K. Hymavathi vs The State Of Andhra Pradesh

2023INSC811 REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2023 (Arising out of SLP (Crl) No. 7455 of 2019)

K. Hymavathi .… Petitioner(s)

Versus

The State of Andhra Pradesh & Anr. …. Respondent(s)

With

Crl. Appeal No………of 2023 @ SLP (Crl) No. 7459 of 2019 Crl. Appeal No………of 2023 @ SLP (Crl) No. 7457 of 2019 Crl. Appeal No………of 2023 @ SLP (Crl) No. 7458 of 2019

JUDGMENT

A.S. Bopanna, J.

1. Leave granted.

2. The appellant is assailing the judgment dated

12.02.2019 passed by the High Court of Andhra Pradesh at Signature Not Verified Digitally signed by

Amravati in Criminal Petition No. 12675 of 2018 and Nisha Khulbey Date: 2023.09.06 16:41:30 IST Reason:

analogous petitions. Through the judgment, the High Court Page 1 while allowing the petitions before it, quashed the criminal

proceedings against Respondent No. 2, being C.C. No.681 of

2017 and analogous complaints on the file of II Additional

Chief Metropolitan Magistrate at Visakhapatnam. The

appellant is the complainant in CC No. 681 of 2017 and the

other complaints, filed against the accused – respondent

no.2 under Section 138 and 142 of the Negotiable

Instruments Act (‘NI Act’ for short). The appellant is

therefore before this Court claiming to be aggrieved by the

said judgment.

3. The brief facts of the case as narrated in the first of the

above appeal are that the appellant and respondent no.2 are

known to each other. Due to their acquaintance respondent

no.2 approached the appellant to borrow a sum of Rs

20,00,000/- stating that he required the amount to finance

his son’s higher education to study medicine and for

domestic expenses. In order to assure the re-payment,

respondent no.2 executed a promissory note on 25.07.2012

wherein it was agreed that the amount was to be repaid in

full and along with interest at 2% per month. There was a Page 2 condition in the promissory note that the full and final

payment will be made by December, 2016. The respondent

No.2 failed to comply with the condition in the promissory

note but on 28.04.2017 issued a cheque bearing No.548045

drawn on the Vijaya Bank, J.P. Marg, Visakhapatnam for a

sum of Rs. 10,00,000/- towards partial discharge of the

debt. The cheque when presented for collection was

returned by the Bank on 15.05.2017 due to insufficient

funds to honour the cheque. The appellant got issued a

legal notice dated 24.05.2017 to respondent No.2, which

was replied to by respondent No.2 on 01.06.2017. The

appellant sent a rejoinder to the said reply on 03.06.2017.

Respondent No.2 sent a reply to the said rejoinder on

07.06.2017. The appellant thereafter filed complaints under

Section 138 of the NI Act on 11.07.2017 before the Special

Magistrate, Vishakhapatnam vide CC No. 681 of 2017 and

analogous complaints. The learned Special Magistrate in

accordance with law, took cognizance of the complaint

under Section 138 of NI Act against the respondent No.2 -

Page 3 accused vide order dated 14.09.2018 and ordered the issue

of summons.

4. The fact situation in the analogous appeals is also

similar except for the date of the promissory note and the

date of the cheque. However, in all the promissory notes the

period for repayment indicated is the same and all other

facts arising for consideration are similar. Hence for the

purpose of narration and consideration of the law, the facts

relating to the appeal arising out of SLP(Crl.) No.7455 of

2019 is referred herein.

5. The respondent No.2 herein however filed the petition in

CRL.P No.12675 of 2018 and analogous petitions under

Section 482 of the Criminal Procedure Code, 1973 (for short

‘CrPC’) before the High Court praying to quash proceedings

under CC No. 681 of 2017 and analogous complaints. The

High Court allowed the petitions filed under Section 482

CrPC by respondent no.2 herein, noting various judgments

by this Court and the various High Courts, and observing

that the limitation for enforcing the promissory notes had

Page 4 expired much prior to the issuance of the cheques in

question. As such, it was held this was a fit case for

quashing since the complaint filed seeking prosecution was

not in respect of a legally recoverable debt.

