A.V. MURTHYversusB.S. NAGABASAVANNA

A                                  A.V. MURTHY
                                           V.

                             B.S. NAGABASAVANNA

                               FEBRUARY 8, 2002

B                 [R.P. SETHI AND K.G. BALAKRISHNAN, JJ.]


          Negotiable Instruments Act, 1881:

           Section 138 and explanation thereto-Dishonour of cheque drawn in
C   respect of debt or liability for amount advanced earlier-Proceedings under
    the Section-Magistrate issued summons to the accused-Accusedfiled revision
    petition alleging that complaint was not maintainable-Sessions Court and
    High Court held there was no legally enforceable debt or liability a11d thus

D
    quashed the proceedings-On appeal, held, debt or liability not barred from
    being enforced under law-At the stage of issue ofsummons, it is incorrect to
    hold that such debt or liability not legally enforceable--Matter remanded to
    the Magistrate.
                                                                                      -
          Appellant and his friends advanced certain amount to respondent. Four
    years later, respondent issued a cheque in favour or appellant which was
E   dishonoured. Appellant then filed a complaint under Section 138 or the
    Negotiable Instruments Act, 1881. Magistrate issued summons to the
    respondent. Thereafter, respondent filed Criminal Revision alleging that the
    complaint was not maintainable as the amount was advanced four years prior
    to the date of issue or cheque and in view of the explanation to Section 138
F   there was no legally enforceable debt or liability against respondent. Sessions
    Judge allowed the Revision Petition in view of bar of limitation and quashed
    the complaint proceedings under Section 138. High Court upheld the Order.
    Hence the present appeal.


          Appellant contended that Sessions Judge was incorrect to hold that there
G was no legally enforceable debt or liability on the part of the respondent.
    Further more, the respondent had acknowledged the liability in his balance
    sheet.


          Allowing the appeal, the Court
H                                        906
         A.V. MURTHY v. B.S. NAGABASAVANNA [K.G. BALAKRISHNAN, J.) 907

            HELD : 1.1. Courts below were in error in quashing the complaint              A
      proceedings under the Negotiable Instruments Act, 1881 as this is not a case
      where the cheque was drawn in respect of a debt or liability which Wll3
      completely barred from being enforced under law. Further at the stage of
      issue of summons it was clearly illegal and erroneous to say that the cheque
      drawn by the respondent in respect of debt or liability was not legally             B
      enforeCllble. (909-D-E)

             1.2. As regards the contention that the respondent had acknowledged
.,.   the liobility in his bolance-sheet no final opinion is expressed as the matter is
      remanded to the Mllgiltrote. [902-C-D)

           CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.                          C
      206 of 2002.

           From the Judsment and Order dated 24.11.2000 of the Kamataka
      High Court ill Crl. R.P. No. 910 of 2000.

           Jagdeep Dhankar, Naresh Kaushik, Ms. Shilpa Chohan, Devashish                  D
      Bharuka and Lalita Kaushik for the Appellant.

            The Judgment of the Court was delivered by

            K.G. BALAKRISHNAN, J. Leave granted.
                                                                                          E
            This appeal is directed against the order passed by a learned Single
      Judge of the High Court of Karnataka. The appellant herein tiled a complaint
      before the Magistrate alleging that the respondent herein had committed an
      offence punishable under Section 138 of the Negotiable Instruments Act,
      1881 [for short, "the Act"]. The appellant alleged that he and his two friends
      had advanced a sum of Rs. 7.5 lakhs to the respondent about four years back         F
      to enable him to start a petrol pump and that the respondent did not pay back
      the said amount despite repeated demands and finally at the request of the
      appellant, on 30.3.1998 the respondent issued a cheque in favour of the
      appellant. The appellant presented the cheque for payment, but the cheque
      was dishonoured by the bank for the reason "Account closed". Thereafter,            G
      the appellant issued a statutory demand notice and as the respondent failed
      to pay the amount, a complaint was filed before the Magistrate by the appellant.
      In the complaint, it was alleged that the appellant and his two friends advanced
      the said sum of Rs. 7 .5 lakhs to the respondent about four years prior to the
      date of issue of the cheque by the respondent. The learned Magistrate issued
      summons to the respondent. The respondent filed a Criminal Revision before          H
   908                     SUPREME COURT REPORTS                    [2002) 1 S.C.R.

