Karnataka High Court rules Son liable to Repay Dues of Deceased Father: Qualifies as 'Legally Enforceable Debt' under Section 138 NI Act

Karnataka High Court rules Son liable to Repay Dues of Deceased Father: Qualifies as 'Legally Enforceable Debt' under Section 138 NI Act

The Karnataka High Court by its single judge, Justice K Natarajan observed that 'a son' being the 'legal representative' as per Section 29 of the Negotiable Instruments Act, 1881 (in short NI Act) of the deceased father is liable to repay the loan.

In the matter of Prasad Raykar vs. BT Dinesh, the appellant/complainant- Prasad Raykar filed an appeal under Section 378 of Code of Criminal Procedure, 1973 for setting aside the judgment of acquittal passed by the Second Additional District and Sessions Judge, Davanagere dated 7 April, 2011 and to confirm the judgment of conviction and sentence passed by the Principal Senior Civil Judge and CJM, Davanagere.

According to the appellant/complainant- Prasad Raykar, the father of the respondent/accused- Bharamappa was said to have borrowed Rs. 2,60,000 from the complainant/appellant on 7 March, 2003 for his business and his family necessities and agreed to pay two per cent interest per month by executing the on-demand promissory note in favor of the complainant.

In the meantime, the father of the respondent/accused - Bharamappa died leaving behind his son-respondent/accused as a legal heir i.e., prior to filing of the private complaint. On the death of Bharamappa, the appellant/complainant asked the respondent/accused for repayment of the loan amount. The respondent/accused paid Rs. 10,000 to the complainant on 10 June, 2005 and the appellant/complainant asked the accused to clear the dues of his father. Later, the interest as well as principal amount was calculated for Rs. 4,50,000 and the respondent/accused said to be issued two cheques bearing Nos. 571677 and 571679 drawn on Vijaya Bank, Davanagere Branch for the sum of Rs.2,25,000 each dated 7 June, 2006 and 7 July, 2006 respectively.

The cheques were presented for encashment which came to be dishonored as the account was closed. A notice also served on the accused, but, he did not pay the amount. Hence, the appellant/complaint came before the Magistrate.

The judgment of conviction was challenged by the respondent/accused before the Sessions Judge. The Sessions Judge being the Appellate Court allowed the appeal and set aside the conviction and sentence passed by the trial Court and acquitted the respondent/accused. Hence, the appellant/complainant was before this Court by way of appeal.

The High Court considered two primary issues:

1) Whether the appellant/complainant is able to prove that there is legally enforceable debt payable by the respondent/accused?

2) Whether the judgment of the First Appellate Court is liable to be set aside?

The Court observed that as per Section 29 of the NI Act, the legal representative of the deceased issued a cheque and he is liable personally. in this case, the respondent/accused was none other than the son of the deceased-father who borrowed the loan from the complainant and the respondent/accused agreed to repay the same and issued the cheque. Such being the case, as a legal representative of the father, the respondent/accused was liable to repay the loan to the appellant/complainant.

The Court opined that the contention raised by the respondent/accused counsel was not acceptable and on the other hand, the appellant/complainant was not able to prove the liability of the accused and the cheque was dishonored, thereby, the respondent/accused was liable for the punishment under Section 138 of NI Act and the complaint was maintainable.

The Court also rejected the argument of the respondent/accused that the debt was time barred since his father had borrowed the loan in the year 2003 and the cheque was issued after four years.

The Court held, "once the amount was already repaid, the question of taking contention that it is barred debt does not arise and it gets renewed. Therefore, the accused once paid Rs.10,000/- by cash and subsequently, he issued a cheque to discharge the liability, he is liable for discharging his liability of his father."

The Court allowed the appeal and set aside the judgment of the Appellant Court and confirmed the order of the Trial Court convicting the respondent/accused.