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Thavva Subrahmanyam Vs. Chenna Venkataratnam - Court Judgment

LegalCrystal Citation
SubjectCommercial;Limitation
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 1281 of 1951
Judge
Reported inAIR1956AP105
ActsLimitation Act, 1908 - Sections 20; Code of Civil Procedure (CPC) , 1908 - Sections 100 to 101
AppellantThavva Subrahmanyam
RespondentChenna Venkataratnam
Appellant AdvocateK. Krishnamurthy, Adv.
Respondent AdvocateV. Parthasarathy, Adv.
DispositionAppeal allowed
Excerpt:
.....100 to 101 of code of civil procedure, 1908 and section 20 of limitation act, 1908 - whether payment by cheque made by debtor in favour of creditor is a payment which satisfies section 20 - court observed that cheque together with subsequent receipt of money by payee would be an acknowledgement of payment within meaning of proviso to section 20 - money sent to creditor along with letter containing acknowledgment would satisfy requirement of law though money will be paid subsequent to writing of letter - held, cheque issued by debtor would be acknowledgment of payment with in meaning of proviso to section 20. - - the said cheque was drawn on the agra bank by one haji muhammad in favour of one of the respondents and endorsed over by him in favour of the appellants. 5. the..........was purchasing salt from the plaintiff and was paying amounts towards purchase price from time to time. on 27-8-1946, he issued a cheque on the andhra bank in favour of the plaintiff and the cheque was cashed and credited in the plaintiff's account on 27-8-1946. the suit was filed on 24-12-1948. the suit would be barred by limitation if the payment of rs. 121-2-0 by the issue of a cheque did not operate as payment within the meaning of section 20, limitation act. the short question, therefore, is whether a payment by cheque made by, a debtor in favour of a creditor is a payment which satisfies the terms of section 20 limitation act. section 20 reads:(1) 'where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the.....
Judgment:

Subba Rao, C. J.

1. Umamaheswaram J. has referred this appeal to a Bench as, in the learned Judge's view, the question of law raised is one of importance and there was a conflict of authorities on the same.

2. The relevant facts, that gave rise to the appeal, may be briefly stated. The plaintiff is a merchant of Kanuparthi dealing in salt and the defendant is a merchant of Bezwada dealing in the same commodity. The defendant was purchasing salt from the plaintiff and was paying amounts towards purchase price from time to time.

On 27-8-1946, he issued a cheque on the Andhra Bank in favour of the plaintiff and the cheque was cashed and credited in the plaintiff's account on 27-8-1946. The suit was filed on 24-12-1948. The suit would be barred by limitation if the payment of Rs. 121-2-0 by the issue of a cheque did not operate as payment within the meaning of Section 20, Limitation Act. The short question, therefore, is whether a payment by cheque made by, a debtor in favour of a creditor is a payment which satisfies the terms of Section 20 Limitation Act. Section 20 reads:

(1) 'Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his duly authorised agent, a fresh period of limitation shall be computed from the time when the payment was made.

Provided that, save in the case of a payment of interest made before the first day of January, 1928, an acknowledgment of the payment appears in the hand writing of, or in a writing signed by, the person making the payment'.

3. The proviso to Sub-section (1) was substituted by the Indian Limitation (Amendment) Act (Act I of 1927) in the place of the old Proviso which stood as follows:

'Provided that in the case of part payment of the principal of debt, the fact of the payment appears in the handwriting of the person making the same'.

4. In 'Mackenzie v. Tiruvengadathan', 9 Mad 271 (A), a Division Bench of the Madras High Court held that an endorsement on a cheque did not satisfy the condition of Section 20, Limitation Act, so as to give rise to a new period of limitation from the date of such endorsement. The facts in that case were: The respondents executed a promissory note in favour of the appellants on 6-9-1881.

