. After these payments nothing was due and the claim of the plaintiff was falsa the other plea was that the suit was barred by limitation.
2. The learned Munsif held that the entire claim of the plaintiff was satis filed and the plea of payment raised by the defendant was correct. He further held that the claim of the plaintiff was barred by limitation. In view of these findings he dismissed the suit the plaintiff being aggrieved by the dismissal of the suit filed an appeal the learned Subordinate Judge held that the plea of payment in respect of the sum of Rs. 1500 was correct but the other plea in respect of Rs. 500 was not correct in view of that conclusion he allowed the appeal in part and decreed the suit of the plaintiff in respect of Rs. 500, with corresponding cost and pleader's fee at the minimum contested scale. Being aggrieved by this decree the defendant has filed this second appeal.
3. Learned counsel for the appellant submitted, in the first instance, that the suit of the plaintiff ought to have been dismissed on the ground that it was barred by limitation. He adopted this course in the appeal, inasmuch as the finding of the learned Subordinate Judge that the plea of payment in respect of Rs. 500 was Incorrect could not be challenged in this second appeal. He contended that the learned Subordinate Judge had erred in holding that the limitation for the suit was saved on account of the issuance of the cheque (Ext. 1) dated 20-4-1960 for the sum of Rs. 1250. This cheque (Ext. 1) was made over to the plaintiff on 20-12-1959 itself, but it was a post-dated cheque, as it bore the date 20-4-1960. This cheque was dishonoured on presentation, but the learned Subordinate Judge took the view that this cheque saved the period of limitation, Inasmuch as the plaintiff got a cause of action after 20-4-1960 when the said cheque was dishonored. Learned counsel for the appellant submitted that the said cheque having been dishonoured there was in fact no payment at all and the period of limitation could not in any event be counted from 20-4-1960. He relied on Chintaman Dhundiraj v. Sadguru Narayan Maharaj Datta Sansthan, (AIR 1956 Bom 553). A Division Bench of the Bombay High Court held as follows in that case:
“There is no acknowledgment of liability merely by giving a cheque which is dishonoured, and a cheque which is dishonoured cannot be regarded as part payment within the meaning of Section 20 of the Limitation Act.
4. Learned counsel relied on Jiwanlal Achariya v. Rameshwarlal Agarwalla.. 1967 BLJR 189 : (AIR 1967 SC 1118). The majority view in that case was expressed in these terms:
“But there can in our opinion be no doubt that where a post-dated cheque is accepted conditionally and it is honoured the payment for purposes of Section 20 of the Limitation Act can only be the date which the cheque bears and cannot be on the date the cheque is handed over, for the cheque being post-dated, can never be paid till the date on(?) the cheque arrives.”
5. In that case the cheque was dated February 25, 1954 and was honoured soon after and, therefore, the date of payment for the purpose of Section 20 of the Limitation Act was held to be 25th February, 1954. It is true that in the said case the question of considering the effect of a cheque which is dishonoured did not arise, but this much is clear that in the event of a cheque being honoured the date of payment for the purpose of Section 20 would be the date which the cheque in question bore and not the date when that cheque might have been made over by one party to the other. This reasoning can be easily appreciated, inasmuch as in the event of the cheque being dishonoured there is no payment at all either of the part of the debt or the whole of it with the result that the debt in question continues to exist. The opening words of Section 20 themselves indicate that there must be a payment and then only the effect of it has to be taken into account for the purpose of determining the period of limitation. I am accordingly of the view that the learned Subordinate Judge has erred in holding that the plaintiff could take in aid the aforesaid cheque (Ext. 1) in order to bring his claim within the period of limitation. The position is this that the period of limitation could not be counted from 20-4-1960, and the suit having been instituted beyond three years of the date of advance must be held to be barred by limitation.
6. Learned counsel for the appellant further submitted that although the cheque (Ext. 1) was dated 20-4-1960, yet it was made over to the plaintiff on 20-12-1959 (which was the date of advance of the loan) and as such even if the plaintiff wanted to take some assistance from that cheque, the period of limitation should be counted from 20-12-1959. This contention, however, was not subsequently pressed, inasmuch as he noticed that the decision of the Supreme Court in the case of Jiwanlal Achariya, 1967 BLJR 189 : (AIR 1967 SC 1118), already referred to above, would be of help to him in support of the other contention (already dealt with above) that there was no payment at all for the simple reason that the cheque dated 20-4-1960 was dishonoured.
7. Learned counsel for the respondent submitted that even if the aforesaid cheque (Ext 1) did not save the period of limitation, It was clear from the case of the defendant himself that he had issued a cheque dated 28-2-1961 for a sum of Rs. 1500 and the said cheque was cashed either on the 3rd or on the 8th of March, 1961. He pointed out that by the payment of Rs. 1500 out of the claim of Rs. 2000 the debt was satisfied in part, according to the defendant, and the suit had been rightly instituted within three years from the 3rd or the 8th of March, 1961. To begin with, it was not the case of the plaintiff that this payment of Rs. 1500 extended the period of limitation and, on the other hand, his case was that this sum was paid in respect of another debt. The cheque in respect of the said sum of Rs. 1500 has not been produced, but learned counsel for the plaintiff respondent relied on the letter (Ext. A) dated 6-7-1966 from the Manager, the Bank of Bihar Ltd. addressed to Shri A.D Rathod (the defendant). This letter was in connection with cheque No. 143257 of 28-2-1961 for Rs. 1500. The Manager of the Bank of Bihar informed the defendant that the amount of that cheque was credited in favour of P.S Padhiar & Co. He urged that although the cheque in respect of the sum of Rs. 1500 was not produced yet the aforesaid letter (Ext. A) sufficiently indicated that the defendant had paid a sum of Rs. 1500 to the plaintiff and this payment saved the period of limitation. It is difficult to accept this contention inasmuch as Section 20 reads thus:
“20. (1) Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy, or by his duly authorised agent, a fresh period of limitation shall be computed from the time when the payment was made:
Provided that, save in the case of a payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of or in a writing signed by, the person making the payment.
(2) ***”.
8. According to this proviso, the acknowledgment of the payment has to be in the handwriting of or in the writing signed by the person making the payment. In the present case, there is nothing in the writing of the defendant so as to amount to an acknowledgment. In Sant Lal Mahton v. Kamla Prasad, AIR 1951 SC 477 the provisions of Section 20 were considered by their Lordships and the relevant observations are these:
“It would be clear, we think, from the language of Section 20 of the Limitation Act, that to attract its operations two conditions are essential: first, the payment must be made within the prescribed period of limitation and secondly, it must be acknowledged by some form of writing either in the handwriting of the payer himself or signed by him. We agree with the Subordinate Judge that it is the payment which really extends the period of limitation under Section 20 of the Limitation Act; but the payment has got to be proved in a particular way and for reasons of policy the legislature insists on a written or signed acknowledgment as the only proof of payment and excludes oral testimony. Unless, therefore, there is acknowledgment in the required form/the payment by itself is of no avail. In view of the principles laid down in the aforesaid decision it cannot be held in the present case that there was any acknowledgment which could come within the purview of Section 20 of the Indian Limitation Act. There is thus no merit in the contention raised that the said payment of Rs. 1500 by the defendant extended the period of limitation.
9. For the reasons given above the appeal is allowed, the judgment and decree of the lower appellate Court are set aside to this extent that the plaintiff is not entitled to a decree even for a sum of Rs. 500 and the judgment and decree of the trial Court dismissing the suit on the ground of limitation are restored. In the circumstances of the present case, the parties will bear their own costs throughput.
10. Appeal allowed.
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