A the llnd Addi. Sessions Judge, Mysore, alleging that the complaint was not
  maintainable as the amount advanced by the appellant to him was about four
  years prior to the date of issue of the cheque, and in view of the 'Explanation'     ..
  appended to Section 138 of the Act, there was no legally enforceable debt or
  liability as against the respondent. The Addi. Sessions Judge accepted this
  plea and held that even on the basis of the averments in the complaint and
B the sworn statement of the complainant, the alleged borrowing was four years
  prior to the issuance of the cheque and hence that debt was not legally
  enforceable in view of the bar of limitation and, therefore, the Magistrate was
  in error in taking cognizance of the alleged offence under Section 138 of the
  Act. As a result, the Addi. Sessions Judge quashed the entire proceedings and
C aggrieved thereby, the appellant filed a Criminal Revision before the High
  Court of Kamataka but the learned Single Judge upheld the view of the Addi.
  Sessions Judge. The appeal has now come up before us.

         We heard learned counsel for the appellant. Learned counsel contended
  that it was incorrect on the part of the Sessions Judge to hold that there was
D no legally enforceable debt or liability on the part of the respondent. He also
  contended that when a cheque is issued, under Section 118 of the Act, it has
                                                                                            --
  to be presumed that it was drawn for consideration. It was further contended
  that even though the appellant and his friends advanced the loan about four
  years back, the respondent had acknowledged this liability in his balance
E sheet and that even for the purpose of a civil suit, such debt or liability is not
  barred by limitation.

        The respondent refused to accept notice and we did not have the
  advantage of hearing him. The respondent seems to have contended that as
  the loan was advanced four years prior to the issuance of the cheque, the debt
F or the liability for which the cheque was drawn by him had ceased to be
  legally enforceable and, therefore, no complaint could have been filed by the
  complainant under Section .138 of the Act.

          As the complaint has been rejected at the threshold, we do not propose
G to express any opinion on this question as the matter is yet to be agitated by
  the parties. But, we are of the view that the learned Sessions Judge and the
  learned Single Judge of the High Court were clearly in error in quashing the
  complaint proceedings. Under Section 118 of the Act, there is a presumption
  that until the contrary is proved, every negotiable instrument was drawn for
  consideration. Even under Section 139 of the Act, it is specifically stated that
H it shall be presumed, unless the contrary is proved, that the holder of a
               A.V. MURTHY v. B.S. NAGABASAVANNA [K.G. BALAKRISHNAN, J.J 909

        cheque received the cheque of the nature referred to in Section 138 for A
        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 Act,
        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. Moreover, B
        in the instant, the appellant has submitted before us that the respondent, in
        his balance sheet prepared for every year sub&equent to the loan advanced by
        the appellant, had shown the amount as deposits from friends. A copy of the
  "I'   balance sheet as on 31st March 1997 is also produced before us. If the
        amount borrowed by the respondent is shown in the balance sheet, it may C
        amount to acknowledgement and the creditor might have a fresh period of
        limitation from the date on which the acknowledgement was made. However,
        we do not express any final opinion on all these aspects, as these are matters
        to be agitated before the Magistrate by way of defence of the respondent.

               This is not a case where the cheque was drawn in respect of a debt or D
        liability, which was completely barred from being enforced under law. If for
...     example, the cheque was drawn in respect of a debt or liability payable under
        a wagering contract, it could have been said that that debt or liability is not
        legally enforceable as it is a claim, which is prohibited under law. This case
        is not a case of that type. But we are certain that at this stage of the proceedings, E
        to say that the cheque drawn by the respondent was in respect of a debt or
        liability, which was not legally enforceable, was clearly illegal and erroneous.

               Therefore, we set aside the order passed by the learned Single Judge of
        the High Court, allow this appeal and remand the matter to the Magistrate to
        proceed with the complaint in accordance with law. We make it clear that F
        whatever has been stated by us regarding enforceability of the debt or liability
        is for the purpose of these prcceedings and the respondent would be at liberty
        to set up all legally available defences.

                There will be no order as to costs.
                                                                                            G
        N.J.                                                            Appeal allowed.