Dishonored cheque payment acknowledges debt, saves limitation period

The Full Bench held that a payment by a dishonored cheque constitutes an acknowledgment of debt and liability, saving the limitation period under Section 18 of the Limitation Act. The matter was referred back to the single Judge for further proceedings based on this ruling.

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Issues Involved:
The judgment addresses the issue of whether a payment made by a dishonored cheque constitutes an acknowledgment of debt and liability.

Summary:

Issue 1: Consideration of Payment by Dishonored Cheque as Acknowledgment of Debt and Liability
The case involved a dispute where the plaintiff sought to recover a specific amount from the defendant, including interest. The trial court decreed a partial amount, holding the rest as time-barred. The appeal contended that the issuance of cheques by the defendant acknowledged the debt owed, thus falling within the limitation period. Reference was made to various legal precedents supporting the acknowledgment of liability through the issuance of cheques. The single Judge referred the matter to a Full Bench due to a conflicting decision of the Bombay High Court.

Issue 2: Interpretation of Section 18 of the Limitation Act
Section 18 of the Limitation Act deals with the effect of acknowledgment in writing on the limitation period for a suit. The provision requires a subsisting jural relationship between the parties, an intention to accept such relationship, and a statement acknowledging the liability. The statement need not specify the exact nature of the liability but must indicate a present subsisting liability and the intention to admit the jural relationship.

Issue 3: Analysis of Dishonored Cheques as Part Payment
The Division Bench considered whether a dishonored cheque could be regarded as an acknowledgment of liability. It was argued that unless the cheque is honored, it cannot be considered an acknowledgment in writing. However, the judgment highlighted that the intention to acknowledge the liability is present at the time of issuing the cheque, regardless of its subsequent dishonor. The Supreme Court's decisions emphasized that a cheque is an acknowledgment of debt, and the date of issuance is crucial in determining the acknowledgment.

Conclusion:
The Full Bench concluded that a payment by a dishonored cheque does amount to an acknowledgment of debt and liability, leading to a saving of the limitation period as per Section 18 of the Act. The matter was remitted back to the single Judge for further proceedings based on this interpretation.

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