The suit was filed in August 1885. There was a credit entry of Rs. 100/- in the books of the appellant and that amount represented the realisations of a cheque. The said cheque was drawn on the Agra Bank by one Haji Muhammad in favour of one of the respondents and endorsed over by him in favour of the appellants.

5. The question that really arose before the learned Judges was whether the writing on the cheque satisfied the proviso as it then stood. The learned Judges observed) at page 272:

'Assuming that respondent 2 endorsed the cheque B, it does not satisfy the requirements of Section 20, Limitation Act. The proviso to that section requires that the fact of part payment should appear in the handwriting of the debtor or his agent. The cheque is only an order for payment and it does not evidence any payment at all. Nor does it show for what purpose the payment was made'.

6. The judgment could be sustained on the ground that the endorsement on the cheque did not satisfy the more stringent condition laid down by the proviso as it then stood, for, under that proviso the fact of part payment should appear in the handwriting of the debtor or his agent. The observations of the learned Judges in regard to the cheque must be treated as obiter. Further, in the year 1886, the practice of issuing and receiving cheques in lieu of payment was not so common as it is now.

Since that decision, except one decision in 'Ram Chander v. Chandi Prasad', 19 All 307 (B), which was also later dissented from by the same High Court, no other High Court, including the Madras High Court, followed that decision. The obiter dictum in that decision based upon the terms of the proviso, since amended, cannot be taken as an authority on the proviso as it now stands, which is far wider in scope than its predecessor.

7. There is a long catena of decisions on thequestion now raised before us but it would be enough if we noticed a few of them throwing light on the subject: In 'Kedar Nath v. Dinabandhu Sah', AIR 1916 Cal 580 (C), Jenkins C.J. expressed his view at page, 580 as follows:

'It seems to me clear that if a cheque be delivered to a payee by way of payment and is received as such by him, it operates as payment and is an extinguishment to that extent of the debt,though this is no doubt subject to a condition subsequent that if upon due presentation the cheque is not paid the original debt revives'.

8. Adverting to the proviso, the learned Judgeproceeded to observe :

'If I am right in the view that the cheque actually was a payment, the very payment was in the handwriting of the person making the same.'

9. We respectfully accept the aforesaid observations as indicating the correct legal position.

10. A Division Bench of the Calcutta High Court in Prafulla Chandra v. Jatindra Nath', AIR 1938 Cal 538 (D) considered the same question after the proviso was amended. The learned Judges held that, when part payment of a debt is made and accepted by cheque, written in the handwriting of the person liable to pay the debt, it is evidence both of the fact of payment and of acknowledgment within the meaning of Section 20, Limitation Act, and fresh period of Limitation shall be computed from the time when the cheque is handled over to the creditor. When an attempt was made to argue that the word 'acknowledgment' in the proviso indicates that the writing should follow the payment, the learned Judge observed :

'So far as this question is concerned, it seems to me that, although the fact of payment may be different from the acknowledgment, if the cheque itself is evidence of the fact of payment, it is also evidence of acknowledgment. It has been contended that acknowledgment must necessarily follow the payment. I do not see why the two may not be simultaneous. If we take the acknowledgment to mean admission, (the ordinary dictionary meaning) of the payment, it may be admission that payment is being made and not necessarily that . payment has already been made'.

11. Horwill J. in 'Krishnaswami Iyer v. Ramakrishna Ayyar', AIR 1945 Mad 515 (E) when confronted with 9 Mad 271 (A), made the following remarks:

'In 9 Mad 271 (A), the learned Judges had to consider a payment by means of a cheque that had not been made by the debtor, but which had been endorsed over by him to his creditor. An endorsement would not amount to a payment acknowledged in the handwriting of the person making the payment; but the difficulty lies in the words used by the learned Judges in saying so. They said

'The cheque is only an order for payment and does not evidence any payment at all.

19 All 307 (B) was also a case of payment by an endorsed cheque. The learned Judges in the Calcutta case would probably not have followed 9 Mad 271 (A) even though payment had been made by an endorsed cheque but they were content to distinguish it.

