Period of limitation starts from the date, the account was declared NPA. However, the last payment is also very relevant. The Supreme Court has confirmed the judgment of Kerala High Court that laid down a law that the penal provision is not attracted in case of time barred debt. Please go through the following illustration and cases:
Time barred debt: Accused cannot be convicted...Not a legally enforceable debt...
On 11.7.1987, the accused received an amount of Rs. 22,000.00 from the complainant with a promise that he would get a plot for the complainant. Thereafter, the accused neither gave the plot as promised by him nor returned the amount of Rs. 22,000.00 to the complainant. Subsequently, on several demands made by the complainant, the accused issued a cheque dated 25.8.1994 for Rs. 25,000.00. When the said cheque was presented before the concerned Bank for realization, it was dishonoured five times for want of sufficient funds. Therefore, the complainant got issued a statutory notice to the accused calling upon him to pay the amount, but the accused failed to pay the amount covered by the cheque. Hence, the complaint was filed against the accused for the offence punishable under Section 138 of the Negotiable Instruments Act.
Accused contended that the cheque was not issued in discharge of a legally enforceable debt, and that since the cheque was issued on 25.8.1994, the claim of the complainant is barred by limitation. It was further contended that there was no cause of action for the complainant to recover the amount through the process of the Court and that the time-barred debt cannot be recovered.
To prove the offence under Section 138 of the Negotiable Instruments Act, three conditions have to be fulfilled: firstly 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; secondly the payee or the holder in due course of the cheque, as the case may be, has made 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 thirdly 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. The Explanation to Section 138 of the Act says that "debt or other liability" means a legally enforceable debt or other liability. Once the accused admits the issuance of the cheque, the burden shifts to the accused to show that it was not a legally enforceable debt as provided under Section 139 of the Act.
"Section 138 is attracted only if the cheque is issued for the discharge of a legally enforceable debt or other liability. In this case, admittedly, the cheque in question was issued in discharge of a time-barred debt. It cannot be said that a time-barred debt is a equally enforceable debt". (Joseph v. Devassia, 2000(2) ALT (Criminal) 416 Kerala)
(Please see the case decided by the Andhra High Court : A. Yesubabu vs D. Appala Swamyand another decided on 29th August, 2003 : 2003 (2) ALD Cri 707= III (2004) BC 48 : Bench: K Bhanu) (See the Delhi High Court judgment that relies upon Supreme Court judgment confirming Kerala judgment on appeal)
On other issue, please ascertain as to whether the Cheque that was given at the time of disbursement of loan was taken by way of security? Generally, it is so. A cheque that is handed over by way of security cannot be enforced, because the law is that on such date, no debt could be said to have been due or incurred. Similarly, the blank cheque, if given does not even fall within the definition of Bill of exchange. It becomes a posted dated cheque when tendered, but again there could be a plea of instrument by way of "security". At the same time, you can always plead or take in defence the factum of "material alteration", if the rest of the facts and figures are not filled in by you.
Hemang D. Rana