“Issue a RTI against drawer” Cheque bounced 5 lakh. Drawer calls you up and says “Allow me to pay 25,000 today. I will settle the balance amount later. Please withdraw your complaint.” With lakhs of rupees at stake and waiting for months, sometimes even a promise to pay 25,000 can sound promising. Promise can also leave you confused. Should you accept it? Does accepting part-amount compromise the cheque bounce case? Does the drawer get a â€free legal clearance’ just because he has paid some money? Do you need to provide him with a receipt? Can you still prosecute him for the remaining amount under Section 138 of the NI Act? You cannot answer these questions by quoting some commercial law sop that says, “Part-payment is permitted” Money offered before a cheque is presented will have very different implications than a post dishonour payment. Similarly, if a payment is made after the statutory notice is issued, it is very different from a compromise payment being made while a Section 138 proceeding is pending. Since the cheque under Section 138 of the NI Act, 18 81 must be for the amount of a legally enforceable debt or liability, the Hon’ble Supreme Court has expressly analysed whether a subsequent payment (made after a cheque is issued but before it is presented) affects that condition. If you are a complainant seeking to recover your dues, the bottom line pragmatic approach to any offer should be to accept the bona fide repaid amount without inadvertently acknowledging a larger amount as being no longer due. BK Singh Advocate & Cheque Bounce Lawyer always look at the cheque, Bank return memo, Documents showing debt, chronology of payments made, Legal notice served and any compromise being offered together before advising clients on how a token amount impacts their options. A 10,000 transaction in a 10 lakh dispute can be inconsequential in terms of money. Its implications on the legal dues can be significant depending on WHEN it was made. The reason why part-payment matters at all is because Section 138 requires the cheque to relate to the legally enforceable liability which the cheque represents at the time of its presentation. Now let’s assume that an accused person owes 4 lakh to someone and issues them a cheque for 4 lakh. Before they deposit that cheque, he makes a bank transfer of 50,000 as part-payment. Now the remaining liability outstanding is 3.5 lakh. If they go and deposit the cheque for 4 lakh (with no mention of the 50,000 payment) then a legal question arises Does that cheque represent the legally enforceable debt that existed at the time of presentation? The Supreme Court replied to this question (in Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel) in the affirmative. It said that where part-payment has been made after the cheque was drawn but before it was presented, then the reduced liability would need to be accounted for (pursuant to Section 56 of the NI Act). An unendorsed cheque presented for a greater amount may fail to meet the Section 138 requirement that the cheque amount represent a legally enforceable debt at the time of presentation. Courts have been revisiting this question well into 20 26. Recent judgments have reaffirmed the principle that a cheque presented for the full face value despite an admission of part-payment before presentation will be cause a fundamental problem for the prosecution. This is why BK Singh Advocate advises creating a specific payment timeline. Don’t ask: “Was some money paid?” Ask: “ When EXACTLY was it paid?” That could make all the difference legally. Part-payment refers to payment of a part of the outstanding liability. It could be by way of bank transfer, UPI, cash, NEFT, RTGS, cheque or structured settlement. It is not the amount that is offered which is objectionable. Advise your friend to therefore not apply one rule to all part-payment situations if he is seeking recovery on bounced cheques. BK Singh Advocate can help determine which stage has been reached before you client accepts any settlement offer or makes any admission about the outstanding liability. Typically an advance after dishonour but only token at best does not nullify the offence at presentation. Section 138 hinges on whether the cheque when presented was a legally enforceable debt or liability and if the other statutory requirements exist. The part payment after presentation of the cheque and its dishonour are distinct events. It may decrease what is ultimately due. It may evidence a compromise. It may have evidential value as to damages. But it does not automatically require that the complainant withdraw from prosecution. It depends. If a cheque is for 6 lakhs and following dishonour accused says and pays 20,000:- "I am paying you now. Don't send notice." Such statement is not something that can be agreed to at face value. The complainant is entitled to think about the statutory period and the balance due. BK Singh Advocate will consider whether it affects your demand, compromise