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2019 DIGILAW 16 (AP)

Padala Veera Venkata Satyanarayana Reddy v. State of Andhra Pradesh

2019-02-12

T.RAJANI

body2019
ORDER : T. RAJANI, J. 1. Since the subject-matter of these petitions are one and the same, these petitions are being disposed of by this common order. 2. These petitions are filed seeking for quash of the proceedings against the respective petitioners in CC Nos. 250, 255 and 254 of 2018 on the file of the Court of IV Special Magistrate, Visakhapatnam and CC No. 1346 of 2017 on the file of the Court of I Additional Chief Metropolitan Magistrate at Visakhapatnam and CC Nos. 681 and 644 of 2017 on the file of the Court of II Additional Chief Metropolitan Magistrate at Visakhapatnam respectively. The offences alleged are under Sections 138 and 142 of the Negotiable Instruments Act, 1881. 3. For the sake of convenience, the respective petitioners and the respective complainants i.e., the 2nd respondent in these petitions will be referred to as 'petitioners' and 2nd respondent' respectively. 4. Heard the Counsel for the petitioners as well as the Public Prosecutor appearing for the 1st respondent and the Counsel appearing for the 2nd respondent. 5. The prime ground, on which the relief of quash is based for, is that the cheques issued by the petitioners are towards a time barred debt and hence, no prosecution can lie against them. According to the averments in the complaint, the petitioners approached the 2nd respondent and there were business transactions between them. The 2nd respondent is a medical practitioner while the petitioners have medical shops. The petitioners borrowed amounts from the 2nd respondent for different purposes and the petitioners failed to discharge the amounts taken by them from the 2nd respondent. The petitioners executed a demand promissory note, agreeing to pay the amount with interest at 24% per annum. The petitioners did not pay the said amounts and later issued cheque towards the discharge of the said amounts. The promissory note is also filed along with the complaint. The list of documents shows that the promissory notes are of the year 2012, while the cheques are issued in the year 2017. The date of issuance of cheques is beyond three years from the date of issuance of the promissory note. Hence, on the face of it, the cheques can be understood to have been issued towards a time barred debt. 6. The date of issuance of cheques is beyond three years from the date of issuance of the promissory note. Hence, on the face of it, the cheques can be understood to have been issued towards a time barred debt. 6. The Counsel for the 2nd respondent relies on a judgment of the Hon'ble High Court of Bombay in between Pragati Credit Co-operative v. Suresh, Criminal Application No. 2933 of 2007 and Batch. The High Court of Bombay dealt with two questions which are formulated by the Sessions Judge therein, which are as follows: "(i) Does the issuance of a cheque in repayment of a time barred debt amounts to a written promise to pay the said debt within the meaning of Section 25(3) of the Indian Contract Act, 1872? (ii) If it amounts to such a promise, does such a promise, by itself, create any legally enforceable debt or other liability as contemplated by Section 138 of the Negotiable Instruments Act, 1881?" By relying on the judgment of the Apex Court in National Insurance Company Limited v. Seema Malhotra and others, 2001 (2) ALD 68 (SC) : (2001) 3 SCC 151 , the Bombay High Court held that the drawer of the cheque promises to the person in whose favour the cheque is drawn or to whom a cheque is endorsed, that the cheque on presentation would yield the amount in cash. When a cheque is drawn to pay wholly or in part, a debt which is not enforceable only by reason of bar of limitation, the cheque amounts to a promise governed by the sub-section (3) of Section 25 of the Contract Act. Such promise which is an agreement becomes exception to the general rule that an agreement without consideration is void. It further held that though on the date of making such promise by issuing a cheque, the debt which is promised to be paid may be already time barred, in view of sub-section (3) of Section 25 of the Contract Act, the promise/agreement is valid and, therefore, the same is enforceable. 7. The Apex Court in National Insurance Company's case (supra), the ruling, which is relied upon by the Bombay High Court, dealt with the issue of the liability of the insurer when the cheque given by the insured towards the first premium amount is dishonoured by the drawee bank, to honour the contract of insurance. 7. The Apex Court in National Insurance Company's case (supra), the ruling, which is relied upon by the Bombay High Court, dealt with the issue of the liability of the insurer when the cheque given by the insured towards the first premium amount is dishonoured by the drawee bank, to honour the contract of insurance. The Court, in the above circumstances, held that the insurer would not be under any obligation to honour the contract of insurance as the insured did not fulfil the promise of paying premium by issuing a cheque. The said proposition cannot be applied to a case where cheque has to be issued towards a legally enforceable debt. 8. The proposition laid down by the Apex Court that by virtue of Section 25(3), the purpose for which the cheque is issued becomes a promise on the part of the drawer of the cheque, will hold good only if there is a reciprocal promise. The failure of the drawer of the cheque towards premium, to fulfil the promise of paying the premium, would relieve