Cheque Bounce: Endorse Part-Payments

Most of us, even bankers for that matter, overlook that the law allows endorsing cheques for part-payments.

A cheque bounce case under Section 138 of the Negotiable Instruments Act (“The Act”) fails if the full cheque amount is not actually due because part of the loan has already been repaid and that part-payment is not endorsed on the cheque. The cheque must represent a legally enforceable debt on the date it is presented.

Let’s take a look at a simple interpretation of the Supreme Court’s decision in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, Criminal Appeal No. 1497 of 2022 (SC).

The Facts:

• A lender claimed a relative had borrowed Rs. 20 lakhs and gave a cheque for that amount, which later bounced for insufficient funds.
• The borrower showed that he had already paid Rs. 4,09,315 towards that loan before the cheque was presented.
• The trial court and the High Court found these part-payments proved, and the Supreme Court examined whether Section 138 applied in such a situation.

Key Legal Point:

• For Section 138 of the Act to apply, the cheque must represent a “legally enforceable debt” on the date it is presented, not just on the date it was written. If part of the amount has been paid after drawing the cheque but before presentation, the unpaid balance—not the original cheque sum—is the enforceable debt.
• The law (Section 56 of the Act) says that if a part-payment is made, it must be endorsed on the cheque (or by a note attached), so the instrument can be used for the remaining balance. Without such endorsement, presenting the old full-amount cheque means it does not reflect the real debt due on presentation.

Supreme Court’s Conclusion:

• Because ₹4,09,315 had already been paid before presentation, the full ₹20 lakhs on the cheque was not due on that date. So, the cheque did not represent a legally enforceable debt for the full amount upon presentation. Section 138 did not apply, and the acquittal was upheld.
• The Court summed up: a dishonour is punishable only if, on the date of presentation, the cheque truly reflects what is legally due. If part-payments are made, they must be endorsed, and the cheque can then be used only for the balance.

Citations in the Judgement:

• Indus Airways v. Magnum Aviation: Section 138 applies only where there is a legally enforceable debt; a mere advance that fails later won’t do.Sampelly Satyanarayana Rao v. IREDA: What matters is whether a legally enforceable debt exists on the date mentioned in the cheque (maturity).
• Sripati Singh v. State of Jharkhand: Even a “security” cheque can be presented if the debt isn’t otherwise repaid by the due date.
• Sunil Todi v. State of Gujarat: “Debt or other liability” includes amounts promised to be paid later arising from present obligations; timing and commercial context matter.
• Rahul Builders v. Arihant Fertilizers: The notice under Section 138 must demand “the said amount” (cheque amount); omnibus demands can be invalid.

So, the bottom line is that the cheque must match the real unpaid debt on the day it’s presented; if part has been paid, endorse it and use the cheque only for the balance—otherwise Section 138 won’t stick.