Time-barred debt can still be adjusted from contractual security; authorised set-off negates criminal breach of trust allegations.

Limitation under Section 3 of the Limitation Act bars the remedy by suit but does not extinguish the underlying debt, unless the statute itself destroys the right. Where a creditor holds adequate contractual security, it may appropriate the debt from that security even if suit recovery is time-barred, provided the contract authorises such adjustment. On the facts, the security bond allowed the bank to adjust loan dues from fixed deposit proceeds and credit only the balance to the account holder. That contractual adjustment was inconsistent with dishonest misappropriation or criminal breach of trust under Section 405 IPC, so the complaint disclosed no prima facie offence and criminal process was not warranted.

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Issues: Whether the complaint disclosed a prima facie case of criminal breach of trust against the bank officials, and whether the bank was entitled to appropriate the fixed deposit proceeds towards a time-barred debt under the security arrangement.

Analysis: Section 3 of the Limitation Act, 1963 bars the remedy by suit but does not extinguish the underlying debt, except in cases where the statute itself destroys the right, such as under Section 27. A creditor in possession of adequate security may adjust the debt from the security in accordance with the contract, even if recovery by suit has become time-barred. The security bond expressly authorised the bank to adjust the loan dues from the fixed deposit proceeds and to credit only the balance to the respondent's account. Action taken in terms of the contract is inconsistent with dishonest misappropriation or criminal breach of trust under Section 405 of the Indian Penal Code, 1860. The complaint, therefore, did not disclose even a prima facie offence, and criminal process ought not to have been used for harassment.

Conclusion: The complaint was an abuse of the process of court, and the prosecution could not be sustained.

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