The Madras High Court has set aside an acquittal order in a Negotiable Instruments (NI) Act case, observing that once a “running account” between parties is admitted, the ground of limitation or a “time-barred debt” cannot be raised to escape liability under Section 138.
The Court held that while a debt might appearing to be beyond the three-year limitation period on the face of it, the continuous nature of business transactions and subsequent part-payments extend the period of limitation.
Background
The appellant, Pramod Kumar Daga (Proprietor of M/s. Ambica Genpower), had filed a private complaint against M/s. Insulation House and its partners. The appellant alleged that the respondents purchased copper materials and owed an outstanding amount of $Rs. 13,65,257.19/-$.
To discharge part of this liability, the 4th respondent (Mandate Holder) issued a cheque for $Rs. 3,27,232.46/-$ dated September 21, 2011. When presented, the cheque was returned with the endorsement “Payment Stopped by the Drawer.” Following a statutory notice and a reply containing “false allegations,” the appellant initiated proceedings under Section 138 of the NI Act.
The trial Court (Metropolitan Magistrate, Fast Track Court-IV, George Town) had acquitted the respondents on April 24, 2017, primarily finding that the cheque was issued for a time-barred debt, as the underlying invoice was dated July 18, 2008, while the cheque was dated September 21, 2011.
Arguments of the Parties
Appellant’s Submissions: The appellant argued that the trial Court erred in its finding of a time-barred debt. It was contended that since there was a “running account” between the parties—a fact allegedly admitted by the respondents in a related civil suit (O.S.No.859 of 2013)—the debt remained legally enforceable. The appellant further noted that substantial payments made in 2010-11 established a fresh starting point for the limitation period.
Respondents’ Submissions: The respondents strongly opposed the appeal, claiming that the appellant actually owed them over $Rs. 1.06$ Crores. They contended that the subject cheque, along with three others, was given as “undated security” in 2010 to prove creditworthiness to bankers, and not for a legally enforceable debt. They maintained that the one-to-one correlation between the 2008 invoice and the 2011 cheque made the debt time-barred.
Court’s Analysis
The Court, presided over by Justice M. Nirmal Kumar, analyzed the evidence and the nature of the transactions. The Court observed that while the invoice was dated 2008 and the cheque 2011, the “running account” status changed the legal landscape.
Verbatim, the Court noted:
“Once it is admitted that the appellant and the respondents were having running account, then there is no question of limitation or time barred debt. From the reply, it is the admitted position. This proves that the debt is not a time-barred one and the cheque (Ex.P2) issued in discharge of part liability.”
The Court found that the trial Court had “misdirected” itself by confining its view only to the date of the invoice (Ex.P1) and the cheque (Ex.P2). It pointed out that the evidence of the 4th respondent (DW1) and the reply notice confirmed the existence of a running account.
The Court also addressed a miscellaneous petition (Crl.M.P.No. 19562 of 2022) for additional evidence regarding a civil suit judgment from 2025. The Court dismissed this petition, stating that there were already “enough materials and evidence” on record to decide the issue without further documentation.
Regarding the legal presumption, the Court referenced the Supreme Court’s decision in Rajesh Jain v. Ajay Singh (2023), noting that once the signature is admitted, the Court must proceed on the premise that the cheque was issued in discharge of a debt.
Decision
The High Court allowed the Criminal Appeal and set aside the judgment of acquittal dated April 24, 2017.
The Court directed:
- The trial Court to rehear arguments and consider the evidence afresh.
- A fresh judgment to be delivered within three months.
- The trial Court may entertain a settlement if the respondents come forward to settle the cheque amount.
The Registry was directed to return all case records to the Metropolitan Magistrate, Fast Track Court-IV, George Town, Chennai, within seven days via a Special Messenger.
Case Details:
- Case Title: Pramod Kumar Daga vs. M/s. Insulation House & Others
- Case No.: Crl.A.No.557 of 2017
- Bench: Justice M. Nirmal Kumar
- Date: 16.04.2026
