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Judgment
By way of present petition filed under Section 482 Cr.P.C., the petitioner seeks quashing of complaint case bearing No. 310/2021 titled as ‘Vijay Khanna vs Chandrajit Saha’ and pending before learned MM (NI Act-04), Central District, Tis Hazari Court, Delhi as well as the summoning order dated 19.02.2021, vide which he has been summoned as an accused in the aforesaid complaint case instituted under Sections 138/142 read with Section 117 NI Act.
Facts, as discernible from the record, are that the respondent/complainant had approached the petitioner/accused and placed an order for supply of rubber and smoked sheet. In this regard, the petitioner raised an invoice of Rs.22,40,000/- which was paid by the respondent through RTGS. However, the petitioner failed to supply the aforesaid goods and in order to refund the payment made, issued a (post-dated) cheque bearing No. 017487 dated 21.03.2020 drawn on Indian Overseas Bank for the aforesaid amount of Rs.22,40,000/-. It is further stated that in between, the petitioner made payment of an amount of Rs.7,50,000/- on 17.03.2020 through RTGS, towards part refund of the amount.
However, despite repeated requests, the petitioner failed to repay the balance refund amount of Rs.14,90,000/- and the respondent presented the cheque for encashment. However, the same was returned dishonoured vide return memo dated 12.06.2020 with the remark ‘kindly contact drawer/drawee bank’. Thereafter, a demand notice dated 10.07.2020 was issued by the respondent, and upon petitioner’s failure to repay the amount, the subject complaint case came to be filed.
Learned counsel for the petitioner submits that before the presentation of the subject cheque, the petitioner had made payment of Rs.7,50,000/-towards part refund of the amount and the same is evidenced in his bank account statement, copy of which has been placed on record. The said part payment has also been acknowledged in the subject complaint. He contends that the proceedings against the petitioner are not maintainable inasmuch as the same have been instituted without following the legal principles surrounding part-payment of debt.
He submits that in terms of Section 56 NI Act as well as the Supreme Court decision in Dasrahtbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel & Anr.1 as well as the Gujarat HC decision in Shree Corporation v. Anilbhai Puranbhai Bansal2, an endorsement of the part-payment has to be made by the respondent upon the cheque and failure to do the same would result in a situation wherein the cheque would not represent a legally enforceable debt at the time of its presentation/encashment. In the present case, no such endorsement has been carried out by the respondent and therefore the presentation and subsequent dishonour of the subject cheque does not constitute the offence under Section 138 NI Act.
Learned counsel for the respondent, on the other hand, has resisted the present petition. He submits that the summoning order has been passed after due consideration of the facts and circumstances of the case. Further, while acknowledging the factum of part payment, he contends that the demand notice issued to the petitioner was only w.r.t the balance refund amount of Rs.14,90,000/-.
I have heard learned counsels for the parties and have also perused the material placed on record.
The issue arising in the present case relates to endorsement of part-payment upon a cheque presented for encashment. In this regard, it would be apposite to refer to Section 56 of the NI Act, which reads as under:-
“56 Indorsement for part of sum due- No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such 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 effect of the aforesaid section is that where certain amount under the cheque has been paid, a note to that effect ‘may’ be endorsed on the cheque, which may thereafter be negotiated (and by extension, presented) for the balance.
The aforesaid section and aspect of endorsement of part-payment on the cheque qua offence under Section 138 NI Act has been clarified by the Supreme Court in Dashrathbhai (Supra), wherein it has been observed:-
“33.Under Section 56 read with Section 15 of the Act, an endorsement may be made by recording part-payment of the debt in the cheque or in a note appended to the cheque. When such an endorsement is made, the instrument could still be used to negotiate the balance amount. If the endorsed cheque when presented for encashment of the balance amount is dishonoured, then the drawee can take recourse to the provisions of Section 138. Thus, when a part-payment of the debt is made after the cheque was drawn but before the cheque is encashed, such payment must be endorsed on the cheque under Section 56 of the Act. The cheque cannot be presented for encashment without recording the part-payment. If the unendorsed cheque is dishonoured on presentation, the offence under Section 138 would not be attracted since the cheque does not represent a legally enforceable debt at the time of encashment. xxx
34.2If 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.
