Whether The Offence Under Section 138 Of The Act Would Deem To Be Committed If The Cheque That Is Dishonored, Supreme Court Clears Air

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The cheque was dishonored due to insufficient funds. The appellant issued the notice calling the respondent to pay the legally enforceable debt. The aggrieved appellant filed a Criminal Complaint against the Respondent. In this matter, Trial Court acquitted the respondent of the offence on the ground that the respondent paid the appellant a sum of rupees 4,09,3015 partly discharging his liability in respect of the debt of rupees twenty lakhs. When the matter was taken in front of The High Court dismissed the appeal upholding the judgment of the Trial Court acquitting the respondent.

After hearing today  Supreme Court held that When a cheque is issued and is treated as ‘security’ towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as ‘security’ cannot be presented prior to the loan or the installment maturing for repayment towards which such cheque is issued as security. The borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot be presented. For the commission of an offence under Section 138, the cheque that is dishonored 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. The first respondent made part-payments after the debt was incurred and before the cheque was encashed upon maturity. The sum of rupees twenty lakhs represented on the cheque was not the ‘legally enforceable debt’ on the date of maturity concluded Supreme Court.