G. Sanil Kumar v. Sujith & Anr.

What happened

The complainant said that the accused had borrowed ₹9,30,230 through various bank transfers and had issued a cheque for that amount, dated 6 July 2015, towards repayment. The cheque was returned with the endorsement "funds insufficient", a legal notice was sent, and the accused did not pay. In ST No. 2754 of 2015 before the Judicial First Class Magistrate, Varkala, the complainant and his power of attorney holder were examined, as were the accused and another defence witness, and the Magistrate framed seven points. All the points but one were decided for the complainant. On the remaining point, relying on the defence witness and the accused's account statement, the Magistrate found that the money had been transferred in instalments in 2011 and 2012, so that the cheque was for a time-barred debt, and acquitted the accused on that sole ground by the judgment of 24 September 2024. The complainant appealed. The State Brief supported the acquittal on the footing that a time-barred debt is not legally enforceable and said that the legal position needed reconsideration.

Questions before the court

• Does the issue of a cheque for a time-barred debt take the case outside section 138 of the Negotiable Instruments Act, so that the drawer cannot be convicted?

Why the court ruled this way

The complainant relied on the Division Bench decision of the High Court in Ramakrishnan v. Parthasaradhy (2003), which held that a person who issues a cheque acknowledges his liability and cannot, if it is dishonoured for insufficient funds, claim that the debt is barred by limitation, and which overruled the earlier Joseph decision, and on later Single Bench decisions of the High Court taking the same view (paragraph 7). The Court also noted the Supreme Court's decision in Hymavathi K. v. State of Andhra Pradesh, in which the question of limitation was described as a mixed question of law and fact to be decided on evidence, with a quashing petition justified only where the amount is out and out non-recoverable (paragraph 7). Applying the settled position of the High Court, it held that a cheque issued for a time-barred debt is akin to a revival of the debt by acknowledging the liability, so that the debt ceases to be time-barred, that issuing such a cheque is not legally prohibited, and that a prosecution under section 138 is not impermissible merely because the debt was time-barred when the cheque was issued. The Magistrate therefore erred in acquitting on that sole ground (paragraphs 12–13).

Controlling point

When a cheque is issued for a time-barred debt, it acknowledges and revives the liability, and the debt's earlier limitation status alone is not a ground to acquit in a prosecution under section 138.

Order and next steps

The appeal was allowed, the judgment of acquittal was set aside and the accused was convicted under section 138. He was sentenced to simple imprisonment for a day, till the rising of the Court, and to a fine of ₹14,00,000, with six months' imprisonment in default. Out of the fine, ₹13,50,000 is to be paid to the complainant as compensation under section 357(1)(b) of the Code of Criminal Procedure and ₹50,000 goes to the State as costs. The accused was directed to appear before the Magistrate's Court at Varkala at 11:00 am on 31 October 2026 to undergo the sentence, failing which the Magistrate is to execute it.

Practical implications

A holder of a dishonoured cheque given for an old advance can proceed under section 138 without being defeated at the threshold by the age of the debt. A drawer who wishes to resist needs a defence on the facts, such as the absence of any liability or the cheque not being given for the debt.

Limits of this ruling

• The Court followed the Division Bench rule of the Kerala High Court and decided only that the limitation status of the debt does not, alone, bar the prosecution; the Magistrate had already found the remaining ingredients proved.