Time-barred debt cannot sustain cheque dishonour liability; rebuttable presumption under Section 139 was displaced

A cheque issued for a time-barred debt does not satisfy Section 138 of the Negotiable Instruments Act because the provision applies only to a legally enforceable debt or liability. The court held that limitation had expired before the cheque was issued, and there was no valid acknowledgment in writing within time to revive the claim under Section 18 of the Limitation Act, 1963. It further held that the Section 139 presumption is rebuttable and does not presume a legally recoverable debt; the respondent's probable defence that the underlying liability was already time-barred rebutted the presumption. The acquittal was therefore upheld.

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Issues: (i) Whether a cheque issued towards a time-barred debt can constitute a legally enforceable debt or liability for the purpose of Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether the presumption under Section 139 of the Negotiable Instruments Act, 1881 stood rebutted on the facts of the case.

Issue (i): Whether a cheque issued towards a time-barred debt can constitute a legally enforceable debt or liability for the purpose of Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Section 138 applies only where the cheque is issued for discharge, in whole or in part, of a legally enforceable debt or other liability. A debt barred by limitation is not enforceable unless there is a valid acknowledgment in writing made within the prescribed period so as to extend limitation under Section 18 of the Limitation Act, 1963. On the record, the last business transaction was in July 2005 and the limitation period expired in July 2008. The cheque dated 12.06.2009 was issued after expiry of limitation, and the material on record did not disclose any valid acknowledgment within time to revive the liability.

Conclusion: A cheque issued towards a time-barred debt does not attract Section 138 of the Negotiable Instruments Act, 1881.

Issue (ii): Whether the presumption under Section 139 of the Negotiable Instruments Act, 1881 stood rebutted on the facts of the case.

Analysis: The presumption under Section 139 is rebuttable and extends only to the fact that the cheque was issued for discharge of a debt or liability. It does not create a presumption of legally recoverable debt. The respondent demonstrated that the underlying liability had become time-barred before the cheque was issued, and the subsequent cash payment and cheque relied upon by the petitioners occurred after limitation had already expired. In these circumstances, the presumption was displaced by a probable defence showing absence of a legally enforceable liability.

Conclusion: The presumption under Section 139 of the Negotiable Instruments Act, 1881 stood rebutted.

Final Conclusion: The acquittal was upheld because the cheque was not shown to have been issued in discharge of a legally enforceable liability.

Ratio Decidendi: For Section 138 of the Negotiable Instruments Act, 1881 to apply, the cheque must be drawn towards a legally enforceable debt or liability, and a time-barred claim is not revived absent a valid acknowledgment within limitation; the presumption under Section 139 remains rebuttable on proof of a probable defence.

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