6. Mr. Sanchit Garga, learned counsel appearing on behalf

of the appellant while assailing the judgment passed by the

High Court, would contend that the High Court did not

appreciate that the promissory note executed by respondent

No.2 has the binding effect of a contract and hence the

complaint under Section 138 of NI Act is maintainable when

a cheque is drawn to pay wholly or in part, a debt which is

enforceable and there is no bar of limitation. The cheque

amounts to a promise governed by Section 25 (3) of the

Indian Contract Act, 1872. Such promise which is an

agreement is an exception to the general rule that an

agreement without consideration is void. Though on the

date of making such promise by issuing a cheque, the debt

which is promised to be paid, even if is time-barred is a

legally recoverable one. In view of Section 25 (3) of the

Indian Contract Act, the promise/ agreement is valid and Page 5 therefore the same is enforceable. The learned counsel for

the appellant has argued on the principle that the limitation

act only bars the remedy and not the right of a party. He

has relied upon the decision of this Court in S. Natarajan

v. Sama Dharman, (2021) 6 SCC 413 and A.V. Murthy v.

B.S. Nagabasavanna, (2002) 2 SCC 642.

7. Mr. Sidharth Luthra, learned senior counsel appearing

as Amicus Curiae on behalf of respondent No. 2 – accused

who has failed to appear despite service of notice, would

however seek to sustain the judgment passed by the High

Court. The learned Amicus Curiae has fairly put on record a

compilation showcasing the different view taken by various

High Courts, as well as the position of law stated by this

Court. It is contended that the earlier view while

considering that the presumption under Section 139 NI Act

will apply, did not consider the scope in a criminal trial and

the bearing that Section 322 of CrPC would have in the light

of the decision in Expeditious Trial of Cases Under

Section 138 of NI Act 1881, (2021) SCC OnLine SC 325

and thus did not consider the jurisdictional fact for invoking Page 6 Section 138 NI Act. It is further contended that the debt

being time-barred was not a legally enforceable debt and

where a debt is barred by law such debt or liability based on

a void contract is against public policy and NI Act cannot

apply in such cases. In order to attract Section 25(3) of the

Indian Contract Act, an express promise made in writing

and signed by the person is required is his contention.

8. At the threshold it would be apposite to take note of the

decisions referred to by the learned counsel for the

petitioner so as to place in perspective the scope of

consideration in a petition filed under Section 482 of CrPC

seeking quashment of a complaint filed under Section 138

of NI Act, more so keeping in view the presumption as

incorporated under Section 139 of the NI Act. As noted, the

learned counsel has relied on the decision in the case of S.

Natarajan vs. Sama Dharman & Anr. (2021) 6 SCC 413

wherein it is held as hereunder:

“6. The High Court referred to Section 25(3) of the Contract Act, 1872 on which reliance was placed by the complainant and observed that with regard to payment of time-barred debt, Page 7 there must be a distinct promise to pay either whole or in part the debt; that the promise must be in writing either signed by the person concerned or by his duly appointed agent. The High Court then observed that unless a specific direction in the form of novation is created with regard to payment of the time- barred debt, Section 25(3) of the Contract Act cannot be invoked. The High Court then went into the question whether issuance of cheque itself is a promise to pay time-barred debt and referred to Sections 4 and 6 of the NI Act. After referring to certain judgments on the question of legally enforceable debt, the High Court stated that for the purpose of invoking Section 138 read with Section 142 of the NI Act, the cheque in question must be issued in respect of legally enforceable debt or other liability. The High Court then observed that since at the time of issuance of cheque i.e. on 1-2-2011, the alleged debt of the accused had become time-barred, the proceedings deserve to be quashed.

7. In our opinion, the High Court erred in quashing the complaint on the ground that the debt or liability was barred by limitation and, therefore, there was no legally enforceable debt or liability against the accused. The case before the High Court was not of such a nature which could have persuaded the High Court to draw such a definite conclusion at this stage.

Whether the debt was time-barred or not can be decided only after the evidence is adduced, it being a mixed question of law and fact.”

