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Deposit of Amount Covered by Dishonoured Cheque - When the amount due under a dishonoured cheque is deposited, the legal proceedings under Section 138 of the Negotiable Instruments Act can continue unless the entire cheque amount is paid and the proceedings are quashed. Partial payments or deposits do not automatically end the case; the case may proceed if the full amount is not recovered 2025 0 Supreme(Guj) 1454, 2023 0 Supreme(Cal) 286.
Effect of Depositing the Cheque Amount - Depositing the cheque amount, especially if it covers only part of the cheque or is made after dishonour, may lead to the case continuing unless the court is satisfied that the entire cheque amount has been paid. In some cases, courts have quashed proceedings if the accused deposits a substantial part (e.g., 25%) of the cheque amount and shows willingness to settle 2025 0 Supreme(SC) 1538, 2024 0 Supreme(All) 250.
Legal Precedents on Continuing Proceedings After Deposit - Courts have held that even if the amount is deposited or partially paid, the criminal proceedings under Section 138 can continue if the full cheque amount is not paid. The deposit does not automatically quash the case unless the entire amount is paid or the court is convinced that the matter is settled 2025 0 Supreme(Guj) 1454,
Manjeet Singh Dhillan VS Baljinder Singh Rajpal - Crimes
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Specific Cases and Court Views - Cases such as those involving deposits made during trial or settlement attempts show that proceedings may continue until the entire cheque amount is recovered or the case is otherwise disposed of. Courts have also emphasized that dishonour due to reasons like account closed still falls under Section 138, and deposit of the cheque amount does not necessarily halt proceedings unless fully paid 2024 0 Supreme(All) 250.

Analysis and Conclusion:Depositing the amount covered by a dishonoured cheque does not automatically terminate criminal proceedings under Section 138 of the Negotiable Instruments Act. The case can continue unless the entire cheque amount is paid and the proceedings are formally quashed. Partial deposits or payments may influence the court's decision but are generally insufficient to end the case unless the full amount is settled and the court is satisfied. Therefore, the continuation of the case depends on whether the full cheque amount has been deposited or paid and whether the court considers the matter settled.

Does Section 138 NI Act Proceedings Continue After Dishonoured Cheque Amount is Deposited?

Does NI Act Case Continue After Cheque Deposit?

In the world of business transactions, cheques remain a common payment method in India. However, when a cheque bounces due to insufficient funds, it triggers serious legal consequences under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). A frequent question arises: After having deposited the amount covered by the dishonoured cheque, can the case under NI Act continue?

This blog post dives deep into this issue, explaining the legal framework, judicial precedents, and practical implications. Whether you're a payee seeking justice or a drawer facing proceedings, understanding this can guide your next steps. Note: This is general information, not specific legal advice. Consult a qualified lawyer for your situation.

Legal Framework of Section 138 NI Act

Section 138 of the NI Act establishes the offence of dishonour of a cheque due to insufficient funds or exceeding the arrangement made with the bank. The offence is complete when:- The cheque is dishonoured.- The payee issues a statutory notice demanding payment.- The payment remains unpaid after 15 days of notice receipt. 2023 4 Supreme 711AJAY KUMAR RADHEYSHYAM GOENKA vs TOURISM FINANCE CORPORATION OF INDIA LTD. - Supreme Court

The cause of action arises once the cheque is dishonoured and the statutory notice is issued. The complainant must approach the court within one month of the notice period's expiry to initiate penal action. 2023 4 Supreme 711AJAY KUMAR RADHEYSHYAM GOENKA vs TOURISM FINANCE CORPORATION OF INDIA LTD. - Supreme Court

These proceedings are criminal in nature, aimed at penalizing the drawer for the dishonour, not just recovering the debt. 2023 4 Supreme 711 2023 0 Supreme(Ker) 895

As one source notes: It happens after it is dishonoured by the bank for specified reasons and thereafter, even after demand the person concerned fails to pay the amount covered by the cheque.

Bhajanpura Co-Operative Urban Thrift & Credit Society Ltd. VS Sushil Kumar - Dishonour Of Cheque

2014 0 Supreme(Del) 2033

Does Depositing the Cheque Amount Stop the Case?

A key point: If the accused deposits the amount covered by the dishonoured cheque before or during the trial, it does not automatically negate the offence. The offence is committed at the time of dishonour, and subsequent deposit does not extinguish the liability. 2023 4 Supreme 711 2023 0 Supreme(Ker) 895

Courts have consistently held that mere deposit does not absolve the accused from penal consequences. The focus is on whether the cheque was dishonoured and statutory notice was served. 2023 4 Supreme 711 2023 0 Supreme(Del) 4524

Partial vs. Full Deposits

Partial Payments: Do not end the case. For instance, even if part of the amount (e.g., Rs. 2.00 lacs) is deposited and withdrawn by the complainant, proceedings continue if full payment isn't made. 2024 0 Supreme(Chh) 17
Full Deposits: Even full deposit may not halt proceedings unless the court quashes them. Depositing the cheque amount, especially if it covers only part of the cheque or is made after dishonour, may lead to the case continuing unless the court is satisfied that the entire cheque amount has been paid. Partial deposits influence but rarely end cases without settlement. 2025 0 Supreme(Guj) 1454 2023 0 Supreme(Cal) 286