Other High Courts have distinguished it or dissented from it. In other High Courts, there is unanimity of opinion that a payment by cheque made by the debtor in favour of the creditor is a payment which satisfies the condition of Section 20 Limitation Act : and I am not prepared to say that 9 Mad 271 (A) which did not have to consider such a case, laid down a different law'.

12. We respectfully agree with the view expressed by the learned Judge and also with his observations in distinguishing 9 Mad 271 (A).

13. Even in England, a cheque has always been considered as a payment subject to a condition. In 'Marreco v. Richardson', 1908-2 Ch 584 (F), Sir Gorell Barnes observed at p 589:

'In the present case the part payment relied upon was by a cheque; a negotiable instrument and payment by cheque has always been considered to be a conditional payment while the cheque is running, the right of action for the original debt is suspended and the payment is, therefore, conditional. This cheque was the acknowledgment to which the plaintiff pointed as implying a promise to pay the whole debt which would prevent the operation of the statute'.

14. The law of the Limitation of Actions by Banning 3rd edition page 51, contains the following passage:

'When a debtor gave a bill on account of the debt and the bill proved ultimately worthless, the bill (being a conditional payment) operated as an acknowledgment of the debt; and if a bill be given in part-payment of a debt, and the bill is duly paid when due, the bill operates as a part payment from the time of the delivery of the bill (and not merely from the time of actual payment)'.

15. There is no reason why the same rule should not be applied in India where, at present, the practice of issuing and receiving cheques towards payment is prevalent in the business world.

16. A payment may be made not only in cash but in any other medium that the creditor may choose to accept. It may be by delivery of goods or by the adjustment of accounts. Whatever might be the position at the time when 9 Mad 271 (A) was decided, it cannot be said that payment by cheque is not now in consonance with the practice obtaining in the commercial world. It has now become the usual mode of payment.

Further, the requirement of the proviso that there should be an acknowledgment of payment is also satisfied by the writing contained on the cheque. The word 'acknowledgment' means only recognition or admission. The admission of payment need not be necessarily subsequent to the payment. It may be simultaneous or even antecedent. The cheque is not only evidence of payment but it 'ex facie' contains recitals admitting the payment.

We, therefore, hold that it satisfies the requirements of the section. We would go further and hold that a cheque together with the subsequent receipt of the money by the payee would be an acknowledgment of payment within the meaning of the proviso. It is not necessary that there should be actual payment of money simultaneous with the endorsement. Money sent to a creditor along with a letter containing an acknowledgment would satisfy the requirements of law, though in fact the money will be paid subsequent to the writing of the letter.

The whole transaction i.e. the writing of the letter and the payment of money to the cretitor may reasonably be considered as one process. So too, in the case of the issue of a cheque, the issue of the cheque and the subsequent realisation of it may be considered as one process -- the cheque containing the acknowledgment and the realisation of the cash being the payment.

We, therefore, hold that, under the new proviso, a cheque issued by a debtor would be an acknowledgment of payment within the meaning of the Proviso to Section 20(1), Limitation Act. It is not disputed that the payment in the present case is within three years from the date of the suit, and, therefore, the suit is within time.

17. Mr. Parthasarathi, learned counsel for the respondent, contended that the article governing the facts of the present case is Article 52, Limitation Act. He contends that the suit was, in effect and substance one for the realisation of the price of the goods sold and delivered and such a suit should be filed within three years from the date of the delivery of each consignment of the goods. This argument was not raised in any of the Courts below.

The whole case proceeded on the basis that the suit would be within time if the issue of the cheque was an acknowledgment within the meaning of Section 20, Limitation Act. We cannot, therefore, allow the respondent to raise for the first time, before us a point, which has not been raised either in the pleadings or in the Courts below, particularly when the point of law depends, upon the elucidation of further facts.

18. In the result, the appeal is allowed and the suit is decreed with costs throughout.


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