Case Title: Dashratbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel and others

The Supreme Court stated that if a cheque is presented for the full amount without endorsing the partial payment made by the borrower after the cheque was issued, no violation of Section 138 of the Negotiable Instruments Act has occurred.

The Court ruled that when a cheque is presented for encashment without endorsing the partial payment, the amount shown on the cheque will not be the "legally enforceable debt" as defined by Section 138 NI Act. According to Section 56 of the NI Act, part payments must be endorsed on the cheque. If such an endorsement is made, the cheque for the remaining amount may be presented, and, according to the Court, if a cheque with such an endorsement of the partial payment is returned unpaid, it will result into an offence under Section 138 of the NI Act.

In this instance, a cheque for Rs 20 lakhs was written. The borrower paid the cheque's drawee a portion of Rs. 4,09,315 after the cheque was issued. However, the part payment was not acknowledged when the cheque for Rs 20 lakhs was presented.

The complaint under Section 138 of the NI Act is not valid in this factual situation, according to the Supreme Court, because the cheque was presented for the full amount before it was cashed.

A bench consisting of Justices DY Chandrachud and Hima Kohli summarised the findings as follows in affirming the Gujarat High Court's decision that authorised the acquittal of the defendants in the case:

1. 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;

2. 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;

3. 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;

In the current case, the Court took notice of the accused's partial payments, which were made both after the debt was incurred and before the cheque was offered for encashment. The cheque's representation of the amount of Rs. 20 lakhs did not correspond to the debt's actual legal enforceability on the due date. As a result, the accused cannot be assumed to have broken Section 138 of the NI Act. The court in this case also noted that a notice of demand for Rupees 20 lakhs had been issued. The Supreme Court rejected the appeal made against the Gujarat High Court's decision after taking these factors into consideration.