TaxTMI 
TaxTMI 
1997 (4) TMI 523
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....que for Rs. 270 drawn on 16.4.84 on account of interest for the period 28.2.82 to 28.3.83. The cheque when presented by the plaintiff to the bank was dishonoured for want of funds. The suit was filed on 4.4.87. ( 3. ) In this case answer to the question whether the suit is barred by time or is within limitation is to be found in Section 19 of the Limitation Act, 1963. The learned Senior Sub Judge has held that a dishonoured cheque cannot be treated to be payment on account of debt within the meaning of S. 19 of the Limitation Act and hence the cheque dated 16.4.84 would not extend or renew the period of limitation. ( 4. ) The relevant part of S. 19 of the Limitation Act 1963 reads as under : "Where payment on account of a deb....
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....ct and a fresh period of limitation has already started. If the negotiable instrument is dishonoured subsequently the creditor, no doubt, can fall back on his original claim. But the new term of limitation of the subsequent happening. To link S. 20 with the subsequent honouring of the negotiable instrument would indeed lead to absurd results. The debtor has intended and at all events represented to the creditor that the negotiable instrument is good, and thereby the creditor has for his part, been given a feeling of security with a fresh term of limitation. If it turns out that the debtor's negotiable instrument is dishonoured (or as for that matter the currency notes that he has given turn out to be counterfeit) this ....
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....e question arising for decision was whether the effective date for extending the period of limitation would be the date of the cheque or the date of delivery thereof. Dealing with the question their Lordships have observed (vide para 8) : " Where therefore the payment is by cheque and is conditional, the mere delivery of the cheque on a particular date does not mean that the payment was made on that date unless the cheque was accepted as unconditional payment. Where the cheque is not accepted as an unconditional payment, it can only be treated as a conditional payment. In such a case the payment for purposes of S. 20 would be the date on which the cheque would be actually payable at the earliest assuming that it will be honoured" ....
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....he debt and if the cheque was sent by post and was met on presentation, the date of payment is the date when the cheque was posted,." The abovesaid decision of the SC clearly recognises payment by cheque a valid mode of payment and lawful tender unless such mode is excluded by agreement of the parties. In Damdi Lal's case their Lordships have gone on to hold that in the contemporary society it was reasonable to suppose such agreement (as to tender of payment by cheque) as implied unless the circumstances of a case indicated otherwise. ( 13. ) I may illustrate. The loan is dated 1.3.81, the limitation for suit for recovery expires on 1.3.84. On 28.2.84 the debtor delivers a cheque in part payment of principal or in payment of inter....