D.S. Mathur, J.
1. This is a revision under Section 115, C. P. C. by S. Dharam Singh, defendant, against the order dated 11-9-1962 of the District Judge of Saharunpur, allowing the revision under Section 25 of the Provincial Small Cause Courts Act and thereby setting aside the judgment and decree of the Judge, Small Cause Court, and decreeing the suit of Khan Chand, plaintiff, in full.
2. The material facts of the case are that on 4-11-1957 the defendant-applicant borrowed a sum of Rs. 400/- from the plaintiff-opposite party, and on 30-9-1958 he (defendant) issued a cheque for the above amount in payment of the loan. The cheque was dishonoured under the note dated 28-11-1958 of the United Commercial Bank Ltd., Delhi. The plaintiff instituted the present suit on 27-9-1961 basing his claim on the loan though pleading that he was entitled to the benefit or Section 20 of the Limitation Act, 1908 (to be referred hereinafter as the Act), in view of the fact that payment had been made by cheque, though dishonoured. In fact, benefit was also claimed of Section 19 of the Act, but this part of the plea was later rightly given up.
3. S. Dharam Singh, defendant, raised various pleas, but they were repelled by the trial Judge, and for purpose of this revision, it is not necessary to reproduce such pleas in this order.
4. The Judge, Small Cause Court, was of opinion that the plaintiff was not entitled to the benefit of Sections 19 and 20 of the Act and that the suit was barred by limitation. He, therefore, dismissed the suit with costs on parties. The plaintiff then went up in revisionunder Section 25 of the Provincial Small Cause Courts Act and the District Judge took the view that the period of limitation stood extended by the cheque issued on 30-9-3.958. He thus recorded the finding that the suit was filed within time, and consequently decreed the suit in full. The present revision is against this order of the District Judge and, naturally, the point raised is that the plaintiffs' suit was barred by limitation.
5. The main point for consideration is whether the plaintiff was entitled to the benefit of Section 20 of the Act by virtue of the debtor (defendant) having issued a cheque on 30-9-1958, though that cheque was later dishonoured. In case the finding is recorded against the plaintiff, it shall have to be considered whether any alternative relief could be granted to him In such a case, this Court shall have to consider whether to pass a final order in the revision or to remand the suit for a fresh hearing so that the defendant may not be taken by surprise and may not, in any manner, be prejudiced.
6. Section 20(1) of the Act provides that where payment on account of a debt is made before the expiration of the prescribed period by the person liable to pay the debt, or by his duly authorised agent, a fresh period of limitation shall be computed from the time when the payment was made. The proviso to this Subsection further lays down that the acknowledgment of the payment should appear to be in the handwriting of, or in a writing signed by, the person making the payment. In case the cheque in question had been honoured, there could be no two opinions on the matter in controversy. Payment by cheque is now common, in fact, has become a rule adopted by the public for many reasons. By making payment by cheque, the necessity of carrying huge sums of money is avoided, and the payer has a document in his possession to prove the payment in case the payee does not give a receipt, or the receipt sent is lost. Payment by cheque is now so common that whenever a cheque is honoured, it can be held without any hesitation that payment has been made.
7. Controversy arises where the cheque has been dishonoured, and in such a case two views are possible. It can be assumed that there was a mere conditional payment and after the dishonouring of the cheque, there was in the eye of law, no payment and the liability exists as prior to the issue of the cheque. The other view can be that there has been payment of the liability, and a fresh cause of action arises on the dishonouring of the cheque. Sometimes it is said that both the causes of action come into existence. Naturally, the views taken by the High Courts are not always the same Those who have laid stress upon the conditional payment by cheque, have held that after the dishonouring of the cheque, the original cause of action remains, and a suit for the recovery of the loan can be filed on the basis of the initial transaction. The others take the view that payment by cheque is a payment within the meaning of Section 20 of the Act and the period of limitation stands extended. At the same time, it has been held that a fresh cause of action accrues on the dishonouring of the cheque and a suit can He on this fresh cause of action also.
8. M.B. Singh and Co. v. Sircar and Co. : AIR1930All392 was relied upon by the District Judge in holding that the plaintiff was entitled to the benefit of Section 20 of the Act. It shall be found that that was a case where the cheques had been honoured and the plaintiff's account was credited with the amounts of the cheques. Therein no observation was made which can suggest that payment within the meaning of Section 20 of the Act shall be deemed to have been made on the date of the issue of the cheque even though it is later dishonoured. On the other hand, it was observed:--
'We are of opinion that it would be laying down a proposition too broadly to say that the mere writing of a cheque and handing it over to and its receipt by the payee will and must always constitute a payment of the amount.'
Thereafter a reference was made to the rule of practice of the creditors, some of whom refuse wholly to regard the receipt of a cheque as a payment, while others accept it as such. A third category regards it as a conditional payment. After indicating that there was no common practice, it was held that in the case under consideration there was no doubt whatever on the facts that the cheques were received by the creditor-plaintiffs in payment of their account. : AIR1930All392 (supra) is thus more helpful to the defendant than to the plaintiff; but considering that no final opinion was expressed on the question in issue in the present revision, this decision cannot be of much help.
