Effect of Part Payments On Dishonoured Cheques Cannot Be Decided In Revision Against Summoning Order: Delhi High Court

The Delhi High Court has ruled that whether dishonoured cheques continued to represent a legally enforceable debt after the drawer made admitted part payments is a disputed question of fact that must be decided at trial.

Justice Madhu Jain observed that the issue depends on the evidence led by the parties and cannot be conclusively determined while exercising revisional jurisdiction against a summoning order.

"Whether, in view of the admitted part payments, the statutory requirement under Section 138 read with Section 56 of the NI Act stood satisfied, and whether the dishonoured cheques continued to represent a legally enforceable debt, are issues which depend upon the evidence led by the parties and the factual foundation established during trial. Such disputed questions could not have been conclusively determined while exercising revisional jurisdiction against a summoning order.", the court ruled.

Justice Jain set aside the Sessions court's October 7, 2024 order quashing the summoning order against Nityam Pharma and another accused.

The judge restored the Metropolitan Magistrate's March 15, 2021 summoning order and directed the parties to appear before the trial court on August 8, 2026.

The case stems from the supply of pharmaceutical goods worth ₹10.02 lakh under an invoice dated August 21, 2019. Three cheques issued towards the invoice amount were dishonoured after payment was stopped by the drawer.

The complaint states that the purchaser subsequently made part payments through NEFT and issued eight fresh cheques towards the remaining dues. After further payments brought the outstanding amount down to ₹6.52 lakh, those cheques too were dishonoured for insufficient funds.

MS Pharmaceuticals then issued a statutory demand notice seeking payment of the outstanding ₹6.52 lakh before initiating proceedings under Section 138 of the Negotiable Instruments Act, which makes the dishonour of a cheque issued towards a legally enforceable debt an offence if the drawer fails to pay despite receiving a statutory demand notice.

The Metropolitan Magistrate summoned the accused in March 2021. That order was later set aside by the Sessions court, which held that the statutory notice was invalid because it sought an amount lower than the total value of the dishonoured cheques, did not reflect the legally enforceable debt corresponding to those cheques and amounted to an omnibus notice.

Before the high court, MS Pharma argued that the statutory notice correctly reflected the amount legally recoverable after adjusting the admitted part payments. Nityam Pharma contended that once part payments had been made before the cheques were presented, the cheques no longer represented the outstanding liability in full.

Referring to Section 56 of the Negotiable Instruments Act, which deals with endorsements recording part payments on negotiable instruments, it argued that, in the absence of such an endorsement, the cheques no longer represented a legally enforceable debt.

The court held that the statutory notice could not be characterized as omnibus because it disclosed the invoice value, the dishonoured cheques, the admitted part payments, and the manner in which the outstanding amount had been calculated.

The court also found that the Sessions court erred in treating the reduced demand as automatically invalid without examining those disclosures.

Accordingly, the high court restored the summoning order, holding that the effect of the admitted part payments needs to be determined during trial. 

For Petitioner: Advocates Vipin Nandwani and Ajay Chaudhary

For Respondent: Advocate Shweta Garg