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Synopsis

The Supreme Court has explained that the question of threshold jurisdiction in a cheque dishonour case would arise only if the cheque is dishonoured towards a loan, which is out and out irrecoverable due to limitation.

"It is only in cases wherein an amount which is out and out non-recoverable, towards which a cheque is issued, dishonoured and for recovery of which a criminal action is initiated, the question of threshold jurisdiction will arise. In such cases, the court exercising jurisdiction under Section 482 CrPC will be justified in interfering but not otherwise," a bench of Justices A S Bopanna and Prashant Kumar Mishra said.

The court further said that if the question as to whether the debt or liability being barred by limitation is an issue to be considered in such proceedings, the same is to be decided based on the evidence to be adduced by the parties since the question of limitation is a mixed question of law and fact.

Referring to previous decisions in 'S Natarajan vs. Sama Dharman & Anr' (2021), A V Murthy vs. B S Nagabasavanna (2002) and 'Expeditious trial of Cases under Section 138 of NI Act' (2021), the bench said, "Whether the debt in question is a legally enforceable debt or other liability would arise on the facts and circumstance of each case and in that light the question as to whether the power under Section 482 CrPC is to be exercised or not will also arise in the facts of such case".

Senior advocate Sidharth Luthra, acting as amicus curiae, cited the 2021 Constitution bench decision and submitted that in a case where the trial court is informed that it lacks jurisdiction to issue process for complaints under Section 138 of the Negotiable Instrument Act, the proceedings will have to be stayed in such cases. 

He said that the power of the trial court to decide with regard to its jurisdiction is not taken away and in that circumstance, exercise of power under Section 482 CrPC by the high court would be justified. 

Luthra further submitted that even the position under Section 25(3) of the Contract Act being applicable to criminal proceedings for dishonour of cheque will have to be examined in the background of the provision contained in the Explanation to Section 138 of NI Act which specifies that the debt or other liability enforceable would be only a legally enforceable debt or other liability. 

"In such circumstances, if the cheque is issued in respect of the debt which is not enforceable or a liability which cannot be recovered, in such event, the presumption under Section 139 of NI Act would not be available," he said.

The bench, however, said, "We do not see the need to tread that path to undertake an academic exercise on that aspect of the matter, since from the very facts involved in the case on hand ex facie it indicates that the claim which was made in the complaint before the trial court based on the cheque which was dishonoured cannot be construed as time-barred and as such it cannot be classified as a debt which was not legally recoverable." 

In the instant case, the court allowed an appeal filed by K Hymavath, complainant against the Andhra Pradesh High Court's judgment which had quashed the criminal proceedings.

The respondent had approached the appellant to borrow a sum of Rs 20 lakh stating that he required the amount to finance his son’s higher education to study medicine and for domestic expenses. In order to assure the re-payment, he executed a promissory note on July 25, 2012 wherein it was agreed that the amount was to be repaid in full and along with interest at 2% per month. There was a condition in the promissory note that the full and final payment will be made by December, 2016. A cheque issued on April 28, 2017 to the sum of Rs 10 lakh towards partial discharge of loan was dishonoured due to insufficient amount, forcing the appellant to initiate proceedings under the NI Act.

The court said that when the respondent had agreed to repay the amount within December, 2016, the cause of action to initiate proceedings to recover the said amount if not paid within December 2016 would arise only in the month of December, 2016. 

"In respect of a promissory note payable at a fixed time, the period of limitation being three years would begin to run when the fixed time expires. Therefore, in the instant case, the time would begin to run from the month of December, 2016 and the period of limitation would expire at the end of three years thereto i.e. during December, 2019," the bench said.

The court said that thus, there was no occasion for the high court to quash the complaint filed in July, 2017 as here not only the amount was a legally recoverable debt, but the complaint was also filed within time. 

Case Title: K. Hymavathi V. The State of Andhra Pradesh & Anr.