Cheque Issued Against a Time-Barred Debt: Kerala High Court Reaffirms Section 138 Liability

 Cheque Issued Against a Time-Barred Debt: Kerala High Court Reaffirms Section 138 Liability

Introduction

A recurring defence in cheque-dishonour prosecutions is that the cheque was issued towards a debt which had become time-barred and therefore was not a “legally enforceable debt” under Section 138 of the Negotiable Instruments Act, 1881. The Kerala High Court’s recent decision in G. Sanil Kumar v. Sujith, Crl. A. No. 2002 of 2024, decided on 8 October 2026, gives important practical support to complainants facing this defence.

The Court held that issuance of a cheque towards repayment of a time-barred debt is not legally prohibited, and that its dishonour can attract prosecution under Section 138 of the NI Act where the cheque has revived the limitation period.

Facts of the case

The complainant alleged that the accused had borrowed ₹9,30,230 through multiple transactions during 2011 and 2012. The accused later issued a cheque dated 6 July 2015 for the same amount towards repayment. The cheque was returned unpaid with the endorsement “funds insufficient”, and payment was not made despite a statutory demand notice.

The Magistrate acquitted the accused solely on the reasoning that the cheque related to a time-barred debt and therefore did not represent a legally enforceable debt for Section 138. The complainant challenged that acquittal before the Kerala High Court.

Kerala High Court’s holding

Justice A. Badharudeen held that the time-barred character of the underlying debt, by itself, does not make a Section 138 prosecution impermissible. The Court 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.”

The Court set aside the acquittal, convicted the accused, and imposed one day’s simple imprisonment together with a fine of ₹14 lakh. Of that amount, ₹13.5 lakh was directed to be paid as compensation to the complainant and ₹50,000 as costs to the State; default was made punishable with six months’ imprisonment.

Reconciling limitation with Section 138

The decision is best understood by separating three distinct concepts:

Concept	Effect
Existence of debt	Limitation generally does not extinguish the debt; it bars the ordinary remedy of recovery through court process.
Voluntary payment	A debtor remains free to pay a time-barred debt voluntarily, and a creditor may accept such payment.
Legal enforceability	A fresh written and signed promise to pay a time-barred debt may create an enforceable contractual obligation under Section 25(3) of the Indian Contract Act, 1872.

This approach reconciles Bombay Dyeing & Manufacturing Co. Ltd. v. State of Bombay, Punjab National Bank v. Surendra Prasad Sinha, and B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates. Those decisions recognise that limitation ordinarily bars the remedy but does not necessarily extinguish the debt or prohibit voluntary payment.

However, Section 138 requires a “legally enforceable debt or other liability.” Therefore, the mere fact that the original debt remains unpaid does not by itself satisfy Section 138. The critical link is whether the cheque, issued after limitation, amounts to a written and signed promise to pay the identified debt.

Role of Section 25(3), Contract Act

Section 25(3) of the Contract Act validates a written and signed promise to pay wholly or partly a debt which the creditor could not enforce because of limitation. A cheque, being a written and signed instrument, may constitute such a promise where it is issued voluntarily towards repayment of the identified debt. The Supreme Court in K. Hymavathi v. State of Andhra Pradesh also recognised that a cheque can amount to a promise governed by Section 25(3).

In G. Sanil Kumar, the cheque was issued for the exact amount alleged to be due, namely ₹9,30,230, and was stated to have been issued towards repayment of the borrowings. That factual foundation was central to the Court’s conclusion that the time-barred nature of the original debt did not defeat the Section 138 prosecution.

What must be proved

A complainant relying on a cheque issued towards a time-barred debt should ordinarily establish:

• the original transaction and the amount advanced or due;

• the date on which the debt became due or repayment became enforceable;

• expiry of limitation, if that is the complainant’s own position;

• that the cheque was issued voluntarily by the drawer or authorised agent;

• that the cheque was issued towards repayment, wholly or partly, of the identified debt;

• that the cheque amount corresponds to the liability existing on the date of presentation;

• presentation of the cheque within its validity period;

• dishonour and the statutory notice;

• non-payment within fifteen days of receipt of notice; and

• timely filing of the complaint.

The presumptions under Sections 118(a) and 139 of the NI Act assist the complainant once execution of the cheque is established. The accused may rebut them by showing that the cheque was not issued towards the alleged debt, was unauthorised, or did not represent the actual liability at presentation.

Limits of the ruling

The Kerala High Court’s ruling does not mean that every cheque issued after expiry of limitation automatically attracts Section 138. The decision proceeds on the footing that the cheque was issued towards repayment of the alleged debt and thereby revived the limitation period.

