Whether the part payment of the cheque amount is enough to defeat the entire cause of action? under Negotiable instruments Act

Whether the part payment of the cheque amount is enough to defeat the entire cause of action? under Negotiable instruments Act

 

 

 

Section 56 in The Negotiable Instruments Act, 1881

Indorsement for part of sum due.—

No writing on a negotiable instrument is valid for the

purpose of negotiation if such writing purports to transfer

only a part of the amount appearing to be due on the

instrument; but where such amount has been partly paid

a note to that effect may be indorsed on the instrument,

which may then be negotiated for the balance.

A latest Judgement of the Apex court in the case of

Dashrathbhai Trikambhai Patel Vs. Hitesh Mahendrabhai

Patel & Anr. [Criminal Appeal No. 1497 of 2022; Decided

on 11.10.2022] 2022 LiveLaw (SC) 830 would enlighten us

reagrding the effect part payment. The Hon’ble Supreme

court has held as follows:

“Negotiable Instruments Act, 1881; Section 138 - For the

commission of an offence under Section 138, the cheque

that is dishonoured must represent a legally enforceable debt

on the date of maturity or presentation - If the drawer of the

cheque pays a part or whole of the sum between the period

when the cheque is drawn and when it is encashed upon

maturity, then the legally enforceable debt on the date of

maturity would not be the sum represented on the cheque -

When a part or whole of the sum represented on the cheque

is paid by the drawer of the cheque, it must be endorsed on

the cheque as prescribed in Section 56 of the Act. The

cheque endorsed with the payment made may be used to

negotiate the balance, if any. If the cheque that is endorsed

is dishonoured when it is sought to be encashed upon

maturity, then the offence under Section 138 will stand

attracted. (Para 30) “

 

 “A” a broker receives a sum of Rs 25,00,000/- form ‘B’ a Mechanical engineering graduate and promises to offer or make arrangements to get a government job at an Indian Railways. In pursuant to the promise, A also issued a Cheque for Rs 25,00,000/- and promised that in the event of failing to get the job, the amount could be

refunded by presenting Cheque. However, ‘A’ neither obtained the job as promised or Honoured the Cheque.

Whether, by averring the above matter in the complaint, the complainant can succeed in prosecution for the offence u/s 138 of NI Act?

The explantion Appended to S. 138 of NI Act reads as

follows:

Explanation.—

For the purposes of this section, “debt or other liability”

means a legally enforceable debt or other liability.

It is also here relevant to extract Section 23 of the Indian

Contract Act, which reads thus:

“23. What consideration and objects are lawful, and what

not - The consideration or object of an agreement is lawful,

unless – it is forbidden by Law; or is of such a nature that, if

permitted, it would defeat the provisions of any law; or is

fraudulent; or involves or implies, injury to the person or

property of another; or the Court regards it as immoral, or

opposed to public policy. In each of these cases, the

consideration or object of an agreement is said to be

unlawful.Every agreement of which the object or

consideration is unlawful is void.”

The illustration given at Item (f) in fact, is almost similar to

the factual aspects of this case, which says that,

“A promises to obtain for B an employment in the public

service and B promises to pay 1,000/- rupees to A. The

agreement is void, as the consideration for it is unlawful.”

Hence, the ‘B’ cannot prosecute the A under section 138 of NI Act as

the consideration passed is for unlawfull object. [1).N.V.P. Pandian, and

M.M. Roy AIR 1979 Madras 42, 2).Virender Singh V/s Laxmi Narain

another2007 CRL.LJ 2262, 3).Kuju Collieries Ltd., Vs. Jharkhand Mines

Ltd., and othersAIR 1974 SC 1892 ]

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 In case of the death of an accused/Convict, the compensation awarded under Section 138 of the Negotiable Instruments Act, 1881 can be recovered from the estate of a deceased accused ?

Section 70 of the Indian Penal Court, 1860 is quoted below:

“70. Fine leviable within six years, or during imprisonment

—Death not to discharge property from liability.—

The fine, or any part thereof which remains unpaid, may be

levied at any time within six years after the passing of the

sentence, and if, under the sentence, the offender be liable to

imprisonment for a longer period than six years, then at any

time previous to the expiration of that period; and the death

of the offender does not discharge from the liability any

property which would, after his death, be legally liable

for his debts.”

The Hon’ble Calcutta high Court in the case of Indranil

Mukherjee V/S- The State Of West Bengal And Others

C.R.R. NO. 1555 OF 2021 Decided on 21.4.2022 has held

that

 “Therefore, I am of the view that if in case of death of an

accused the compensation awarded under Section 138 of the

Negotiable Instruments Act, 1881 can be recovered from the

estate of a deceased accused, but an interim compensation

awarded under Section 143A of the said Act cannot be

recovered from the estate of a deceased accused, who died

before the conclusion of the trial.”

Section 70 IPC and Section 421(1) proviso would make it clear that by a legal fiction, even though a default sentence has been suffered, yet, compensation would be recoverable in the manner provided under Section 421(1) of CrPC.,

Whether the complaint for the offence under Section 138 of the

Negotiable Instruments Act is maintainable as against the accused,

when the said accused was already declared as an insolvent in the

insolvency proceedings?

The Madras High Court in the case of Bharath N. Mehtha vs. Mansi

Finance[1999 (1) CTC 687] wherein the Hon’ble High Court had an

occasion to exclusively deal with the question that,

“17. The offence under Section 138 of the Negotiable

Instruments Act is a statutory offence and these proceedings

are totally different from that of the insolvency proceedings

and by any stretch of imagination, it cannot be said that

Section 17(2) prohibits the continuation of criminal

proceedings initiated for dishonour of the cheque under

Section 138 of the Negotiable Instruments Act.

Therefore, I am of the considered view that mere declaration

by the Insolvency Court that the petitioners are insolvents

would not disentitle the complainants to seek for the remedy

by way of penal action before the criminal court over the

offences said to have been committed by the petitioners”.

The reading of the above judicial precedent makes it clear that the pendency of insolvency proceedings or even declaration by insolvency court that the accused is insolvent would no way affect the complaint under Sec.138 of N.I. Act.