When a part payment is received and admitted by the complainant during a subsisting prosecution under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), the legally enforceable debt stands proportionately reduced. Since the dishonoured cheque no longer represents the full outstanding liability, the complainant is obliged to formally document the part payment, appropriately modify the claim before the Court, and thereafter either prosecute the case for the remaining balance or arrive at a settlement.
Procedure to be Followed
1. File a Joint Compounding Petition The most legally sound and procedurally appropriate course is for both parties to jointly file a compounding application before the Magistrate under Section 147 of the NI Act. Such a petition formally records the part payment received and may set out a mutually agreed timeline or terms for settlement of the outstanding balance.
2. Endorse the Part Payment on the Cheque Under Section 56 of the NI Act, the complainant is required to make a formal endorsement of the part payment directly on the dishonoured cheque. This endorsement legally updates the instrument so that it represents only the remaining enforceable balance, and not the original face value.
3. Amend the Complaint The complainant must bring the part payment to the Court’s notice by filing a memo or an application to amend the complaint, formally reducing the claimed amount to the precise balance remaining after accounting for the payment received.
4. Withdrawal or Closure Upon Full Settlement If the remaining balance is subsequently paid in full, or if a comprehensive mutual settlement is reached, the complainant may make a statement before the Court expressing the intention to withdraw the complaint as fully settled, whereupon the Court may close the proceedings.
Consequence of Failure to Endorse or Amend
If the complainant proceeds on the basis of the original cheque amount without accounting for the part payment already received — whether by omission or otherwise — the complaint may become legally untenable.
The Court may find that the cheque does not represent a legally enforceable debt for the amount claimed, potentially resulting in the acquittal of the accused.
When Part Payment Made Before Presentation of the Cheque
The Supreme Court in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel & Another [(2022) SCC OnLine SC 1422] authoritatively held that where a part payment of the underlying debt is made after the cheque is drawn but before it is presented for encashment, such payment must necessarily be endorsed on the cheque in accordance with Section 56 of the NI Act.
The cheque cannot lawfully be presented for encashment without recording the part payment thereon. If the cheque, without such endorsement, is subsequently dishonoured upon presentation, the offence under Section 138 of the NI Act would not be attracted, for the reason that the cheque does not represent a legally enforceable debt at the time of its presentation.
