Section 138 liability survives post-notice tender and unproved deduction claims, restoring conviction on dishonoured cheques.
A dispute under Section 138 of the Negotiable Instruments Act turned on whether a later letter modified the earlier settlement, whether payment after the statutory notice period but before complaint filing avoided criminal liability, and whether the cheque amount was not legally due because of a claimed deduction. The Bombay High Court held that the letter did not alter the earlier liability, the claimed deduction was not proved, and post-notice tender did not extinguish liability because the offence is complete on failure to pay within the notice period. The acquittal was set aside, and conviction with fine was restored.
Issues: (i) Whether the complainant's letter dated 15-4-2002 operated as a modification or alteration of the earlier settlement so as to defeat liability under Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether tender or payment made after expiry of the statutory notice period but before filing of the complaint absolved the drawer of criminal liability under Section 138; (iii) Whether the cheque amount was not legally due because the drawer claimed a right to deduct a specified sum from the settlement amount.
Issue (i): Whether the complainant's letter dated 15-4-2002 operated as a modification or alteration of the earlier settlement so as to defeat liability under Section 138 of the Negotiable Instruments Act, 1881.
Analysis: The letter merely authorised the accused to make certain payments and make deductions from the hotel account. It did not refer to the dishonoured cheques or the earlier agreements as a replacement or variation of those arrangements. The complainant withdrew the letter before the accused acted upon it. The accused led no evidence to prove that the letter was acted upon or that it altered the earlier liability.
Conclusion: The letter did not amount to a legal modification of the earlier settlement and did not erase liability under Section 138.
Issue (ii): Whether tender or payment made after expiry of the statutory notice period but before filing of the complaint absolved the drawer of criminal liability under Section 138.
Analysis: The offence under Section 138 is completed on failure to make payment within the statutory period after service of notice. Subsequent payment may have relevance only to sentence, not to criminal liability. The observations in the earlier authority relied upon by the accused were treated as casual observations and not the binding ratio. On the facts, the accused did not make valid payment within time, and the later tender was not accepted in the manner required by the complainant's reply.
Conclusion: Post-notice, pre-complaint tender did not absolve the accused of liability under Section 138.
Issue (iii): Whether the cheque amount was not legally due because the drawer claimed a right to deduct a specified sum from the settlement amount.
Analysis: The claimed deduction was not proved by evidence. If the accused had accepted his own understanding of the deduction, he could have complied with the notice by paying the admitted balance, but he did not do so. The complainant's explanation for the disputed letter was accepted, and the accused did not establish that the cheque amount exceeded the legally due liability.
Conclusion: The deduction defence failed and the cheque remained enforceable.
Final Conclusion: The acquittal was set aside, the accused was convicted under Section 138 of the Negotiable Instruments Act, 1881, and a fine was imposed with payment directed to the complainant.
Ratio Decidendi: Liability under Section 138 is not extinguished by a post-notice payment or tender made after the statutory period; once the drawer fails to pay within time after notice, the offence is complete, and later payment affects only sentencing.
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