The defence remains available where the accused establishes that:

• the cheque was not issued towards the alleged debt;

• it was issued only as accommodation;

• the alleged transaction was illegal or void;

• the cheque was forged, materially altered or unauthorised;

• the amount claimed does not correspond to the liability due on presentation; or

• part-payment or adjustment had reduced the liability before presentation.

In Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, the Supreme Court held that the cheque must represent the legally enforceable liability existing on the date of presentation. Where part-payment had reduced the liability before presentation, an unendorsed cheque for the original amount could not sustain Section 138 liability.

Practical significance

G. Sanil Kumar is significant because it rejects a mechanical acquittal based only on the plea that the original debt was time-barred. The correct judicial enquiry is whether the cheque itself, or the surrounding documents, establishes a fresh written promise to pay the identified debt under Section 25(3) of the Contract Act.

For complainants, the decision underscores the importance of obtaining or preserving written acknowledgments, settlement letters, balance confirmations, emails or messages identifying the cheque as repayment of the outstanding debt. For accused persons, the decision confirms that a bare assertion of limitation may not suffice, the precise purpose of issuance and the liability existing at presentation must be examined.

Conclusion

The Kerala High Court has correctly reconciled limitation law with cheque-dishonour liability. A time-barred debt may not be recoverable through an ordinary civil suit, but a voluntary written and signed promise to pay it, including an appropriately issued cheque, can create an enforceable obligation under Section 25(3) of the Contract Act. If that cheque is dishonoured and all statutory requirements of Section 138 are satisfied, prosecution is maintainable.

The governing principle may therefore be stated as follows:

• A cheque issued towards a time-barred debt does not automatically escape Section 138 merely because the original debt had become barred by limitation. If the cheque amounts to a written and signed promise to pay the identified debt, thereby reviving enforceability under Section 25(3) of the Contract Act, its dishonour may attract Section 138 of the NI Act.

Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision, commercial or otherwise. One must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.

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References;

1. G. Sanil Kumar v. Sujith, Crl. A. No. 2002 of 2024. Livelawbiz

2. Dashrathbhai Trikambhai Patel Vs. Hitesh Mahendrabhai Patel & Anr. (Criminal Appeal No. 1497 of 2022) 

3. K. Hymavathi v. State of Andhra Pradesh, [Criminal Appeal No. 2743 OF 2023 @ SLP (Crl) No. 7455 of 2019]

4. B.K. Educational Services Private Limited Vs. Parag Gupta Associates (Civil Appeal  No.23988 of 2017).

5. Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay (AIR 1958 SC 328)  

6. Punjab National Bank And Ors vs Surendra Prasad Sinha (Criminal Appeal No. 254 of 1992). 

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G Sanil Kumar vs Sujith - Adverting to the legal position, settled and reiterated by this Court, it is held 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 seizes to be a time-barred debt.

 HC Kerala. (2026.10.08) in G Sanil Kumar vs Sujith [2026:KER:78185, 2026 KER 78185 Crl. A. No. 2002 of 2024] held that; 

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

• When a person issues a cheque, he acknowledges his liability to pay. In the event of the  cheque being dishonoured on account of insufficiency of funds he will not be entitled to claim that the debt had become barred by limitation and that the liability was not thus legally enforceable. He would be liable for penalty in case the charge is proved against him.

• it is crystal clear that this Court keeping in perspective the nature of the proceedings arising under the NI Act and also keeping in view that the cheque itself is a promise to pay even if the debt is barred by time has in that circumstance kept in view the provision contained in S.25(3) of the Contract Act and has indicated that if the question as to whether the debt or liability being barred by limitation was an issue to be considered in such proceedings, the same is to be decided based on the evidence to be adduced by the parties since the question of limitation is a mixed question of law and fact.

• Adverting to the legal position, settled and reiterated by this Court, it is held 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 seizes to be a time-barred debt.

• 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. 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.

Blogger’s Comments;

Hon’ble SCI (2018.10.11) in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates [Civil Appeal  No.23988 of 2017] observed as under; 

• ". . . In the case of Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay [AIR 1958 SC 328] it has been held that when the debt becomes time-barred the amount is not recoverable lawfully through the process of the court, but it will not mean that the amount has become not lawfully payable. Law does not bar a debtor to pay nor a creditor to accept a barred debt.” 

The Indian Contract Act, 1872.

# Section 25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless—

(1) it is expressed in writing and registered under the law for the time being in force for the registration of 1[documents], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless;

(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.

Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2.—An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

Illustrations

XXXX

(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.

