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2012 (10) TMI 1238 - BOMBAY HIGH COURTDishonor of Cheque u/s 138 of the Negotiable Instruments Act, 1881 (Act) - legally enforceable debt or not - issuance of a cheque for repayment of a time barred debt would amount to a written promise to pay the said debt within the meaning of Section 25(3) of the Indian Contract Act, 1872 or not - Rebuttable presumption u/s 118 and 139 - HELD THAT:- On plain reading of Section 13 of the said Act of 1881, a negotiable instrument does contain a promise to pay the amount mentioned therein. The promise is given by the drawer. Under Section 6 of the said Act of 1881, a cheque is a bill of exchange drawn on a specified banker. The drawer of a cheque promises to the person in whose name the cheque is drawn or to whom the cheque is endorsed, that the cheque on its presentation, would yield the amount specified therein. Hence, it will have to be held that a cheque is a promise within the meaning of Sub-section (3) of Section 25 of the Contract Act. What follows is that when a cheque is drawn to pay wholly or in part, a debt which is not enforceable only by reason of bar of limitation, the cheque amounts to a promise governed by the Sub-section (3) of Section 25 of the Contract Act. Such promise which is an agreement becomes exception to the general rule that an agreement without consideration is void. Though on the date of making such promise by issuing a cheque, the debt which is promised to be paid may be already time barred, in view of Sub-section (3) of Section 25 of the Contract Act, the promise/agreement is valid and, therefore, the same is enforceable. The promise to pay time barred debt becomes a valid contract as held by the Apex Court in the case of A.V. Moorthy [2002 (2) TMI 1214 - SUPREME COURT]. Therefore, the first question will have to be answered in the affirmative. Under Section 118, there is a rebuttable presumption that every negotiable instrument was made or drawn for consideration. Section 139 creates a rebuttable presumption in favour of a holder of a cheque. The presumption is that the holder of a cheque received the cheque of the nature referred to in Section 138 for discharge, in whole or in part of any debt or liability. Thus, under the aforesaid two Sections, there are rebuttable presumptions which extend to the existence of consideration and to the fact that the cheque was for the discharge of any debt or liability. Once it is held that a cheque drawn for discharge of a time barred debt creates a promise which becomes enforceable contract, it cannot be said that the cheque is drawn in discharge of debt or liability which is not legally enforceable. The promise in the form of a cheque drawn in discharge of a time barred debt or liability becomes enforceable by virtue of Subsection (3) of Section 25 of the Contract Act. Thus, such cheque becomes a cheque drawn in discharge of a legally enforceable debt as contemplated by the explanation to Section 138 of the said Act of 1881. Therefore, even the second question will have to be answered in the affirmative. Therefore, we answer both the questions in the affirmative. We direct that these Applications/Petitions shall be placed before the appropriate Court for disposal in accordance with law.
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