A cheque issued to repay a time-barred debt can revive liability and trigger Section 138, Kerala High Court rules

The complainant alleged that the accused borrowed ₹9,30,230 through bank transfers and issued a cheque for that amount, dated 6 July 2015, towards repayment.

The cheque was dishonoured for insufficiency of funds, and the accused did not pay despite demand notice.

At trial, the Magistrate accepted the complainant’s evidence regarding the transaction and cheque but found, on the basis of the accused’s account statement, that the underlying transfers occurred in 2011–2012.

Treating the cheque as one issued for a time-barred debt, the Magistrate acquitted the accused.

The complainant appealed.

Whether the Magistrate erred in acquitting the accused merely because the cheque was issued for a time-barred debt.

Whether the acquittal required appellate interference.

Section 138 of the Negotiable Instruments Act, 1881 penalises the dishonour of a cheque for insufficiency of funds where the statutory requirements are met.

Relying on Ramakrishnan v. Parthasaradhy, the Court held that issuance of a cheque for a time-barred debt is not prohibited and that the debt’s limitation status does not, by itself, bar prosecution under Section 138.

The Court also referred to Mamman S.A. v. C.P. Gopalan Achari, Kesavan E.K. v. Thomas, Hymavathi K. v. State of Andhra Pradesh and A.V. Murthy v. B.S. Nagabasavanna in support of the proposition that limitation may involve a mixed question of law and fact and ordinarily should be determined on evidence.

The Court stated that a cheque issued towards a time-barred debt revives the debt and liability.

The Magistrate’s finding that the transactions occurred in 2011–2012 was supported by the accused’s account statement and was not disputed by the complainant.

However, the complainant’s evidence, supported by the power-of-attorney holder and documentary exhibits, established the transaction and execution of the cheque; the Magistrate had also found the other elements of the Section 138 case in the complainant’s favour.

Applying the stated rule that a cheque may be issued for a time-barred debt and that such issuance revives the liability, the High Court held that the debt’s age alone did not justify acquittal.

It convicted the accused under Section 138 of the NI Act and sentenced him to simple imprisonment until the rising of the Court and a fine of ₹14,00,000; in default, he must undergo six months’ imprisonment.

Of the fine, ₹13,50,000 was directed as compensation to the complainant under Section 357(1)(b) of the Code of Criminal Procedure, with ₹50,000 payable to the State Exchequer as costs.

The accused was directed to appear before the Magistrate on 31 October 2026 to undergo sentence.