1 APPLN-O-5792.09 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE CRIMINAL APPLICATION NO.5792 OF 2009 Alfaz Miller .... Applicant Vs. M/s. Deccan Enterprises & Ors. .... Respondents S/Shri A.P. Mundargi, Senior Counsel i/b Sunil D'Souza for the Applicant. S/Shri Prakash Naik with Mustafa Kachwala i/b Daniel Arif for Respondent Nos.1 to 5. Shri S.A. Shaikh, APP, for the State. CORAM: R.C. CHAVAN, J. DATED: JULY 07, 2011 ORAL ORDER: 1. This is an application for leave to file appeal against judgment of acquittal of respondent Nos.1 to 5 for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, the Act ), rendered by the learned Additional Chief Metropolitan Magistrate, 5th Court, Dadar, Mumbai. The applicant had entered into an agreement with the respondents in respect of development of certain property. Since the project could not commence, the parties reached 2 APPLN-O-5792.09 a Memorandum of Understanding (for short, MOU ) on 7-5-2002 whereby it was agreed by the respondents that a sum of Rs.2,40,00,000/- is due and payable to the applicant and this amount was to be paid on 30-6-2002. Certain conveyance deeds were also handed over to the applicant as a collateral security. In terms of this MOU, a cheque for Rs.74,00,000/-, dated 31-3-2005, was issued. It was returned unpaid and so a notice was issued demanding payment of the amount under the dishonoured cheque. Thereafter the respondents issued a fresh cheque on 14-11-2005 for the same amount, which was also presented. It was dishonoured on 10-5-2006. A fresh demand notice was issued and thereafer the complaint was filed. 2. The learned Magistrate, after considering the evidence of the parties, held that the cheque in question was issued towards security and not towards any debt or a legally enforceable liability. The learned Magistrate also held that the cheque was given towards a liability which was barred by limitation, since the MOU was executed on 7-5-2002 and the cheque was issued on 14-11-2005. 3. The learned Magistrate had referred to 3 APPLN-O-5792.09 a decision of this Court in Shri Shyamsundar Babu Naik Dessai v. Shri Baban Anant Naik & Anr., reported in 2008 All MR (Cri.) 2376, where I had held that a cheque could be issued even in respect of a time barred obligation and would still represent a legally enforceable debt or liability. Relying on another decision of this Court the learned Magistrate however found that mere giving of a cheque without anything more would not make the cheque for a time barred debt as one issued in discharge of a legally enforceable debt or liability. 4. The learned counsel for the applicant points out, first, that in this case towards the liability of Rs.2,40,00,000/-, the respondents had made a payment of Rs. 81,00,000/- between 12-6-2003 to 10-11-2003. Therefore, these payments would amount to acknowledgement by the respondents within the period of limitation and therefore the limitation would start from the last date of such payment, that is, 10-11-2003. Therefore, according to him, the cheque issued on 14-11-2005 was in respect of a debt which was very much within limitation. The learned counsel for the applicant pointed out that the affidavit of the respondents in lieu of the 4 APPLN-O-5792.09 examination in-chief specifically acknowledges the payment of Rs.81,00,000/- by the respondents to the applicant. 5. Apart from this, the learned counsel submitted that there was absolutely no warrant for the belief that a cheque would not amount to a promise to pay a time barred debt under Section 25 of the Indian Contract Act, 1872 (for short, the Contract Act ). Even if it was to be presumed that on 14-11-2005 the limitation for recovery of the balance out of Rs.2,40,00,000/- had expired, the learned counsel submitted that a cheque is also a contract to pay a certain sum made in writing and therefore fulfils the requirement of Clause (3) of Section 25 of the Contract Act. 6. The learned counsel for the respondents submitted that consistent view by several learned single Judges of this Court has, however, been that a cheque could not be held to be a promise to pay a time barred debt under Section 25 of the Contract Act and also that since the cheque had to be for discharge, in the whole or in part, of any legally enforceable debt or other liability, there had to be some writing other than the cheque to 5 APPLN-O-5792.09 show that the debt in question was legally enforceable. The learned counsel for the respondents submitted that in view of the conflicting decisions, a learned single Judge had made a reference of this question to a Division Bench by his order dated 23-9-2008, passed in Criminal Application No.2933 of 2007 with connected matters (Dinesh B. Chokshi v. Rahul Vasudeo Bhatt and Anr.). He also made available for my perusal a copy of the order whereby the reference was made. 7. The contention raised enabled me to re-examine the rationale of my judgment referred to in the order making the reference, apart from the judgment dated 21-7-2008, delivered in Shri Shyamsundar Babu Naik Dessai (supra). The order whereby the reference is made indicates that mere issuance of a cheque cannot amount to a written promise to pay a time barred debt within the meaning of Section 25 of the Contract Act. The learned Judge making the reference has referred to the definition of bill of exchange and cheque in the Act and concluded that nature of agreement is not writ large on the face of a cheque and that the cheque is merely a direction to the Bank and its issuance 6 APPLN-O-5792.09 simpliciter will not amount to making a promise to the payee. 