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Cheque's Part Payment Trap: Kerala HC Insists on Mandatory Endorsement for S.138 Bite
In a ruling that reinforces strict compliance in cheque bounce prosecutions, the dismissed an appeal against acquittal, holding that presenting a cheque for its full amount after part payments—without endorsing those payments—fails to trigger . Justice A. Badharudeen delivered the verdict in , confirming the trial court's decision and drawing directly from a precedent.
The case pitted complainant Danikutti Philip against accused Johnykutty J. Ozhukkayil, a retired professor, with the as co-respondent.
From Loan to Litigation: The Cheque's Rocky Journey
The dispute stemmed from a ₹10.90 lakh loan advanced by Philip to Johnykutty on . To secure repayment, Johnykutty issued cheque No. 02075324 dated . When first presented on , via , it bounced for insufficient funds.
Post-bounce, Johnykutty made part payments: ₹1.94 lakh on , and ₹1.96 lakh the next day. Philip re-presented the cheque on , without noting these payments. It dishonoured again, prompting a complaint under Section 138 NI Act before the (S.T. No. 404/2018).
The trial court acquitted Johnykutty on , citing lack of a "" for the full amount. Philip's appeal under , reached the High Court on .
Creditor's Plea vs. Accused's Shield
Philip's counsel argued the full cheque amount remained due despite the omission to endorse payments, urging interference with the acquittal.
"Even though the said omission happened on the part of the appellant, the amount covered by the cheque is due,"
they contended.
Johnykutty's side countered firmly, upholding the trial court's reliance on law. They stressed that without endorsement, the re-presented cheque did not reflect the actual debt, shielding against criminal liability.
Decoding the Endorsement Mandate: Echoes in Kerala
Justice Badharudeen dissected , which govern endorsements. Section 56 bars negotiation of a cheque for only part of the sum due unless payments are noted, allowing negotiation of the balance.
Pivoting to Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel (2022 (7) KHC 61), the court extracted its core ratio: a dishonoured cheque must represent a at presentation. Part payments between drawing and maturity reduce that debt unless endorsed. Paragraph 30 of the judgment crystallized this:
"(ii) If 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 on the date of maturity would not be the sum represented on the cheque; (iii) When 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 S.56 of the Act."
The High Court applied this: unendorsed re-presentation for ₹10.90 lakh ignored ₹3.90 lakh paid, rendering no offence under Section 138.
As noted in contemporary reports, this aligns with the
's clarification that
"
Not Attracted If Part Payment Is Not Endorsed On Cheque Presented."
Court's Sharp Observations
Key excerpts underscore the ruling's precision:
"When a part... of the sum represented in a cheque is paid by the drawer, the same must be indorsed on the cheque as prescribed under . Then the indorsed cheque could be used to negotiate the balance, if any."
"The cheque endorsed with the payment made may be used to negotiate the balance, if any. If the cheque that is endorsed is dishonoured... then the offence under S.138 will stand attracted."
"Presenting the cheque for the whole sum, of which a part payment has already been paid, does not represent the ; thus no offence under the NI Act would lie."
Appeal Dismissed: A Caution for Future Creditors
The High Court confirmed the acquittal:
"Appeal fails and is dismissed. The verdict impugned is confirmed."
This decision signals to lenders: track and endorse part payments meticulously, or risk losing criminal recourse under Section 138. It streamlines NI Act jurisprudence, prioritizing documentary precision over verbal adjustments, potentially reducing frivolous prosecutions while safeguarding genuine debtors.
