The loan was from 2014 and the cheque from 2019, so he argued the debt had died. The instalment schedule said otherwise
A time-barred debt cannot support a Section 138 conviction — but limitation runs from when the last instalment fell due, not from when the borrowing began. The Himachal Pradesh High Court works through the dates.
“Legally enforceable debt or liability” is the phrase that carries the whole of Section 138 of the Negotiable Instruments Act, and the word doing the work in it is enforceable. A cheque issued towards a debt that limitation has already extinguished is not a cheque issued in discharge of a legally enforceable liability, and the prosecution fails — which is why the defence is worth running whenever a gap of years separates the borrowing from the instrument.
It is also why the arithmetic has to be done properly. On 24 September 2026 Justice Rakesh Kainthla dismissed a revision in which it had not been.
A vehicle loan and a cheque five years later
Shriram Transport Finance Company had advanced a loan to Rajender Singh, who issued a cheque of ₹2,60,000. It was returned unpaid, a demand notice followed, and he was convicted under Section 138 by the Chief Judicial Magistrate, Shimla on 7 October 2025 and sentenced to a year’s simple imprisonment. The Sessions Judge, Shimla upheld the conviction and sentence on 18 August 2026. Mr. R.S. Chandel appeared for the petitioner in the revision; there was no appearance for the respondent.
Three defences were pressed, and each fell to a different answer.
The limitation argument, and the dates that defeated it
The first was that the cheque was issued in 2019 while the loan was taken in 2014, so the cheque was towards a time-barred debt.
The appellate court had already located the flaw, and the High Court adopted it. The loan was repayable in forty-seven monthly instalments. The first instalment fell due on 20 January 2015 and the last on 20 November 2018. The cheque was issued on 12 July 2019 — within eight months of the date on which the final payment became due. On that schedule the debt could not be said to be barred by limitation.
The point is elementary once stated, and it is missed often enough to be worth stating. Where a loan is repayable in instalments, time does not run from the date of the borrowing. Each instalment carries its own limitation, and the debt as a whole remains enforceable by reference to the last of them. A five-year gap between the advance and the cheque tells you nothing until you know when repayment was due to finish.
The repossession that was not proved
The second defence was that the finance company had repossessed the accused’s vehicle and sold it for ₹2,85,000, which would have extinguished the liability.
This failed on the evidence rather than on any principle. The Court noted that the defence witness on the point, Suresh Sharma (DW-2), said nothing at all about the sale of the vehicle. A plea of that kind is provable — there would be a sale letter, a receipt, an account statement — and the accused produced none of it. The plea was held not proved.
The security cheque, and the handwriting
The third was that the cheque was issued as security, apparent from the handwriting in the body differing from the signature.
Justice Kainthla applied his Court’s own decision in Hamid Mohammad v. Jaimal Dass, 2016 (1) HLJ 456, which holds that an accused is liable for the dishonour of a cheque even where it was issued towards security. The reasoning there is worth repeating: Section 138 is attracted where a cheque is issued on account of any liability, and where the instrument itself carries no recital confining it to security, there is nothing on its face to take it out of the section. A security cheque is still a cheque.
The accused also never claimed that he had sufficient funds in the account and that the cheque was wrongly dishonoured, so the endorsement of “funds insufficient” stood proved. Service of the demand notice was proved from his own admission in cross-examination that the acknowledgement bore his signature.
An argument built on Vijay — where a post-dated cheque meant to be presented after two months was presented the same day, making the omission to mention the date of the loan material — was distinguished on the simple ground that this accused never claimed the cheque was post-dated or was to be presented later.
When the complaint itself is time-barred
A separate limitation point was taken against the complaint rather than the debt: the complaint recorded that the cause of action accrued on 18 July 2019 when the notice of dishonour was received, and it was said to have been filed out of time. The Court rejected it, relying on the Supreme Court’s decision in Vishnoo Mittal v. Shakti Trading Co., (2025) 9 SCC 417.
The distinction between the two limitation arguments is worth holding on to, because they are often run together and they are not the same. One asks whether the underlying debt was still enforceable when the cheque was issued — that is the Section 138 question, and it is answered from the repayment schedule. The other asks whether the complaint was filed within a month of the expiry of the fifteen-day grace period after the demand notice — that is a question of the complaint’s maintainability, answered from the notice dates. Losing one says nothing about the other.
Sentence and outcome
On compensation the Court noted the guidance in R. Vijayan v. Baby, (2012) 1 SCC 260, that there should be a consistent approach, with courts uniformly levying fines up to twice the cheque amount along with simple interest at 9% per annum absent special circumstances.
Measured against that, the ₹1,50,000 awarded on a cheque of ₹2,60,000 could not be called excessive. The complainant had been deprived of the interest it would have earned had it advanced the money to others, and had to engage counsel and prosecute the complaint; it was entitled to be compensated for that. No interference was called for.
The revision failed and was dismissed, along with the pending applications, and the record of the courts below was ordered returned with a copy of the judgment.