9. Before making further comment, it shall be proper to refer to the reported decisions of other High Courts in which a similar question was considered. Chintaman Dhundiraj v. Sadguru Narayan Maharaj Datta Sansthan : AIR1956Bom553 , is in support of the proposition that payment by cheque which is dishonoured does not amount to payment within the meaning of Sections 19 and 20 of the Act and does not give a fresh start to the limitation for the recovery of the loan.
10. In Gorilal Baldeodas v. Ramjeelal Bhuralal. : AIR1961MP346 , a contrary view was expressed and payment by dishonoured cheque was treated as payment within the meaning of Section 20 of the Act. Recording such a finding. Krishnan, J., observed that the word 'payment could be used in two slightly different senses where a bill or cheque or any other negotiable instrument was given, one sense was that it was payment because it represented money and the parties intended that as soon as it went into the hands of the creditor, the debt should be washed out and the other sense was in regard to the ultimate effect. Krishnan, J. laid stress upon the first, and not the other, and relying upon certain observations made in the decisions of the Calcutta and Madras High Courts, in cases where the cheque had been honoured, recorded the finding that payment by dishonoured cheque was also payment within the meaning of Section 20. With clue respect T cannot subscribe to this view. No creditor shall agree that the debt would stand discharged assoon us the cheque in payment of the loan was given to him. What he has in mind is that if the cheque is honoured and the amount is credited to his account, the delivery of the cheque shall amount to payment of the loan, and not otherwise. It is true that dishonouring of a cheque is not common, but is not unknown. Consequently, a creditor can be deemed to know that at occasions a cheque may be dishonoured, may be for want of funds or For dis-similarity of signature. Whatever the reason for the dishonouring of the cheque may be, the creditor shall like to safeguard his interest by ensuring that the payment shall be assumed only after the cheque has been honoured and not otherwise. Of course, if under the law or by custom or usage, receipt of the cheque amounts to payment, the Courts of law can hold that irrespective of the cheque being honoured or dishonoured, payment is made on the date the cheque is issued. But for so long as there is no such law, custom or usage, the Courts must take a reasonable view keeping in mind what may be the implied contract between the creditor and the debtor, or what was in their mind.
11. The simple word 'payment' has been used in Section 20 of the Act and any step taken cannot amount to payment unless the amount is available to the creditor. Payment in cash can never be in controversy as the amount once received by the creditor amounts to payment of that amount. With regard to payment by cheque, strictly speaking, the payment is made on the date the amount of the cheque is credited to the account of the creditor; but in view of the prevalent practice, all the more, where local cheques are issued, the date of handing over the cheque can be treated as the date or payment. It is after the amount of the cheque is credited to the account that payment can be said to have been made, either on the date of delivery of the cheque or on the date of the credit of the amount; but if the cheque is dishonoured and the amount of the cheque is not credited to the account, that is, in the eye of law and also for all practical purposes, no payment. If in common parlance or in the fiction of law, the handing over of the cheque is treated as some kind of payment, it would be a mere conditional payment, and not a payment as contemplated by Section 20 of the Act.
12. To sum up, where a cheque is dishonoured, the handing over of the cheque does not amount to payment of the debt, in whole or in part, within the meaning of Section 20 of the Act and the issue of the cheque would not give a fresh start to the period of limitation. In this view of the matter, the present suit of the plaintiff based on the original transaction of 4-11-1957 was barred by limitation; but the plaintiff had an alternative remedy. He could easily base his claim on the dishonoured cheque. It shall be highly inequitable if a party has to suffer a loss as a result of any improper act or conduct on the part of the other. This is why the legislature made a provision in the Act for the recovery of amount not only on a bill of exchange, but also on a dishonoured bill of exchange. Cheque is defined in Section 6 of the Negotiable Instruments Act as a bill of exchangedrawn on a specified banker and not expressed to be payable otherwise than on demand. Cheque is, therefore, a kind of bill of exchange, and cause of action accrues on a cheque being dishonoured as on a dishonoured bill of exchange. Limitation for a suit based on a dishonoured bill of exchange including cheque is laid down in Articles 78 and 80 of the Act. Article 78 makes a provision for a suit by the payee against a drawer of bill of exchange which has been dishonoured by non-acceptance; while Article 80 for a suit on a bill of exchange not expressly provided for in the Act. The period of limitation for both is three years; in case of Article 78, it commences from the date of refusal to accept and in case of Article 80, from the date the bill becomes payable. Article 78 would ordinarily not apply to cheques; but the payee can easily avail of the provisions of Article 80. Thus a suit based on a dishonoured cheque shall be maintainable within three years of the delivery of the cheque to the payee. The present suit was instituted within three years of the issue of the cheque, and hence would be within time if based on the bill of exchange.
13. In view of Order VII, Rule 7, C. P. C. this Court can grant the plaintiff the alternative relief based on the dishonoured cheque even though not expressly prayed for in the plaint; but to avoid the possibility of any injustice being done to the defendant, it shall be desirable to remand the suit for a fresh hearing. After the plaintiff has suitably amended the plaint, the trial Court shall give an opportunity to the defendant to file an additional written statement, and after framing additional issues and recording further evidence of the parties, if any, pronounce judgment.
14. The revision is hereby allowed in thesense that the order of the District Judge underrevision and also the judgment and decree ofthe Judge, Small Cause Court, are set aside.At the same time the suit is remanded to thetrial Court for a fresh hearing in accordancewith the law, keeping the observations madeabove in mind. Costs of all the three Courtsshall abide the final decision of the suit.