the promised from the obligation that underlies the insurance of the cheque, but does not become a basis for prosecution or action. Such promise which is an agreement becomes exception to the general rule that an agreement without consideration is void, is what is said by the Supreme Court. There was a reciprocal promise in the case before the Apex Court, which can be considered as the consideration. Promise without consideration, would be a gratuitous promise and has no legal force. A mere moral duty to perform a promise, like promise to subscribe to a charitable institution, is without consideration and void. This ratio is reflected in the judgment of the Hon'ble High Court of Madhya Pradesh reported in a case between Firm Gopal Co. Ltd. v. Firm Hazari Lal and Co., AIR 1963 MP 37 . The case of the promisor issuing cheque towards discharge of a time barred debt, would only be a promise to fulfil a moral duty and breach of such promise may subject him to civil liability, if the promise is construed as an agreement or even criminal liability if any criminality is made out from such promise. Section 25 of the Indian Contract Act makes a promise to discharge time barred debt a valid agreement. Section 25 of the Indian Contract Act makes a promise to discharge time barred debt a valid agreement. But such agreement cannot be made a basis for prosecution under Section 138 of N.I. Act. A cheque issued for discharge of debt no doubt carries a promise to discharge the time barred debt but, for a prosecution under Section 138 N.I. Act, there should be a legally enforceable debt by the date of issuance of cheque. Such cheque becomes an agreement between the promisor and promised and becomes enforceable, but does not allow prosecution. Unless there is a legally enforceable debt, the cheque issued, promising to discharge a time barred debt will not make the promisor liable under Section 138 of the N.I. Act. In a case under Section 138 of N.I. Act, the issuance of the cheque itself must be towards a legally enforceable debt. Hence, the reasoning given by the Hon'ble High Court of Bombay does not persuade this Court. 9. The Counsel for the petitioner relies on two judgments of this Court in Rakesh Agarwal v. K. Narasimha Rao, 2016 (1) ALT (Crl.) 136 (AP) and A. Yesubabu v. D. Appala Swamy, 2003 (2) ALD (Crl.) 707 (AP). In Rakesh Agarwal's case (supra), the Court held that once the promissory note debt is barred by time, it cannot be brought within Section 25 of the Contract Act treating the cheque as an acknowledgment of the time barred debt. In A. Yesubabu's case (supra), this Court held that if any cheque is issued by the accused after expiry of the limitation for releasing the debt, it cannot be said that it was issued for a legally enforceable debt. In the said case, the cheque was issued on 25.8.1994 nearly 7 years after the taking of the amount from the complainant. The Court considered the earlier ruling of this Court in Giridhar Lal Rathi v. P.T.V. Ramanujachar and another, 1997 (2) Crimes 658 , wherein the loan was advanced in the year 1985 and the cheque was issued in the year 1990. It was held therein that by the time the cheque was issued, the debt appears to have been barred by limitation because there no acknowledgment is alleged to have been obtained by the appellant from Rl-accused, before expiry of three years from the date of loan. It was held therein that by the time the cheque was issued, the debt appears to have been barred by limitation because there no acknowledgment is alleged to have been obtained by the appellant from Rl-accused, before expiry of three years from the date of loan. It was held that the debt was not legally enforceable at the time of issuance of cheque and, therefore, vide explanation to Section 138 of N.I. Act, which reads as under: "Explanation.--Until the debt is legally recoverable the drawer of the cheque cannot be fastened with liability under Section 138 of N.I. Act" the cheque cannot be said to have been issued towards discharge of legally enforceable debt." A Division Bench judgment of this Court was also relied upon by the High Court, which is rendered in Mr. Amit Desai and another v. Shine Enterprises and another, 2000 (1) ALD (Crl.) 587 (AP) : 2000 Cri. LJ 2386, wherein it was specifically laid down that the debt or other liability means a legally enforceable debt or other liability and enforcement of legal liability has to be in the nature of civil suit because the debt or other liability cannot be recovered by filing a criminal case and when there is a bar of filing a suit by unregistered firm, the bar equally applies to criminal case as laid down in Explanation (2) of Section 138 of Negotiable Instruments Act. 10. In these cases, as already observed, the limitation for enforcing the promissory notes expired much prior to the issuance of the cheques in question. Hence, in view of the above, this Court opines that the impugned complaints cannot be sustained and that these are fit cases for quashing of the proceedings against the petitioners. 11. With the above observations, the criminal petitions are allowed and the proceedings against the respective petitioners in CC Nos. 250, 255 and 254 of 2018 on the file of the Court of IV Special Magistrate, Visakhapatnam and CC No. 1346 of 2017 on the file of the Court of I Additional Chief Metropolitan Magistrate at Visakhapatnam and CC Nos. 681 and 644 of 2017 on the file of the Court of II Additional Chief Metropolitan Magistrate at Visakhapatnam respectively, are hereby quashed. 12. As a sequel, the miscellaneous applications, if any pending, shall stand closed.