Recently, in a significant challenge surrounding cheque dishonour under the Negotiable Instruments Act, the Kerala High Court stepped in to examine whether criminal liability can be invoked when a cheque is presented for the full amount despite partial repayments already made. The case raised a crucial issue: does a dishonoured cheque still represent a legally enforceable debt if prior payments reduce the actual liability? The Court’s scrutiny focused on this precise gap between the cheque amount and the subsisting debt, hinting at a decisive clarification on the liability of Section 138 of the NI Act.
The controversy began when the complainant alleged that the accused had issued a cheque of ₹10.9 lakh towards repayment of a loan, which was dishonoured due to insufficient funds. However, the narrative took a critical turn when it emerged that after the initial dishonour, the accused had made part payments totalling nearly ₹3.9 lakh. Despite this, the complainant re-presented the cheque for the entire original amount without recording these payments or making any endorsement on the instrument. Counsel for the complainant argued that the debt remained due in substance, while the defence relied on settled legal principles to contend that the cheque no longer reflected the actual enforceable liability.
The Court, while examining the statutory framework under the Negotiable Instruments Act, particularly Sections 15 and 56, highlighted how part-payments strike at the very foundation of a cheque dishonour case. It clarified that once any portion of the cheque amount is repaid before the cheque is presented, the original amount mentioned on the cheque no longer represents a legally enforceable debt. In such a situation, the law mandates that the part-payment must be formally recorded by way of an endorsement on the cheque itself.
Referring to the Supreme Court’s ruling in Dashrathbhai Trikambhai Patel, the Court emphasised that the offence under Section 138 of the NI Act is not triggered merely because a cheque is dishonoured, it must be a cheque that reflects the exact subsisting liability at the time of presentation. The Bench observed that “when part payment(s) is/are made and the indorsement mandated under Section 56 of the NI Act failed to be recorded, presenting the cheque for the whole sum… does not represent the legally enforceable debt.”
The Court noted that the complainant, despite receiving substantial payments after the first dishonour, chose to re-present the cheque for the entire amount without disclosing these payments or making the required endorsement. This omission was not a mere technical lapse, it went to the root of criminal liability. The Court reasoned that allowing prosecution in such circumstances would amount to permitting recovery of an inflated claim through criminal process, which the law does not countenance. The Court reinforced that Section 138 of the Act is not a tool for enforcing disputed or inaccurately quantified claims. Since the cheque amount no longer matched the actual outstanding liability, the very ingredient of a “legally enforceable debt” was missing.
Consequently, the Court upheld the acquittal, confirming that no offence under Section 138 of the Act was made out and dismissed the appeal.
Case Title: Danikutti Philip Vs. Johnykutty. J and Anr.
Case No.: Crl. A No. 1965 of 2025
Coram: Hon'ble Mr. Justice Vinai Kumar Dwivedi, Hon'ble Mr. Justice J.J. Munir
Advocate for the Applicant: Adv. Lalji P.Thomas
Advocate for the Respondent: Sr. PP Vipin Narayan A, Advs. Sarath Babu Kottakkal, Archana Vijayan, Sebastin
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