This post summarizes previous decisions of the Amhara Regional State Supreme Court and Federal Supreme Court, Cassation Bench regarding the decision of Amhara Regional State High Court on the application of limitation of action on a cheque.
Case
Ato Asmamaw Beyene Vs. Ato Asefa Negash; Amhara Regional High Court File No.: 01_31103, Amhara Regional Supreme Court File No.: 01_00874, Federal Supreme Court Cassation Bench File No.:139932
Genesis
The respondent endorsed a cheque (cheque No. 5938779 with amount Birr 500,000.00) to the claimant. The date stated on the cheque was November 24, 2015, G.C. When the claimant went to draw the cheque on October 7, 2016, G.C, the Bank refused to make the payment due to the respondent’s insufficient balance.
The claimant brought the case to the Amhara High court, on October 14, 2016, for the payment of the amount with interest, including the legal cost. The respondent objected to the claim that the limitation of action will be applicable. In response, the claimant argued that he brought the case within one year (from the date of issuance of the cheque) that the period of limitation of action will not be applicable.
The court decided that the presentment of the cheque was after six months; as such, the limitation of action will be applicable as per article 855 & article 881/1 of the Ethiopian Commercial Code. Thus, the claimant cannot claim for the payment of the amount.
Appeal to the Amhara Regional Supreme Court
The claimant appealed to the Supreme Court against the decision of the Amhara Regional High court. The Amhara Regional Supreme Court reaffirmed the High Court’s decision and rejected the appeal.
Review at the Federal Supreme Court Cassation Bench
The claimant, aggrieved by the Amhara Regional Supreme Court Decision, took the case to the Federal Supreme Court, Cassation Bench (the Bench).
The Bench reasoned out and decided as follows:
The provision on limitation of action, Article 881/1 of the Ethiopian Commercial Code, reads as follows:
“Actions of recourse by the holder against the endorsers, the drawer, and the other parties liable shall be barred after six months from the expiration of the limit of time for presentment.”
And with regard to time for presentment for payment, Article 855 of the Ethiopian Commercial Code, reads as follows:
“A cheque shall be presented for payment within six months of the date thereof, regardless of when the cheque was issued.”
The Cassation Bench reasoned that the time of presentment for payment is a prerequisite for the application of the period of limitation. If the holder presented the cheque for payment within six months from the date thereof and if the drawer or the endorser failed to make payment, the holder can bring a legal action within six months from the expiration of the time of presentment. Thus, the holder can bring legal action within one year from the date on the cheque.
Regarding the facts of the case, the claimant failed to bring the cheque for payment within six months from the date of the cheque. Hence, the period of limitation could not be counted in the first place. Thus, the court rejected the appeal and affirmed the lower court’s decision.