IMPORTANT POINT
A cheque that is presented for encashment must reflect the total legally enforceable debt, and any part payments made prior to its presentation must be endorsed on the cheque; failure to do so negates the applicability of Section 138 of the NI Act.

ORDER :

N. Anand Venkatesh, J.

[PRAYER : Criminal Original Petition filed under Section 482 of the Code of Criminal Procedure, to quash the proceedings in STC.No.617/2022 on the file of Fast Track Court, Judicial Magistrate No.II, Erode.]

This petition has been filed seeking to quash the proceedings in S.T.C.No.617/2022 on the file of the Fast Track, Judicial Magistrate No.II, Erode.

2. When the matter came up for hearing on 10.02.2023, this Court passed the following order :

This petition is filed to call for the records connected with the S.T.C.No.617/2022 on the file of the Fast Track, Judicial Magistrate No.II, Erode and quash the same.

2. The learned counsel for the petitioners submitted that it is claimed in the complaint that the due from the petitioners was Rs.16,00,227/- as on October 2018. The impugned cheques were given on 26.11.2018 and on 25.01.2019. Petitioners made payment of Rs.8,00,000/- on 14.01.2019 and Rs.3,00,000/- on 01.03.2019. Without taking into consideration these payments, the cheque was presented for collection for the total amount of Rs.16,00,227/-. In such circumstances, this Court orders notice to respondent, returnable in three weeks.

3. There shall be an order of interim stay of all further proceedings in S.T.C.No.617/2022 on the file of the Fast Track, Judicial Magistrate No.II, Erode, till then.

4. Personal appearance of the petitioners in STC No.617/2022 is dispensed with till then.

2. Heard the learned counsel for the petitioner.

3. The respondent has been served with notice and the name of the respondent has also been printed in the cause list. There is no representation either in person or through counsel.

4. As noted in the earlier order passed on 10.02.2023, the petitioners had paid a sum of Rs.11,00,000/- between 14.01.2019 to 01.03.2019 out of the total amount that was due and payable to the tune of Rs.16,00,227/-. However, the cheque for the entire amount of Rs.16,00,227/- was presented by the respondent.

5. To substantiate the above claim, the bank account statement of the petitioners maintained in Corporation Bank was also produced before this Court. It is seen that a sum of Rs.8,00,000/- was debited in the account of the petitioners on 14.01.2019 and this amount was transferred to the respondent through RTGS. That apart, yet another sum of Rs.3,00,000/- was also debited on 01.03.2019 and the amount was transferred through RTGS to the respondent. In view of the same, out of the total amount of Rs.16,00,227/-, the petitioners had already repaid back a sum of Rs.11,00,000/- by 01.03.2019. However, on 18.03.2019, the respondent deposits the cheque for a sum of Rs.16,00,227/-.

6. Where there is part payment of the debt, the payment must be endorsed on a cheque under Section 56 of the NI Act and 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 did not represent a legally enforceable debt at the time of encashment. Useful reference can be made to the judgment of the Apex Court in Dashrathbhai Trikambhai Patel Vs. Hitesh Mahendrabhai Patel and others reported in MANU/SC/1294/2022 and the relevant paragraphs are extracted hereunder :

''29. Under Section 56 read with Section 15 of the Act, an endorsement may be made by recording the 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