Cheque dishonour under Section 138 fails where part payment reduced the subsisting liability before presentation.

Where part payment had already been received before cheque presentation, Section 56 of the Negotiable Instruments Act required endorsement of that payment and permitted negotiation only for the balance. Because the cheque was presented for an amount exceeding the subsisting liability, the statutory ingredient of Section 138 was not satisfied. The penal provision was construed strictly, and liability could not be created where the cheque did not represent the amount then due, even in part. On the admitted facts, the accused was not found to have committed an offence under Section 138, the acquittal was upheld, and the appeal failed.

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Issues: Whether dishonour of a cheque attracts offence under Section 138 of the Negotiable Instruments Act, 1881 when, before presentation, part payment has been received and no endorsement of that payment is made on the cheque, though the cheque is then presented for the full amount and notice is issued only for the balance.

Analysis: A cheque under the Act is an instrument for payment of money towards a debt or liability, in whole or in part. Where part of the amount due has already been repaid, Section 56 of the Negotiable Instruments Act, 1881 requires an endorsement of the part payment and permits negotiation only for the balance. The statutory scheme, read with Section 15 of the same Act, recognises endorsement on the instrument or an annexed slip. On the admitted facts, the cheque was presented for an amount higher than the subsisting liability on the date of presentation. The Court held that the essential ingredient of Section 138 was absent because the cheque did not represent the amount then due, even in part. The provision, being penal, had to be construed strictly and could not be stretched to create liability where the statutory precondition was not satisfied.

Conclusion: The accused did not commit an offence under Section 138 of the Negotiable Instruments Act, 1881; the acquittal was upheld and the appeal failed.

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