2024 (6) TMI 701 - HC - Indian Laws

Dishonour of Cheque - maintainability of proceedings against the petitioner, inasmuch as the same have been instituted without following the legal principles surrounding part-payment of debt - HELD THAT - The effect of the Section 56 of the NI Act 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. 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. 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. Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are quashing of a complaint case under Sections 138/142 read with Section 117 NI Act and the summoning order based on the presentation and subsequent dishonour of a cheque for non-payment of the balance refund amount.

Summary:

Issue 1: Quashing of complaint case under Sections 138/142 NI Act
The petitioner sought quashing of a complaint case and summoning order under Sections 138/142 NI Act. The respondent/complainant ordered goods from the petitioner, who failed to supply them. The petitioner issued a post-dated cheque for the payment made, which was dishonoured. The petitioner contended that the cheque did not represent a legally enforceable debt due to lack of endorsement of part-payment. The respondent argued that the demand notice was for the balance refund amount. The court referred to Section 56 of the NI Act and relevant case laws, emphasizing the necessity of endorsing part-payment on the cheque for it to be presented for encashment. As the cheque was not endorsed for part-payment, the court quashed the complaint case and set aside the summoning order, deeming the legal proceedings against the petitioner as an abuse of process of law.

Keywords:
- Quashing of complaint case
- Sections 138/142 NI Act
- Post-dated cheque
- Dishonoured cheque
- Legally enforceable debt
- Endorsement of part-payment
- Demand notice
- Section 56 NI Act
- Abuse of process of law