Cheque Issued For Time-Barred Debt Does Not Make Prosecution U/S 138 NI Act Impermissible: Kerala High Court

The Kerala High Court has held that merely because a cheque was issued towards a time-barred debt, a prosecution under Section 138 of the Negotiable Instruments Act, 1881 does not become impermissible.

The Court observed that when a cheque is issued towards a time-barred debt, it is akin to the revival of the debt and liability by acknowledging the same, and the nature of the debt ceases to be a time-barred debt.

The Court set aside the judgment of the Judicial Magistrate of First Class, which had acquitted the accused solely on the ground that the cheque was issued towards a time-barred debt.

The Bench of Justice A Badharudeen observed, "When a cheque is issued towards a time-barred debt by reviving the period of limitation, merely for the reason that the cheque was issued towards a time-barred debt does not make a prosecution under Section 138 of the NI Act impermissible. In such view of the matter, the learned Magistrate went wrong in acquitting the accused on finding that the cheque was issued towards a time-barred debt. Thus, the verdict impugned would require interference and the appeal succeeds accordingly."

Advocate P Rahul appeared for the Appellant, while PP Sajeev PK appeared for the Respondents

Brief Facts

An appeal was filed assailing the judgment passed by the lower court acquitting the Respondent in a matter arising out of a case under Section 138 of the Negotiable Instruments Act, 1881.

The Respondent borrowed a sum of ₹9,30,230/- from the complainant through various transactions on different dates, through the account of the accused.

The Magistrate raised seven points for consideration. All the points, one regarding the transaction, execution of the cheque and failure to repay the amount on issuance of demand notice, which would constitute commission of a deemed offence under Section 138 of the NI Act, were found in favour of the complainant.

While answering the point, the Magistrate found that the oral evidence and the statement of accounts of the accused would show that the money was transferred by the complainant to the Respondent in instalments on various occasions during the period from 2011 to 2012.

Accordingly, it was found that the consideration for the cheque was a time-barred debt and, on that sole reason, the Respondent was acquitted.

Contentions of the Parties

The complainant/appellant contended that the Magistrate went wrong in so finding, even though the finding that the transactions were in the years 2011 and 2012 was true based on the evidence available.

It was contended that it is settled law that issuance of a cheque for a time-barred debt is not prohibited, and that on dishonour of the said cheque, when there is failure to repay the cheque amount within the statutory period on issuance of demand notice mandated under Section 138(1) of the NI Act, the offence under Section 138 of the NI Act would attract.

The respondent/accused contended that a time-barred debt is not legally enforceable on first principle and, as such, the finding of the learned Magistrate in this regard was liable to be confirmed. It was also pointed out that the legal position put forth by the learned counsel for the complainant would require reconsideration to lay down a ratio on first principles.

Observations/Findings of the Court

The Court reiterated that when a cheque is issued for a time-barred debt, the same is akin to revival of the debt and liability thereof by acknowledging the debt and liability, and thereby the nature of the debt ceases to be a time-barred debt.

It was also noted, "It is pertinent to note that issuance of cheque to discharge a time-barred debt or for repayment of a time-barred debt in any manner is not legally prohibited."

Accordingly, the Court allowed the appeal and set aside the impugned judgment.

The Court sentenced the Respondent to undergo simple imprisonment for a day till rising of the Court and to pay a fine of ₹14,00,000/- to the Complainant.

Cause Title: G Sanil Kumar v. Sujith and Anr. [Neutral Citation: 2026:KER:78185]

Appearances:

Appellant: Advocate P. Rahul, Advocate Abhina L.

Respondents: Senior Public Prosecutor Sajeev P K, Advocate Prasanth M. P.

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