Dishonour of Cheque: Legal Enforcement Requires Reflection of Part Payments

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Dashrathbhai Trikambhai Patel vs. Hitesh Mahendrabhai Patel & Anr.

Court: Supreme Court of India

Citation: Criminal Appeal No. 1497 of 2022

Date of Judgment: October 11, 2022

Judges: Dr. Dhananjaya Y Chandrachud, J., and Hima Kohli, J.

Legal Context: Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

Key Facts:

  • The appellant, Dashrathbhai Trikambhai Patel, issued a statutory notice under Section 138 of the NI Act to the respondent, alleging the dishonour of a cheque worth ₹20 lakhs, issued by the respondent to discharge a debt.
  • The respondent admitted to making part payments towards the debt before the cheque was encashed but denied that the full amount was due when the cheque was presented.

Legal Issues:

  1. Whether a dishonoured cheque, which does not represent the full enforceable debt at the time of encashment due to part payments, can attract liability under Section 138 of the NI Act.
  2. Whether a notice under Section 138 demanding the full cheque amount, without acknowledging part payments, is valid.

Judgment:

  • The Supreme Court upheld the acquittal of the respondent, affirming that the cheque, when dishonoured, did not represent the full enforceable debt as part payments had been made.
  • It was held that Section 138 is only attracted when the dishonoured cheque represents the full legally enforceable debt on the date of its encashment.
  • The court ruled that if part payments are made after the issuance of the cheque but before its presentation, such payments must be endorsed on the cheque as per Section 56 of the NI Act. Failing to do so invalidates the cheque's representation of the enforceable debt, thereby negating the applicability of Section 138.

Conclusion: The appeal was dismissed, confirming that for an offence under Section 138 to be made out, the cheque must represent the exact legally enforceable debt on the date of its encashment. The decision highlights the importance of reflecting any part payments on the cheque to avoid invalidation of the statutory notice under Section 138.

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