The Kerala High Court (Ernakulam Bench) has ruled that when a part of the sum covered by the cheque is paid during the period between the date on which the cheque is drawn and its encashment upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque.
The High Court clarified that when part payment is made and the indorsement mandated under Section 56 of the Negotiable Instruments Act (NI Act) failed to be recorded, presenting the cheque for the whole sum, of which a part payment has already been paid, does not represent the legally enforceable debt; thus no offence under the NI Act would lie in case of dishonour of such a cheque.
A Single Judge Bench of Justice A. Badharudeen observed that Sections 15 and 56 of the NI Act assume significance, noting that Section 56 provides that where an amount has been partly paid, a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.
The Single Judge observed that if the drawer of the cheque pays a part or whole of the sum between the period when the cheque is drawn and when it is encashed upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque. It noted that the complainant launched prosecution claiming Rs. 10.90 lakhs as such, shown in the cheque itself, without disclosing the part payments in the complaint.
The Bench therefore observed that the prosecution could not be held as one consequent to dishonour of a cheque which represent a legally enforceable debt coming to Rs. 10.90 lakhs, and when the prosecution is not for a legally enforceable debt in full on the date of presentation of the cheque, no offence under Section 138 of the NI Act gets attracted.
Briefly, the complainant had alleged that the accused had issued a cheque in discharge of a loan to the tune of Rs. 10.90 lakhs availed by the accused on May 27, 2011, and when the cheque was presented for collection through the Idukki District Co-operative Bank, the same got dishonoured for want of funds. After dishonour of the cheque for the first time, the accused paid Rs. 1.94 lakhs and Rs. 1.96 lakhs in Nov 2017 respectively to the complainant.
The cheque was again presented for collection in Jan 16, 2018 for the full amount of Rs. 10.90 lakhs without making the required indorsement under Section 56 of the NI Act. The Judicial First Class Magistrate Court acquitted the accused on the finding that the amount covered by the cheque was higher than the actual amount of debt due on the date of presentation, and as a sequel thereof, the cheque did not represent a legally enforceable debt to fasten criminal liability under Section 138 of the NI Act.
Appearances:
Advocate Lalji P. Thomas, for the Appellant
Advocates Sarath Babu Kottakkal, Archana Vijayan, and Sebastin, for the Respondent