In some cases, depositing a substantial part (e.g., 25%) with willingness to settle has led to quashing, but this is discretionary. 2025 0 Supreme(SC) 1538 2024 0 Supreme(All) 250

One case highlights: The convict-appellant has already deposited Tk. ... up to the face value of the cheque as far as is covered by the fine realised shall be paid. Md. Mohin vs The state and another - 2024 Supreme(BD)(SC) 15019 - 2024 Supreme(BD)(SC) 15019 Dr. Md. Jahangir Hossain -Vs-The state and another - 2024 Supreme(BD)(SC) 8533 - 2024 Supreme(BD)(SC) 8533

Judicial Precedents on Case Continuation

Indian courts emphasize that Section 138 proceedings continue post-deposit because the wrong is against public interest in commercial morality.

Offence Completion: The legal principle is that the offence is committed at the time of dishonour, and the subsequent deposit does not extinguish the liability for the offence. 2023 4 Supreme 711 2023 0 Supreme(Ker) 895
Criminal Nature: Unlike civil recovery, these are penal. The proceedings under Section 138 are criminal in nature and are aimed at penalizing the drawer. 2023 4 Supreme 711 2023 0 Supreme(Ker) 895
Deposit During Trial: When the amount due under a dishonoured cheque is deposited, the legal proceedings under Section 138... can continue unless the entire cheque amount is paid and the proceedings are quashed. 2025 0 Supreme(Guj) 1454
Manjeet Singh Dhillan VS Baljinder Singh Rajpal - Crimes
Specific Examples:
Cheque deposited on 06.03.2013, dishonoured: Limitation starts from dishonour date. 2017 0 Supreme(Del) 4665
The cheque was deposited within the statutory period and it was dishonoured. There has been no compliance with that demand notice. Ingredients met despite later actions. 2013 0 Supreme(Bom) 1886
Security cheques: Even if issued as security, dishonour triggers liability if not paid on demand. 2022 8 Supreme 240

Courts may quash if full payment and settlement are proven, but typically, cases proceed to trial or sentencing. 2024 0 Supreme(All) 250

Practical Implications for Parties Involved

For the Complainant (Payee):

Document the deposit meticulously.
Proceed with trial unless opting for compounding (possible as offences are compoundable).
Bhajanpura Co-Operative Urban Thrift & Credit Society Ltd. VS Sushil Kumar - Dishonour Of Cheque
Strengthen case with proof of notice and dishonour. 2018 0 Supreme(Bom) 1006

For the Accused (Drawer):

Deposit alone isn't a defense; prepare mitigating factors.
Seek quashing under Section 482 CrPC if full settlement reached.
Note: Offences are bailable, compoundable, non-cognizable. 2014 0 Supreme(Del) 2033

Timelines and Procedures:

Complaint under Section 200 CrPC.
Cheque must be presented within validity (usually 3 months).
Notice within 30 days of dishonour bank memo. 2024 0 Supreme(Chh) 17

Key Takeaways and Recommendations

The case under Section 138 NI Act can continue even after depositing the cheque amount. The deposit does not negate the offence, completed upon dishonour and notice failure. Proceedings address penal implications beyond debt recovery. 2023 4 Supreme 711AJAY KUMAR RADHEYSHYAM GOENKA vs TOURISM FINANCE CORPORATION OF INDIA LTD. - Supreme Court2023 0 Supreme(Ker) 895 2023 0 Supreme(Del) 4524
Exceptions: Full payment + court satisfaction may lead to quashing, especially with substantial deposits or settlements. However, partial payments generally insufficient. 2025 0 Supreme(Guj) 1454 2023 0 Supreme(Cal) 286

Recommendations:- For Payees: Follow procedures strictly; consider compounding if settled.- For Drawers: Deposit promptly, negotiate settlement, explore defenses.- Always maintain records of cheques, notices, and deposits.

In conclusion, while depositing the amount is a positive step, it typically does not end NI Act proceedings without court intervention. Stay informed, act swiftly, and seek professional legal counsel to navigate these complexities effectively.

References: 2023 4 Supreme 711AJAY KUMAR RADHEYSHYAM GOENKA vs TOURISM FINANCE CORPORATION OF INDIA LTD. - Supreme Court2023 0 Supreme(Ker) 895 2023 0 Supreme(Del) 4524 2025 0 Supreme(Guj) 1454 2023 0 Supreme(Cal) 286 2025 0 Supreme(SC) 1538 2024 0 Supreme(All) 250 2024 0 Supreme(Chh) 17

Bhajanpura Co-Operative Urban Thrift & Credit Society Ltd. VS Sushil Kumar - Dishonour Of Cheque

2014 0 Supreme(Del) 2033 #NIACT, #ChequeBounce, #LegalAdvice