Dishonour of Cheque : A cheque issued towards repayment of a time-barred debt constitutes a valid and enforceable

Rajasthan High Court Upholds Conviction in Cheque Bounce Case. Court Affirms Validity of Cheques Issued for Time-Barred Debt Under Indian Contract Act

In a landmark judgment, the Rajasthan High Court's Jaipur Bench, presided by Mr. Pramil Kumar Mathur, J., has upheld the conviction of Gopal Sharma in a cheque bounce case under Section 138 of the Negotiable Instruments Act, 1881. The court set aside the acquittal by the appellate court, reaffirming that a cheque issued for repayment of a time-barred debt constitutes a valid contract under Section 25(3) of the Indian Contract Act, 1872.

The case originated from multiple complaints filed by Ratiram Yadav against Gopal Sharma, concerning cheques drawn from the State Bank of Bikaner and Jaipur. These cheques, dated in 2013, were dishonored due to insufficient funds, prompting legal action. Despite legal notices, Sharma failed to fulfill the payment obligations, leading to his conviction by the trial court.

The appellate court had acquitted Sharma based on the argument that the debt was time-barred and not legally enforceable. However, the High Court overturned this decision, emphasizing that under Section 25(3) of the Indian Contract Act, a signed promise to pay a time-barred debt is enforceable. The court highlighted the presumptions under Sections 118 and 139 of the Negotiable Instruments Act, which place the burden of proof on the accused to rebut the presumption of liability.

The judgment underscored that a cheque issued, even if for a time-barred debt, revives the enforceability of the debt under the said provisions. Consequently, the High Court reinstated the trial court's conviction and sentence for Sharma, while maintaining the appellate court's conviction on one count with reduced sentence.

The decision has been hailed as a significant affirmation of the legal principles governing cheque bounces and the enforceability of time-barred debts, reinforcing the legislative intent behind the Negotiable Instruments Act.

Bottom Line:

A cheque issued towards repayment of a time-barred debt constitutes a valid and enforceable contract under Section 25(3) of the Indian Contract Act, 1872. Presumption under Sections 118 and 139 of the N.I. Act arises unless successfully rebutted.

Statutory provision(s): Section 138 of the Negotiable Instruments Act, 1881, Section 25(3) of the Indian Contract Act, 1872, Sections 118 and 139 of the Negotiable Instruments Act, 1881.

Ratiram Yadav v. Gopal Sharma, (Rajasthan)(Jaipur Bench) : Law Finder Doc Id # 2793597