34.3When a part or whole of the sum represented on the cheque is paid by the drawer of the cheque, it must be endorsed on the cheque as prescribed in Section 56 of the Act. The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured when it is sought to be encashed upon maturity, then the offence under Section 138 will stand attracted.”
Further in Shree Corporation (Supra), Gujarat HC through Hon’ble Mr. Justice J.B. Pardiwala (as his lordship was then), observed the following:-
“23.The question which comes up for consideration is as to what the expression “amount of money” means in a case where the admitted liability of the drawer of the cheque gets reduced, on account of the part payment made by him, after issuing but before the presentation of cheque in question. No doubt, the expression “amount of money” would mean the amount of the cheque alone in case the amount payable by the drawer, on the date of presentation of the cheque, is more than the amount of the cheque. But, can it be said the expression “amount of money” would always mean the amount of the cheque, even if the actual liability of the drawer of the cheque has got reduced on account of some payment made by him towards the discharge of the debt or liability in consideration of which the cheque in question was issued. If it is held that the expression “amount of money” would necessarily mean the amount of cheque in every case, the drawer of the cheque would be required to make arrangement for more than the admitted amount payable by him to the payee of the cheque. In case he is not able to make arrangement for the whole of the amount of the cheque, he would be guilty of the offence punishable under Section 138 of Negotiable Instruments Act. Obviously this could not have been the intention of the legislature to make a person liable to punishment even if he has made arrangements necessary for payment of the amount which is actually payable by him. If the drawer of the cheque is made to pay more than the amount actually payable by him, the inevitable result would be that he will have to chase the payee of the cheque to recover the excess amount paid by him. Therefore, I find it difficult to take the view that even if the admitted liability of the drawer of the cheque has got reduced, on account of certain payments made after issue of the cheque, the payee would nevertheless be entitled to present the cheque for the whole of the amount, to the banker of the drawer, for encashment and in case such a cheque is dishonoured for want of funds, he will be guilty of offence punishable under Section 138 of Negotiable Instrument Act.”
From the above, it is clear that in case a cheque is issued for a certain amount, and before its presentation, part of the said amount is paid by the drawer of the cheque, then the drawee has to necessarily/mandatorily make an endorsement of the aforesaid part-payment upon the cheque and only then the cheque can be presented for encashment. If the said endorsement is not made, then even if the said cheque is dishonoured upon presentation, the same does not make out an offence under Section 138 NI Act, since the cheque does not represent ‘legally enforceable debt’ at the time of its presentation/encashment.
In the present case, the factum of part-payment of Rs.7,50,000/- is not disputed. However, the subject cheque, which has been presented for encashment, is for the entire amount payable under it i.e. Rs.22,40,000/-, which is evidenced by the return memo dated 12.06.2020, which mentions the cheque amount as ‘Rs.2240000’ and which fact is also acknowledged by learned counsel for the respondent. Failure of the respondent to endorse the part-payment on the subject cheque is fatal to his case, as one of the essential ingredients for the offence under Section 138 NI Act i.e., presentation of cheque for ‘legally enforceable debt’ is not fulfilled.
While an argument has been raised on behalf of the respondent that the demand notice issued was only w.r.t the balance amount of Rs.14,90,000/-, however, in light of the aforenoted authoritative decisions, the said contention does not lend any credence to the case of the respondent.
In view of the factual and legal position enumerated above, this Court is of the considered opinion that continuation of the legal proceedings against the petitioner would be an abuse of process of law. Consequently, the petition is allowed and the complaint case bearing No.310/2021 is quashed. As a necessary sequitur, the summoning order dated 19.02.2021 is also set aside.
The petition alongwith pending application is disposed of in the above terms.