Time-barred liability cannot support Section 138 proceedings when the cheque is issued for an unenforceable debt.

Cheques issued towards a time-barred liability do not represent a legally enforceable debt for Section 138 of the Negotiable Instruments Act. The underlying agreement had become barred by limitation, and the alleged later acknowledgment did not satisfy Section 18 of the Limitation Act because it was not shown to have been made within the prescribed period or in the required written form. As a result, the statutory presumption under Section 139 could not extend to enforceability of the stale claim. The complaint based on those cheques was therefore unsustainable and the proceedings were quashed.

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Issues: Whether cheques issued in discharge of a time-barred liability constitute a legally enforceable debt for the purposes of Section 138 of the Negotiable Instruments Act, and whether the complaint based on such cheques was liable to be quashed.

Analysis: The complaint itself showed that the underlying agreement was of 14.06.2000 and that the alleged settlement acknowledging payment was of 26.01.2005, well beyond the three-year limitation period for recovery of the amount. An acknowledgment under Section 18 of the Limitation Act, 1963 must be in writing and must be made within the prescribed period of limitation to create a fresh period of limitation. On the facts pleaded, the alleged acknowledgment did not satisfy these requirements. The cheques dated 25.03.2005 and 30.04.2005 were therefore issued in relation to a claim that had already become time-barred. A cheque issued for a time-barred debt does not answer the statutory description of a legally enforceable debt, and the presumption under Section 139 of the Negotiable Instruments Act, 1881 does not extend to the existence of such enforceability.

Conclusion: The cheques were not issued in discharge of a legally enforceable debt, and the complaint under Section 138 of the Negotiable Instruments Act, 1881 could not be sustained.

Final Conclusion: The proceedings founded on the dishonoured cheques were quashed because the underlying liability had become time-barred and was outside the scope of Section 138.

Ratio Decidendi: A cheque issued towards a time-barred liability does not represent a legally enforceable debt for the purpose of Section 138 of the Negotiable Instruments Act, 1881.

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