8. In view of this, I have re-examined as to what is a cheque or a bill of exchange if not a contract and who promises what to whom in a cheque. There should be no doubt about the proposition that every negotiable instrument represents a contract, since the rights and liabilities of the parties to the negotiable instrument flow from what they agree to do and not from any civil wrong (tortious liability). The parties to the negotiable instruments are not obliged under any statute to enter into or be parties to a negotiable instrument. They, of their own volition, make or receive such instrument and, therefore, negotiable instruments denote a special type of a contract. A cheque cannot be construed as anything but an order to a Banker to pay the amount mentioned on the cheque to the payee. The beneficiary is the payee and not the Banker and therefore the Act provides for a mechanism for the payee to enforce payment and gives him a right to sue on dishonour of such an instrument. Therefore, though payment is required to be made by the Banker who is merely custodian of drawer s money, the payment, is 7 APPLN-O-5792.09 obviously on behalf of the drawer of the instrument and therefore the cheque signifies a promise by the drawer to pay to the payee the sum mentioned in the cheque. In view of this, it is not clear as to why a cheque, which is a promise made in writing and signed by the person who can be charged therewith to pay a particular sum to the payee, which payment could have been enforced by the payee, but for the law of limitation, would not qualify to be an agreement under Section 25 of the Contract Act. If a cheque is a contract to pay a certain sum, then it will itself evidence an obligation which is legally enforceable to pay a debt. 9. A view has been taken that such a cheque itself may not be evidence of existence of a legally enforceable liability and such evidence has to be furnished by some other documents. It is not clear as to why there should be an insistence on existence of any other collateral document to evidence the existence of a legally enforceable liability. This, in my humble opinion, would be reading something which the statute does not prescribe and injecting technicalities in a law which was supposed to be simple. Unless the statute requires that the liability should be evidenced 8 APPLN-O-5792.09 by some other document, apart from the cheque, it would be impermissible to so require. 10. In any case, the entire debate may only be academically significant in view of the decision of a Three Judge Bench of the Supreme Court in Rangappa v. Mohan, reported in 2010 Cri.L.J. 2871. In Rangappa v. Mohan the Supreme Court had considered an earlier decision of its Two Judge Bench in Krishna Janardhan Bhat v. Dattatraya G. Hegde, reported in 2008 All MR (Cri.) 1164 (SC). In Krishna Janardhan Bhat the argument was that the ingredients of Section 138 of the Act, namely, that the drawer of the cheque issued the cheque to satisfy part or whole of the debt only was the subject-matter of presumption under Section 139 of the Act and not that there is a legally enforceable debt. After considering several judgments, as also the requirement of Section 271D of the Income- Tax Act, the Bench held in para 21 of the decision that Section 139 of the Act merely raises a presumption that the cheque was drawn for discharge in whole or in part of any debt or other liability and that existence of a legally recoverable debt is not a matter of presumption under Section 139 of the Act. 9 APPLN-O-5792.09 11. This view taken by the Division Bench came in for scrutiny in Rangappa s case (supra) and the Three Judge Bench of the Supreme Court held in para 14 of the Judgment that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. Thus, the moment a cheque is shown to have been issued, a presumption would have to be drawn about existence of a legally enforceable debt or liability. Therefore, whether the cheque was issued in respect of a claim which could not have, but for the cheque, been made before a Civil Court, on account of the law of limitation, would become irrelevant and the cheque would have to be presumed to have been issued for a legally enforceable debt or liability, though the presumption would always be rebuttable. 12. In view of this, leave granted. Appeal admitted. Call for the R & P. Hearing expedited. Since the learned counsel for respondent Nos.1 to 5 states that he would be representing the said respondents, action under Section 390 of Cr.P.C. is dispensed with. Application disposed of. (R.C. CHAVAN, J.)