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Report No. 89

19.7. Section.-Explanation (.-Application to charges.- Another point concerning section 19 Explanation (a) concerns the word 'mortgage', as occurring in this explanation. There is no reason why clause (a) of the Explanation should not include a 'charge'. But the Chief Court of Oudh1 has held otherwise, and, to avoid controversy on this point, it is desirable that the section should be suitably amended to cover a case of 'charge' also.2-3

1. Gurden v. Ralkumar, AIR 1943 Oudh 211: ILR 18 Luck 637.

2. Cf. Muthuswami v. Chennamalai, (1970) 1 MLJ 341 (343).

3. See para. 19.10, infra, for a draft.

19.8. Payment by cheque.- We now turn to the question of payment by cheque. With the progress of institutionalised banking, payment by cheque has become the normal practice, especially in urban areas. If the cheque, accepted by the creditor, is ultimately honoured, ho problems present themselves. The "payment" constitutes part payment.1

In fact, Halsbury2 has gone further to say that "the acceptance by the debtor of a bill drawn upon him by a creditor, or the delivery to the creditor of a bill drawn by the debtor on a third person, on account of part of the debt, is also sufficient part payment, whether the bill is paid at maturity or not; it seems that in that case the part payment is deemed to be made at the time of the delivery of the bill, and not when it is paid." The effect, it is stated, would be the same if a cheque is given on the day, with an agreement that the same should not be presented to the bank until a later day and, acting upon the agreement, the creditor presents the cheque on the agreed day and receives payment.3

However, opinion in India on the subject is not uniform. The High Courts of Bombay4, Patna5, and Punjab6 have held that the acceptance of a cheque which is subsequently dishonoured does not constitute "payment" within the meaning of section 19. The Madhya Pradesh High Court has held to the contrary.7 According to the Andhra High Court, whether payment by cheque amounts to "payment" depends on whether the payment was accepted as such or not.8

1. Marreco v. Richardson, (1908) 2 KB 584 (CA).

2. Halsbury's, 4th Edn., Vol. 28, p. 404, para. 900 and f.n. 11.

3. Marreco v. Richardson, (1908) 2 KB 584: (1908-12) All ER Rep 55 (CA).

4. Chinttaman v. Sadguru Narain Maharaj, AIR 1956 Born 553 (554).

5. Arjun La! v. Daya Ram, AIR 1971 Pat 278 (279, 280).

6. Northern India Finance Corm v. R.L. Soni, AIR 1973 Punj 35 (37), para. 5.

7. Gori Lal v. Ramjee, AIR 1961 MP 346 (347), para. 5.

8. Subrahamanyam v. Venkatarathnam, AIR 1956 Andhra 108.

19.9. Need for clarification.- There appears to be a substantial case for clarification on the subject. We see no reason in principle why the benefit of section 19 should not be extended to such cases, i.e., to cases where a cheque is accepted in payment irrespective of whether it is honoured or not. Such a wide view would not be doing violence to the rationale1on which payment is regarded as giving a fresh lease of life. Even in the substantive law, so far as a dishonoured cheque is concerned, a new cause of action accrues upon delivery of the cheque to the creditor.2

1. cf. para, 19.1, supra.

2. Halsbury's, 4th Edn., Vol. 28, p. 300, para. 668.

19.10. Agreement for deferring presentation of the cheque.- We are not oblivious to the fact that while giving and accepting a cheque, the debtor and the creditor may enter into a private agreement that the creditor will defer the actual presentation of the cheque to some agreed future date, by which date the debtor is expected to arrange to ensure adequate funds to his credit with the drawee. Even in such a contingency, there appears to be no reason why the benefit of section 19 should not be extended to the creditor.

If, in the hypothetical situation mentioned above, the debtor manages to have adequate funds in his account by the agreed date, none is worse off. If the debtor fails so to do and litigation becomes necessary, a fresh period of limitation would accrue in favour of the creditor. By not allowing the benefit of section 19 to cases of dishonoured cheques, the law may precipitate matters and drive the creditor to court, by denying the parties a chance to settle their accounts amicably.

19.11. For these reasons, we consider it desirable that payment by cheque should be expressly covered, on lines to be indicated in the amendment that we are suggesting.1

1. Para. 19.12, infra.

19.12. Recommendation.- In the light of the above discussion. We recommend that section 19 should be revised as indicated belo.-

Revised section 19

"Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period for a suit or application for the recovery of such debt or legacy by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made, in respect of any suit or application for the recovery of such debt or legacy, as the case may be:

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

Explanation 1.- For the purposes of this section.

(a) Where immovable property which is mortgaged or charged is in the possession of the mortgagee or charge-holder, the receipt of the income of such property shall be deemed to be a payment.

(b) "debt" does not include money payable under a decree or order of a court.

Explanation I.-Where payment on account of a debt or of interest on a legacy is sought to be made by a negotiable instrument, the tender of the negotiable instrument, if accepted by the payee in such payment, amounts to payment of the amount for the purposes of this section whether or not the negotiable instrument is subsequently honoured."

The Limitation Act, 1963 Back

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