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Discussion > Criminal Law > Cheques > time barred debt and N I act   Unanswered Threads Post New Topic

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There are 18 Replies to this message


Ravikant Soni


LAWYER IN JAIPUR
[ Scorecard : 3577]
Posted On 14 October 2010 at 17:18 Report Abuse

With great respect to all my learned friends!!!

Here is a case where my client gave a cheque against a time barred debt of a bank. Loan was taken in 2003 and no installment was paid. In 2007 the bank officials filled up a cheque that was given at the time of taking loan. and that was dishonoured. Bank filed case against my client.

Can i get success on the basis of time barred loan? This fact is apparently proved on record.



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Goutam


Student
[ Scorecard : 264]
Posted On 14 October 2010 at 20:05 Report Abuse

Hi Ravikant.

                      Explain the facts of your case in details....

1.Whether ur Client has given the post dated cheque to the bank at the time of taking loan.

2.It was given as a security cheque.

3.On what conditions he gave the cheque to the bank.

4.Whether it is blank cheque or not.



Rajeev kulshreshtha


advocate
[ Scorecard : 2084]
Posted On 14 October 2010 at 20:06 Report Abuse

Yes . the loan is not legally  enforceable now and in case of 138 NI Act the loan should be legally enforceable. The acknowledgment of loan is time barred so in that case also u/s 18 limitation act it could not be recovered.



SACHIN AGARWAL


ADVOCATE
[ Scorecard : 1336]
Posted On 15 October 2010 at 01:51 Report Abuse

Yes. The Cheque issued for a time barred debt - Dishonored - Time barred debt is not a legally enforceable debt - Hence, accused cannot be convicted.

This view has been taken by Kerla High Court in the matter of JOSEPH V/S DEVASSIA reported in Civil Court Cases 2001 Volume I page 49



Tarun Thakur


advocate
[ Scorecard : 350]
Posted On 15 October 2010 at 19:03 Report Abuse

Above views are correct. Debt must be legally recoverable debt. But every case is decided upon its own facts.  check out the pleadings of Bank.. there must be something against u, because bank is an expert money lender....

 



manish


Advocate
[ Scorecard : 181]
Posted On 15 October 2010 at 20:14 Report Abuse

in cross it is admitted that the cheque was given at the time of taking loan on 2003 if yes then there is citation for time bar debt but recently i cant get it i will try to collect, advocate Tarun is right



Adesh Kumar Sharma


Senior Associate Lawyer
[ Scorecard : 308]
Posted On 20 October 2010 at 13:13 Report Abuse

My dear Friends,

In my opinion, the period of limitation of three years ought to have been computed not from the first date when the loan was disbursed  but from the date of the last instalment which was due and payable and  that only could have given a cause of action to the complainant to recover the amount lent to the accused. In the circumstances, therefore, the view that the period of limitation of three years had to be computed from the date of disbursement of the loan cannot be accepted. It should be computed from the last date of the last instalment which was payable and that is on or about last date of payment of last installment and only that would have given the cause of action for the complainant to file a Civil Suit and that is within a period of three years therefrom. 

Therefore you just need to find out the exact date of loan disbursement and the date for payment of  last  installment. If you find in computation that the cheque was given for time barred debt then the complaint is not maintainable. 

Further there is difference in opinions of Various High Courts, therefore you can go through the attached judgments and findout the difference as I hav attached some judgments in favour and against as well. 

But I would  hav been a Judge then in my opinion the complaint for time barred debt is not maintainable even in light of section 25 of Indin Contract Act, because prosecution under section 138 can be launched upon legally enforcable debt. Once the debt  is not legally enforcable that can not be legally enforcable by issuing a cheque after the period of limitation is over. This is the rule of interpretation that the every penal provision has to be interpreted strictly.

Thanks




Attached File (downloaded 335 times) :

Adesh Kumar Sharma


Senior Associate Lawyer
[ Scorecard : 308]
Posted On 20 October 2010 at 13:23 Report Abuse

Dear Mr. Soni,

On the fact your case is little bit different  as you said that the cheque was given at the time of loan disbursement, therefore  you plz provide the date of disbursing of loan and  date of payment for last installment and other particulars of the case, which you think that may facilitate to provide any opinion as its all about limitation. Then any clear opinion may be given. Because if the cheque used by the bank is within limitation then you can take a defence that the cheque in question was issued as a security cheque.

But no opinion can be firmed unless all the facts are made clear.

 

Thanks



Hemang


Advocate
[ Scorecard : 1383]
Posted On 18 June 2012 at 03:53 Report Abuse

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
corporatearmour@gmail.com 



Attached File (downloaded 186 times) :

Hemang


Advocate
[ Scorecard : 1383]
Posted On 18 June 2012 at 03:55 Report Abuse

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
corporatearmour@gmail.com 



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