The Kerala High Court has dismissed a criminal appeal in a cheque bounce case, holding that prosecution cannot continue when the cheque amount does not reflect the actual legally enforceable debt at the time of presentation.
The ruling came in Crl.A No. 1965 of 2025, decided on March 26, 2026, by Justice A. Badharudeen.
Background of the Case
The dispute arose from a complaint filed under Section 138 of the Negotiable Instruments Act, 1881. The complainant alleged that the accused had issued a cheque of ₹10.9 lakh towards repayment of a loan taken earlier.
However, the cheque was dishonoured due to insufficient funds. During the trial before the Judicial Magistrate in Nedumkandam, evidence from the complainant and supporting documents were presented.
The Magistrate later found that the accused had already made partial payments ₹1.94 lakh and ₹1.96 lakh before the cheque was presented again for encashment. Based on this, the accused was acquitted.
The complainant challenged the acquittal, arguing that despite partial payments, a substantial amount was still due and the cheque liability remained valid.
On the other hand, the defence relied on established legal principles, stating that once part payments are made, the cheque amount must reflect the reduced liability.
The High Court examined key provisions of the Negotiable Instruments Act, particularly Sections 15 and 56, which deal with endorsement and part payments.
The Court referred to the Supreme Court ruling in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel, clarifying the legal position on cheque dishonour cases involving part payments.
“The cheque that is dishonoured must represent a legally enforceable debt on the date of presentation,” the Court noted.
It further observed that if part payments are made after issuing the cheque but before its presentation, those payments must be recorded (endorsed) on the cheque.
Importantly, the Court emphasized:
“When part payment is made and not endorsed, presenting the cheque for the full amount would not represent a legally enforceable debt.”
In this case, the complainant failed to disclose the part payments and presented the cheque again for the full amount of ₹10.9 lakh.
After reviewing the facts and legal position, the High Court found no error in the Magistrate’s decision.
“The finding that offence under Section 138 is not attracted is perfectly justifiable,” the bench observed.
The Court concluded that since the cheque amount did not reflect the actual outstanding liability at the time of presentation, the essential condition for prosecution under Section 138 was not met.
Accordingly, the appeal was dismissed and the acquittal of the accused was upheld.
Case Details
Case Title: Danikutti Philip v. Johnykutty J & State of Kerala
Case Number: Crl.A No. 1965 of 2025
Judge: Justice A. Badharudeen
Decision Date: 26 March 2026