Excerpts of the order;

Dated this the 8th day of October, 2026 The complainant in ST No.2754/2015 on the files of the Judicial First Class Magistrate Court, Varkkala, has filed this appeal, challenging judgment rendered by the learned Judicial First Class Magistrate in the above case, whereby the first respondent/the accused therein was acquitted.

# 2 Heard the learned counsel for the complainant/appellant and Adv.Sri.Prasanth M.P., appointed as the State Brief to argue the case of the first respondent/accused, after relinquishment of the engagement of Adv.Sri.N.Sunil Joseph, who had earlier filed vakalat for the first respondent/accused.

# 3. I shall refer the parties in this appeal as 'complainant' and 'accused' for easy reference.

# 4. Here, the prosecution case is that the accused committed offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'NI Act' for short). The summary of the allegation is that the accused borrowed a sum of ₹9,30,230/- from the complainant through various transactions on different dates, through the account of the accused. Thereafter, towards repayment of the said amount, Ext.P1 cheque for ₹9,30,230/- was issued on 06.07.2015. When the same was presented for collection, the same was returned with endorsement “funds insufficient”. Thereupon, legal notice was issued demanding payment of the said amount, but the accused did not pay the amount.

# 5. The learned Magistrate proceeded with trial. During trial, PW1 and PW2 were examined and Exts.P1 to P12 were marked on the side of the prosecution. On the side of defence, DW1 and DW2 were examined and Exts.D1 to D5 were marked.

# 6. Thereafter, the learned Magistrate raised seven points for consideration and all the points, except point No.2 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 by the learned Magistrate. However, while answering point No.2, the learned Magistrate found that the oral evidence of DW2 supported by Ext.D5, statement of accounts of the accused, would show that the money was transferred by the complainant to the accused in installments on various occasions during the period from 2011 to 2012. Accordingly, it was found that the consideration for Ext.P1 cheque is a time-barred debt and accordingly, the accused was acquitted on the sole reason.

# 7. According to the learned counsel for the complainant, the learned Magistrate went wrong in finding so, even though the finding of the learned Magistrate that the transactions were in the year 2011 and 2012 is true based on the evidence available. It is settled law that issuance of cheque for a time-barred cheque is not prohibited and on dishonour of the said cheque also, when failure to repay the cheque amount within the statutory period, on issuance of demand notice mandated under Section 138(1) of the NI Act, offence under Section 138 of the NI Act would attract. In this connection, it is apropos to refer a Division Bench decision of this Court in Ramakrishnan v. Parthasaradhy, reported in 2003 KHC 462 : 2003 (2) KLT 613 : 2003(2) KLJ 513 : ILR 2003(2) Ker.586 placed by the learned counsel for the complainant, wherein, in paragraph No.25, the Division Bench of this Court held as under:

• “25. In view of the above, the question as posed at the outset is answered in the negative. It is held that: 

• (1) When a person issues a cheque, he acknowledges his liability to pay. In the event of the  cheque being dishonoured on account of insufficiency of funds he will not be entitled to claim that the debt had become barred by limitation and that the liability was not thus legally enforceable. He would be liable for penalty in case the charge is proved against him. 

• (2) The view taken by this Court in Joseph’s case cannot be sustained as laying down the correct principle of law. It is consequently overruled.”

According to the learned counsel for the complainant, similar view has been taken by the learned Single Judges of this Court in the decisions in Mamman S.A. v. C.P.Gopalan Achari and Another, reported 2011(3) KHC 806 and Kesavan E.K. v. Thomas, reported in 2025(1) KHC 627. In fact, when the decision of the learned Single Judge in Joseph v. Devassia, reported in 2000(3) KLT 533 was challenged before the Hon’ble Apex Court as per the decision in Sasseryil Joseph V. Devassia, reported in MANU/SCOR/00031/2001 the Apex Court confirmed the above verdict of the learned Single Judge. At the same time, it is noticeable that in paragraph Nos.21 and 22 of the Division Bench decision in Ramakrishnan’s case, the Division Bench considered the above aspect while laying down the ratio therein. On looking at another decision of the Apex Court placed by the learned counsel for the appellant in Hymavathi K. v. State of Andhra Pradesh, reported in 2023(6) KHC 117, wherein quashment of a complaint, filed alleging commission of offence punishable under Section 138 of the NI Act, by the High Court holding that the debt involved therein as time-barred debt which was not legally enforceable, was challenged before the Apex Court, the Apex Court held in paragraph No.10 that from a perusal of the legal position enunciated, it is crystal clear that this Court keeping in perspective the nature of the proceedings arising under the NI Act and also keeping in view that the cheque itself is a promise to pay even if the debt is barred by time has in that circumstance kept in view the provision contained in S.25(3) of the Contract Act and has indicated that if the question as to whether the debt or liability being barred by limitation was an issue to be considered in such proceedings, the same is to be decided based on the evidence to be adduced by the parties since the question of limitation is a mixed question of law and fact. It is only in cases wherein an amount which is out and out non recoverable, towards which a cheque is issued, dishonoured and for recovery of which a criminal action is initiated, the question of threshold jurisdiction will arise. In such cases, the Court exercising jurisdiction under S.482 Cr.PC will be justified in interfering but not otherwise. In that light, this Court was of the view that entertaining a petition under S.482 CrPC to quash the proceedings at the stage earlier to the evidence would not be justified. Similar view has been taken by the Apex Court in another decision in A.V.Murthy v. B.S. Nagabasavanna, reported in 2002 KHC 1154.

