The Kerala High Court has recently held that issuing a cheque towards repayment of a time-barred debt is not legally prohibited and its dishonour can attract prosecution under Section 138 of the Negotiable Instruments Act, 1881.

“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,” Justice A. Badharudeen ruled.

The court set aside the acquittal of an accused in a cheque-dishonour case, finding that the Magistrate had erred in acquitting him solely because the cheque was issued towards a time-barred debt.

The appeal was filed by complainant G. Sanil Kumar against the acquittal in a case under Section 138 of the NI Act.

According to the complainant, the accused had borrowed ₹9,30,230 through multiple transactions in 2011 and 2012. He later issued a cheque for the same amount, dated July 6, 2015, towards repayment. The cheque was returned unpaid with the endorsement “funds insufficient”. The accused did not pay the amount after a legal notice demanding repayment was issued.

The Judicial First Class Magistrate Court, Varkala, acquitted the accused after finding that the cheque related to a time-barred debt and did not represent a legally enforceable debt for the purposes of Section 138.

The complainant argued that issuing a cheque for a time-barred debt was not prohibited, while the State Brief representing the accused contended that such a debt was not legally enforceable.

Referring to earlier rulings,the court held that issuing a cheque towards repayment of a time-barred debt was not legally prohibited and that its time-barred status alone did not bar prosecution under Section 138 of the NI Act.

The court set aside the acquittal and convicted the accused, sentencing him to one day's simple imprisonment and a fine of ₹14 lakh. Of the fine, ₹13.5 lakh was ordered as compensation to the complainant and ₹50,000 as costs to the State. Default in payment would attract six months' imprisonment.

For Appellant: Advocates R Rahul and Abhina L

For Respondents: Senior Public Prosecutor Sajeev P.K and Advocate Prasanth M.P

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Case Title :  G Sanil Kumar v. Sujith and AnrCase Number :  Crl. A No. 2002 of 2024CITATION :  2026 LLBiz HC(KER) 196
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