Cheque Dishonour | S.138 NI Act Not Attracted If Part Payment Is Not Endorsed On Cheque Presented: Kerala High Court

The Kerala High Court has clarified that the offence under Section 138 of the Negotiable Instruments Act, 1881 can be attracted in cases where part payment has been done only if the presented cheque has recorded indorsement of such payment.Justice A. Badharudeen clarified the position of law after relying on Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel and Another:“when a part of the sum covered by the cheque is paid during the period between the date on which the cheque is drawn and its encashment upon maturity, then the legally enforceable debt on the date of maturity would not be the sum represented on the cheque. Further, when a part, or the whole of the sum represented in a cheque is paid by the drawer, the same must be indorsed on the cheque as prescribed under Section 56 of the NI Act. Then the indorsed cheque could be used to negatiate the balance, if any. On dishnour of cheque, which was presented for getting the balance amount, excluding the amount indorsed as paid, then the offence under Section 138 of the NI Act would be attracted. However, 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, of which a part payment has already been paid, does not represent the legally enforceable debt; thus no offence under the NI Act would lie in case of dishonour of such a cheque.”The accused had issued a cheque to the tune of Rs. 10.90 lakhs to the complainant in discharge of a debt. Thereafter, the accused repaid a sum of around Rs. 4 lakhs to the complainant on two separate occasions. Subsequently, the cheque was presented and it was dishonoured for want of funds. The appellant/complainant then preferred a complaint. The Magistrate found that since the cheque was presented for the full amount without recording the endorsement of the part-payment, the amount covered by the cheque was higher than the actual amount due.As the cheque did not represent a legally enforceable debt, the Magistrate acquitted the accused. Aggrieved, the complainant preferred an appeal before the High Court.After hearing the parties, the Court examined Sections 15 and 56 of the NI Act, which respectively refers to 'Indorsement' and 'Indorsement for part of sum due'. It also referred to Dashrathbhai's case to arrive at the conclusion that when a cheque is presented with full amount without recording indorsement of part payment, the offence under Section 138 would not be attracted.The Court was of the opinion that since in the present case the cheque was presented with Rs. 10.90 lakhs and the complainant initiated prosecution claiming this amount without disclosing the part payments, no offence can be made out.Thus, it dismissed the appeal.Case No: Crl. A. No. 1965 of 2025Case Title: Danikutti Philip v. Johnykutty J. and Anr.Citation: 2026 LiveLaw (Ker) 228Counsel for the appellant: Lalji P. ThomasCounsel for the respondents: Sarath Babu Kottakkal, Archana Vijayan, Sebastin, Vipin Narayan A. - Sr. Public ProsecutorClick to Read/Download Judgment

Cheque Dishonour | S.138 NI Act Not Attracted If Part Payment Is Not Endorsed On Cheque Presented: Kerala High Court

K. Salma Jennath

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