No Offence U/S.138 Of NI Act If Endorsement Of Part Payment As Per Section 56 Isn’t Recorded: Kerala High Court

The High Court was considering a criminal appeal filed under Section 419(4) of the Bharatiya Nagarik Suraksha Sanhita, 2023, at the instance of the complainant on the files of the Judicial First Class Magistrate Court, Nedumkandam.

The Single Bench of Justice A. Badharudeen further explained, “On dishnour of cheque, which was presented for getting the balance amount, excluding the amount indorsed as paid, then the offence under Section 138 of the NI Act would be attracted. However, when part payment(s) is/are made and the indorsement mandated under Section 56 of the 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.. The rationale is that, in order to attract an offence under Section 138 of the NI Act, the dishonoured cheque must represent a legally enforceable debt.”

“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 get attracted”, it added.

Advocate Lalji P. Thomas represented the Petitioner while Senior Public Prosecutor Vipin Narayan .A represented the Respondent.

Factual Background

The complainant lodged a complaint under Section 142 of the Negotiable Instruments Act, 1881 (NI Act), alleging commission of an offence punishable under Section 138 by the accused, on the premise that the accused issued a cheque to the complainant, in discharge of a loan to the tune of ₹10,90,000 availed by the accused, which got dishonoured for want of funds. The Magistrate acquitted the accused on the finding that before the presentation of the cheque, the complainant had received ₹ 1,94,000 and 1,96,000 from the accused. Finding that the amount covered by the cheque was higher than the actual amount of debt due on the date of presentation of the cheque, it was held that the cheque did not represent a legally enforceable debt to fasten criminal liability upon the accused. Aggrieved thereby, the appellant approached the High Court.

Reasoning

The Bench explained 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. “Further, when a part, or the whole of the sum represented in a cheque is paid by the drawer, the same must be indorsed on the cheque as prescribed under Section 56 of the NI Act. Then the indorsed cheque could be used to negotiate the balance, if any ”, it added.

On a perusal of the facts of the case, the Bench noted that after dishonour of the cheque for the first time, the accused paid ₹1,94,000 and ₹1,96,000 to the complainant. It was thereafter that the accused failed to repay the balance amount, the cheque was again presented without making the required indorsement under Section 56 of the NI Act, and the complainant launched prosecution claiming ₹10,90,000 as such, shown in the cheque itself, without disclosing the part payments in the complaint.

As per the Bench, the prosecution could not be held as one consequent to dishonour of a cheque which represents a legally enforceable debt of ₹10,90,000. Finding the view of the Magistrate that the offence under Section 138 of the NI Act was not attracted to be perfectly justifiable, the Bench dismissed the appeal.

Cause Title: Danikutti Philip v. Johnykutty. J (Neutral Citation: 2026:KER:27586)

Appearance

Petitioner: Advocate Lalji P. Thomas

Respondent: Sr. Public Prosecutor Vipin Narayan .A, Advocates Sarath Babu Kottakkal Archana Vijayan, Aebastin

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