IMPORTANT POINT
Dishonour of cheque – If drawer of cheque pays a part or whole of sum between period when cheque is drawn and when it is encashed upon maturity, then legally enforceable debt on date of maturity would not be sum represented on cheque.

JUDGMENT :

Dhananjaya Y. Chandrachud, J.

1. This appeal arises from a judgment dated 12 January 2022 of the High Court of Gujarat. The High Court dismissed an appeal against the judgment of the Additional Chief Judicial Magistrate dated 30 August 2016 by which the first respondent was acquitted of the offence under Section 138 of the Negotiable Instruments Act 1881¹[The Act]. At the core, the issue is whether the offence under Section 138 of the Act would deem to be committed if the cheque that is dishonoured does not represent the enforceable debt at the time of encashment.

The Facts

2. On 10 April 2014, the appellant issued a statutory notice under Section 138 of the Act to the first respondent-accused. It was alleged that the first respondent borrowed a sum of rupees twenty lakhs from the appellant on 16 January 2012 and to discharge the liability, issued a cheque dated 17 March 2014 bearing cheque No. 877828 for the said sum. It was further alleged that the cheque when presented on 2 April 2014 was dishonoured due to insufficient funds. The appellant issued the notice calling the first respondent to pay the legally enforceable debt of Rs. 20,00,000:

“Therefore, my client hereby calls upon you to make payment of Rs. 20,00,000/- towards the legally enforceable debt due and payable by you within a period of 15 days from the date of receipt of this particular notice, […]”

3. On 25 April 2014, the first respondent addressed a response to the statutory notice where he alleged the following:

(i) The first respondent and the appellant are related to each other. The appellant’s son married the first respondent’s sister;

(ii) The appellant lent the first respondent a loan of rupees forty lakhs. There was an oral agreement between the parties that the first respondent would pay rupees one lakh every three months by cheque and rupees eighty thousand in cash to the appellant. Two cheques were given to the appellant for security. It was agreed that the appellant would return both the cheques when the sum lent was paid in full;

(iii) The appellant’s son-initiated divorce proceedings against the respondent’s sister. However, the dowry that was given at the time of marriage is still in the possession of the appellant; and

(iv) The cheques that were issued for security have been misused by the appellant.

4. On 12 May 2014, the appellant filed a criminal complaint against the first respondent for the offence under Section 138 of the Act. On 19 May 2014, the first respondent issued another reply to the legal notice. By the said reply, the earlier reply to the legal notice was sought to be amended by replacing the acknowledgment of having received a loan of rupees forty lakhs to rupees twenty lakhs.

5. By a judgment dated 30 August 2016, the Trial Court acquitted the first respondent of the offence under Section 138 on the ground that the first respondent paid the appellant a sum of rupees 4,09,3015 between 8 April 2012 and 30 December 2013 partly discharging his liability in respect of the debt of rupees twenty lakhs. The split up of the payments is set out below:

The Trial Court observed that the appellant has failed to prove that he was owed a legally enforceable debt of rupees twenty lakhs:

“Therefore, the plaintiff’s complaint proved that the accused has paid Rs, 4,09,315 out of the amount due as per fact. So that on the day the plaintiff deposited in the bank to recover a legal amount of Rs, 20,00,000/- The court believes that the prosecution has failed to prove that fact.”

6. The appellant filed an appeal against the judgment of the Trial Court before the High Court of Gujarat. On 10 October 2019, the first respondent moved an application b