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The court held that even if a debt is time-barred, the issuance of a cheque towards such debt creates a fresh legally enforceable liability u/s 25(3) of the Indian Contract Act, 1872. This provision deems a written promise to pay a time-barred debt as a valid contract. Consequently, the dishonor of such a cheque can attract penal provisions u/s 138 of the Negotiable Instruments Act. The acquittal order was set aside, recognizing that the furnishing of a cheque for a time-barred debt effectively resurrects the debt itself through a fresh agreement u/s 25(3) of the ICA. Denying the drawee's right to invoke Section 138 despite Section 25(3)'s recognition of a fresh agreement to pay would be an unfortunate disentitlement.
The court held that even if a debt is time-barred, the issuance of a cheque towards such debt creates a fresh legally enforceable liability u/s 25(3) of the Indian Contract Act, 1872. This provision deems a written promise to pay a time-barred debt as a valid contract. Consequently, the dishonor of such a cheque can attract penal provisions u/s 138 of the Negotiable Instruments Act. The acquittal order was set aside, recognizing that the furnishing of a cheque for a time-barred debt effectively resurrects the debt itself through a fresh agreement u/s 25(3) of the ICA. Denying the drawee's right to invoke Section 138 despite Section 25(3)'s recognition of a fresh agreement to pay would be an unfortunate disentitlement.
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