9. The Learned counsel has further referred to the

decision in the case of A.V. Murthy vs. B.S.

Page 8 Nagabasavanna (2002) 2 SCC 642 wherein it is held as

hereunder:

“5. As the complaint has been rejected at the threshold, we do not propose 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 it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for 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, in the instant case, the appellant has submitted before us that the respondent, in his balance sheet prepared for every year subsequent to the loan advanced by the appellant, had shown the amount as deposits from friends. A copy of the balance sheet as on 31-3-1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance sheet, it may amount to acknowledgment and the creditor might have a Page 9 fresh period of limitation from the date on which the acknowledgment 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.

6. This is not a case where the cheque was drawn in respect of a debt or 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, 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.”

10. From a perusal of the legal position enunciated, it is

crystal clear that this Court keeping in perspective the

nature of the proceedings arising under the NI Act and also

keeping in view that the cheque itself is a promise to pay

even if the debt is barred by time has in that circumstance

kept in view the provision contained in Section 25(3) of the

Contract Act and has indicated that if the question as to

whether the debt or liability being barred by limitation was

an issue to be considered in such proceedings, the same is

Page 10 to be decided based on the evidence to be adduced by the

parties since the question of limitation is a mixed question

of law and fact. It is only in cases wherein an amount

which is out and out non-recoverable, towards which a

cheque is issued, dishonoured and for recovery of which a

criminal action is initiated, the question of threshold

jurisdiction will arise. In such cases, the Court exercising

jurisdiction under Section 482 CrPC will be justified in

interfering but not otherwise. In that light, this Court was

of the view that entertaining a petition under Section 482

CrPC to quash the proceedings at the stage earlier to the

evidence would not be justified.

11. Notwithstanding the above, the learned Amicus Curiae

would submit that the decisions referred to hereinabove

would have to be viewed differently keeping in view the

subsequent decision of a Constitution Bench of this Court

in the case of the Expeditious trial of Cases under

Section 138 of NI Act, 2021 SCC Online SC 325 to

contend that in the said decision the power of the

Magistrate under Section 322 of CrPC being an aspect to be Page 11 taken into consideration was considered. In a case where

the Trial Court is informed that it lacks jurisdiction to issue

process for complaints under Section 138 of the Act the

proceedings will have to be stayed in such cases. Hence, it

is contended that the power of the Trial Court to decide

with regard to its jurisdiction is not taken away and in that

circumstance exercise of power under Section 482 CrPC by

the High Court would be justified. It is further contended

by the learned Amicus Curiae that even the position under

Section 25(3) of the Contract Act being applicable to

criminal proceedings for dishonour of cheque will have to be

examined in the background of the provision contained in

the Explanation to Section 138 of NI Act which specifies

that the debt or other liability enforceable would be only a

legally enforceable debt or other liability. In such

circumstances if the cheque is issued in respect of the debt

which is not enforceable or a liability which cannot be

recovered, in such event, the presumption under Section

139 of NI Act would not be available.

Page 12

12. Having referred to the judgments cited, prima facie we

are of the opinion that the decision in S. Natarajan and

A.V. Murthy (supra) has taken into consideration all

aspects. No other elaboration is required even if the

observations contained in the case of Expeditious Trial of

Cases under Section 138 of NI Act (supra) is taken note,

since, whether the debt in question is a legally enforceable

debt or other liability would arise on the facts and

circumstance of each case and in that light the question as

to whether the power under Section 482 CrPC is to be

exercised or not will also arise in the facts of such case.

Even otherwise we do not see the need to tread that path to

undertake an academic exercise on that aspect of the

matter, since from the very facts involved in the case on

hand ex facie it indicates that the claim which was made in

the complaint before the Trial Court based on the cheque

which was dishonoured cannot be construed as time-barred

and as such it cannot be classified as a debt which was not

legally recoverable, the details of which we would advert to

here below. In that view, we have chosen not to refer to the

Page 13 cases provided as a compilation as it would be unnecessary

to refer to the same.