# 8. The learned State Brief, in fact, justified the verdict of acquittal on the submission that the verdict impugned would not require any interference. According to him, a time-barred debt is not legally enforceable on the first principle and as such, the finding of the learned Magistrate in this regard is liable to be confirmed. It is pointed out that the legal position pointed out by the learned counsel for the appellant would require reconsideration to lay down a ratio on the first principle.

# 9. Having appraised the rival contentions, the points arise for consideration are:

• 1. Whether the learned Magistrate erred in acquitting the accused merely on the ground that Ext.P1 cheque was issued for a time-barred debt?

• 2. Whether the verdict impugned would require any interference? 

• 4. Order to be passed.

# 10. Here, PW1 given evidence, supporting the transaction and execution of Ext.P1 cheque. The case of the complainant is that the accused had borrowed an amount of ₹9,30,230/- from the complainant. The money was given to the accused through various bank transfers. According to the complainant, Ext.P1 cheque was issued by the accused in his favour for discharging the said liability. He deposed about the presentation of the cheque, its dishonour, and failure on the part of the accused to repay the cheque amount, even on issuance of demand notice. Exts.P1 to P11 documents were tendered in evidence through the complainant to prove his case. The power of attorney holder of the complainant was examined as PW2. He stated that he had personal knowledge regarding the transaction by which the accused had executed and handed over Ext.P1 cheque to the complainant.

# 11. The case of the complainant is that the accused had executed Ext.P1 cheque in his favour towards discharge of a legally enforceable debt on 02.07.2015 and handed over the same to the complainant at the house of the complainant, acting on his demand for the said sum on 30.06.2015. PW1 has specifically stated that the accused herein had signed Ext.P1 cheque dated 06.07.2015 in his presence and in the presence of PW2 as well.

# 12. On perusal of the judgment and the evidence available, it is perceivable that, in the instant case, transaction led to execution of Ext.P1 cheque was established by the complainant by giving evidence as PW1, supported by the evidence of PW2, and Exts.P1 to P12. It was found so by the learned Magistrate also. DW1, the accused himself, got examined and Ext.D5, his statement of accounts, was tendered in evidence and the same would show that the transaction took place during the period 2011 and 2012. This aspect is not disputed by the complainant also. Accordingly, the learned Magistrate found that Ext.P1 cheque was issued towards a time-barred debt and the same is not a legally enforceable debt for the purpose of finding offence under Section 138 of the NI Act.

# 13. Adverting to the legal position, settled and reiterated by this Court, it is held that when a cheque is issued for a timebarred 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 seizes to be a time-barred debt. 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. 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.

# 14. In the result, this appeal stands allowed and the judgment of acquittal rendered by the learned Magistrate stands set aside. Consequently, the first respondent/accused is convicted for the offence punishable under Section 138 of the NI Act.

# 15. The accused is sentenced to undergo simple imprisonment for a day till rising of the Court and to pay a fine of ₹14,00,000/- (Rupees fourteen lakh only) to the complainant. In default of payment of fine, the accused shall undergo default  imprisonment for a period of six months. If the fine amount would be paid or realised, ₹13,50,000/- (Rupees thirteen lakh and fifty thousand only) shall be given as compensation to the complainant under Section 357(1)(b) of the Code of Criminal Procedure, and the remaining amount of ₹50,000 (Rupees fifty thousand only) shall go to the State Exchequer being cost. 

# 16. The first respondent/accused is directed to appear before the Judicial First Class Magistrate Court, Varkala, to undergo the sentence imposed at 11.00 am on 31.10.2026 and on failure to do so, the learned Magistrate is directed to execute the sentence hereby imposed without fail. Registry is directed to forward a copy of this judgment to the Judicial First Class Magistrate Court, Varkala, for information and compliance forthwith.

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