S. Natarajan v. Sama Dharman

ORDER

1. Leave granted. The Appellant is the complainant in C.C. No. 250 of 2011. It is his case that on 6/5/2006, the Respondents/accused had received a sum of ` 49,000/- from him. On 4/7/2006, they have received a further sum of ` 1,00,000/-. On the same day, they received another sum of ` 1,00,000/-. It is further the case of the Appellant that on 11/1/2007, the accused have received ` 50,000/- and subsequently they have received ` 1,000/-. Thus, according to the complainant, a total sum of ` 3,00,000/- has been received by the accused. According to the Appellant, to discharge the said debt, accused No. 1 gave a cheque dated 1/2/2011. The Appellant presented the said cheque for payment through his bank on 2/2/2011. The said cheque was dishonoured on the ground that the accused did not have sufficient funds in their account. A copy of the Memorandum dated 12/2/2011 issued by the Karur Vysya Bank Limited is on record at Annexure P-1.

2. Inasmuch as the said cheque was dishonoured, the Appellant issued Notice dated 2/3/2011 to the accused calling upon them to pay the cheque amount of ` 3,00,000/- within 15 days. The accused replied to the said notice contending that the Appellant and his son were working as partners with the accused; that the accused had signed blank cheques which had been stolen by the Appellant and his son; that the business of the accused ran into loss and was closed in the year 2008; that upon closure of the business, there were no business relations between them; and that by misusing the stolen cheque, a false claim was being made by the Appellant. Since the accused failed to comply with the demand made in the Notice dated 2/3/2011, the Appellant filed a complaint Under Section 138 of the Negotiable Instruments Act, 1881 ('the NI Act') being C.C. No. 250 of 2011 in the Court of learned Judicial Magistrate, Musiri.

3. The accused moved an application Under Section 482 of the Code of Criminal Procedure ("the Code") in the Madras High Court for quashing of the said complaint. The accused inter alia pleaded that no amount had been borrowed by the accused; that the dishonoured cheque had not been issued for a legally enforceable debt and that the complaint was barred by time. By the impugned order, the High Court quashed the proceedings in Criminal O.P. (MD) No. 3824 of 2012 and M.P.(MD) Nos. 1and 2 of 2012 holding that the complaint was time barred. The said order is challenged in this appeal.

4. We have heard Learned Counsel for the Appellant and Learned Counsel for the Respondents.

5. The High Court referred to Section 25(3) of the Indian Contract Act, 1872 on which reliance was placed by the complainant and observed that with regard to payment of time barred debt, there must be a distinct promise to pay either whole or in part the debt; that the promise must be in writing either signed by the person concerned or by his duly appointed agent. The High Court then observed that unless a specific direction in the form of novation is created with regard to payment of the time barred debt, Section 25(3) of the Contract Act cannot be invoked. The High Court then went into the question whether issuance of cheque itself is a promise to pay time barred debt and referred to sections 4 and 6 of the ni act. After referring to certain judgments on the question of legally enforceable debt, the High Court stated that for the purpose of invoking Section 138 read with Section 142 of the NI Act, the cheque in question must be issued in respect of legally enforceable debt or other liability. The High Court then observed that since at the time of issuance of cheque i.e., on 1/2/2011, the alleged debt of the accused had become time barred, the proceedings deserve to be quashed.

6. In our opinion, the High Court erred in quashing the complaint on the ground that the debt or liability was barred by limitation and, therefore, there was no legally enforceable debt or liability against the accused. The case before the High Court was not of such a nature which could have persuaded the High Court to draw such a definite conclusion at this stage. Whether the debt was time barred or not can be decided only after the evidence is adduced, it being a mixed question of law and fact.

7. In this connection, we may usefully refer to a judgment of this Court in A.V Murthy v. B.S Nagabasavanna. (2002) 2 SCC 642 where the accused had alleged that the cheque issued by him in favour of the complainant in respect of sum advanced to the accused by the complainant four years ago was dishonoured by the bank for the reasons "account closed". The Magistrate had issued summons to the accused. The Sessions Court quashed the proceedings on the ground that the alleged debt was barred by limitation at the time of issuance of cheque and, therefore, there was no legally enforceable debt or liability against the accused under the Explanation to section 138 of the ni act and, therefore, the complaint was not maintainable. While dealing with the challenge to this order, this Court observed that Under section 118 of the ni act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. This Court further observed that section 139 of the ni act specifically notes 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 the ni act for discharge, in whole or in part, of any debt or other liability. This Court further observed that under Sub-section (3) of Section 25 of the Contract Act, 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. Referring to the facts before it, this Court observed that the complainant therein had submitted his balance sheet, prepared for every year subsequent to the loan advanced by the complainant and had shown the amount as deposits from friends. This Court noticed that the relevant balance sheet is also produced in the Court. This Court observed that if the amount borrowed by the accused therein is shown in the balance sheet, it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. After highlighting further facts of the case, this Court held that at this stage of proceedings, to say that the cheque drawn by the accused was in respect of a debt or liability, which was not legally enforceable, was clearly illegal and erroneous. In the circumstances, this Court set aside the order passed by the High Court upholding the Sessions Court's order quashing the entire proceedings on the ground that the debt or liability is barred by limitation and, hence, the complaint was not maintainable. It is, therefore, clear that the contention urged by the Appellant herein can be examined only during trial since it involves examination of facts.

8. In Rangappa v. Sri Mohan. (2010) 11 SCC 441, the legal question before this Court pertained to the proper interpretation of section 139 of the ni act which shifts the burden of proof on to the accused in cheque bouncing cases. This Court observed that the presumption mandated by section 139 of the ni act includes a presumption that there exists a legally enforceable debt or liability. This is of course in the nature of rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. This Court further observed that section 139 of the ni act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. This Court clarified that the reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. This Court, then, explained the manner in which this statutory presumption can be rebutted. Thus, in cheque bouncing cases, the initial presumption incorporated in section 139 of the ni act favours the complainant and the accused can rebut the said presumption and discharge the reverse onus by adducing evidence.

9. In our opinion, therefore, the High Court could not have quashed the proceedings on the ground that at the time of issuance of cheque, the debt had become time barred and therefore, the complaint was not maintainable. The High Court, therefore, fell into a grave error in quashing the proceedings.

10. In the result, the impugned order dated 25/7/2012 is set aside. The trial court shall proceed with the case. The appeal is allowed in the afore-stated terms.