13. In that regard the perusal of the impugned judgment

would disclose that the very narration as contained in para

4 of the impugned order would indicate that the

consideration therein was predicated only on two facts as

noted by the High Court, (i) that the promissory notes are of

the year 2012, (ii) that the cheques are issued in the year

2017. It is in that light the High Court has indicated that

the date of issuance of the cheque is beyond three years

from the date of issuance of the promissory note so as to

classify it as a time-barred debt. In this regard, on perusal

of the records we note that the High Court has in fact

misdirected itself, has proceeded at a tangent and has

therefore erred in its conclusion.

14. As already noted, the facts are almost similar in all four

cases and as such for the purpose of narration a perusal of

the promissory note dated 25.07.2012 (Annexure P/1)

would inter alia record as follows:

Page 14 “…..hereby admit to have availed a loan amount shown above for the purpose of meeting my own family expenses and for higher education of my children by collecting the cash amount of Rs.20,00,000/- (In words:

Rupees Twenty Lakhs only) for which I do hereby further agree to pay a monthly interest of Rs.2/- (In words: Rupees Two only) per month and fully understand hereby that I am bound by virtue of the promissory to repay the capital or principal loan amount as well as the agreed payable monthly interest amount within the date of December 2016 by ensuring the total payment to you or any of your assignees as directed by you by taking the payable amount to your home and pay it there...”

(emphasis supplied)

15. A perusal of the above-extracted and emphasised

portion would indicate that the promise is to repay the

principal amount with the interest accrued within

December, 2016. Hence, when the respondent had agreed

to repay the amount within December, 2016, the cause of

action to initiate proceedings to recover the said amount if

not paid within December 2016 would arise only in the

month of December, 2016. In that light, the limitation

would be as provided under Article 34 to the Schedule in

Page 15 the Limitation Act, 1963. For the purpose of easy reference,

the same is extracted here below:

THE SCHEDULE

PERIODS OF LIMITATION

Description Period of Time from of suit limitation which period begins to run

PART II – SUITS RELATING TO CONTRACTS

34. On a bill Three years When the of exchange fixed time or expires.

promissory note payable at a fixed time, after sight or after

Page 16 demand.

(emphasis supplied)

16. The provision would indicate that in respect of a

promissory note payable at a fixed time, the period of

limitation being three years would begin to run when the

fixed time expires. Therefore, in the instant case, the time

would begin to run from the month of December, 2016 and

the period of limitation would expire at the end of three

years thereto i.e. during December, 2019. In that light, the

cheque issued for Rs.10,00,000/- which is the subject

matter herein is dated 28.04.2017 which is well within the

period of limitation. The complaint in CC No.681 of 2017

was filed in the Court of the Chief Metropolitan Magistrate

on 11.07.2017. So is the case in the analogous complaints.

Therefore, in the instant case not only the amount was a

legally recoverable debt which is evident on the face of it,

the complaint was also filed within time. Hence there was

no occasion whatsoever in the instant case to exercise the

power under Section 482 to quash the complaint. In that

view, the order impugned dated 12.02.2019 passed by the Page 17 High Court in Criminal Petition Nos.12652, 12670, 12675,

and 12676 of 2018 is not sustainable.

17. The order impugned is accordingly set aside.

18. The complaints bearing CC No.681 of 2018, CC

No.644 of 2018, CC No.250 of 2018, and CC No.254 of 2018

are restored to the file of the Chief Metropolitan Magistrate,

Visakhapatnam. Keeping in view that the matter has been

pending from the year 2017, the Trial Court shall now

proceed with the matters as expeditiously as possible but in

any event shall dispose of the matter within six months

from the date on which a copy of this judgment is

furnished.

19. Before parting with the matter, we would like to place

on record and command the usual, able assistance

rendered by Mr. Sidharth Luthra, learned senior counsel as

Amicus Curiae in the absence of respondent, in guiding this

Court to arrive at its conclusion.

Page 18

20. The appeals are accordingly allowed with no order as

to costs.

21. Pending application, if any, shall stand disposed of.

………………...……………………….J. (A.S. BOPANNA)

....……………….…………………….J. (PRASHANT KUMAR MISHRA)

New Delhi, September 06, 2023

Page 19