position or procedure. Sometimes 5K or 10K is really the first instalment of payment towards settlement. Sometimes it is just an oral request for time. Courts will not presume that because there has been a transfer of 5,000/- or 10,000/- that the settlement is concluded. The question is whether the parties have agreed to a settlement of terms. Some questions to ask: "I will pay slowly" in a vague Whats App message does not amount to the same thing as a proper recorded and executed settlement. BK Singh Advocate advises that we be clear that the receipt of money and a full- and- final settlement are two different things. Payment can be taken on account but make sure the legal effect is recorded properly. Accepting money does not necessarily imply acceptance of the accused’s condition of “closing the matter”. The complainant can accept part of what has been admitted as liability and continue to claim that the balance amount is yet to be paid. The cover letter with the cheque can become crucial evidence. Example: The accused sends a cheque for 50,000 towards a 5 lakh demand and writes: “I accept this amount as a full and final settlement.” If the complainant is not agreeing to this condition, then remaining silent can lead to factual disputes later on which could have been easily avoided. Responding in writing that the said amount is being accepted towards part satisfaction of the outstanding demand will eliminate any ambiguity. You don’t have to sound brutal. Just be clear. BK Singh Advocate will draft such receipt notes that allow you to take the money without giving any wrong impression as to the demand or its being settled. Yes, received amount must be acknowledged properly. But choose your words in acknowledgement. You may give a receipt saying : “Received 25,000 towards outstanding liability.”. Which is not the same as saying, “Received 25,000 as full and final settlement.”. Don’t say the later if its not the case. Sent ledger posting also needs to tally with Bank statements and settlement letters.. Sending mixed accounting may undermine your position. If the recipient later claims 25,000 was accepted as whole settlement , proper written documents become valuable. BK Singh Advocate Might want to proof read settlement language if a large cheque bounce case is being settled by instalments. Voluntary part-payment could be relevant, depending on the facts. It is not conclusive evidence because it might show that you admit that you owe some money. However, it is not conclusive evidence of all the complainant's allegations. The accused can say that the payment was for something else. Maybe there are multiple invoices with a business. Maybe friends or family have more than one financial transaction. Hence part-payment references are important. Bank narration, texting, settlement emails and bank statements can all help associate a payment with the alleged debt. The court will not assume. Provide evidence. Do not discard the record of all payments made. Retain all evidence including the bounced cheque. Evidence that may be relevant to keep: If a firm is the complainant, power-of-authority and corporate documents would be necessary too. Retaining clean documents is crucial especially when payment is made in instalments. Acceptance of payment should not be denied when it is credited in the bank account. Claims for original demand should not be persevered with without adjusting payments as per law. Do not encash an old cheque in a mechanical manner after receiving considerable amount prior to presentation. Read Section 56 and the Judgement of the Supreme Court. "Do not" execute "full and final settlement" if not intending to do so. "Do not" verbally consent to drop the case because you have received one small instalment. "Do not" allow the limitation to become statutory while talking about an informal settlement. DO NOT mistake your compromise negotiations as surrender of your legal rights. While negotiating a professional settlement, there is no harm in remaining polite and courteous. Professional review is useful where: BK Singh Advocate can review the transaction prior to you making a recovery decision based on partial information. At Cheque Bounce Lawyer, we help people and companies with respect to their dishonoured cheque issues. This includes the statutory notices, document review, settlement queries and 138 proceedings. Why are part-payments tricky? Because the timeline of part payments can alter the legal position. BK Singh Advocate will initially determine if the payment was made- We then look at the underlying liability. Invoices, loan agreements, bank statements, messages, acknowledgements and settlement correspondence can become very relevant at this stage. The aspect of civil recovery should be reviewed separately. You should determine all the available documents as well as the limitation position. At Cheque Bounce Lawyer we also point out the difference between cheque bounce litigation and civil recovery in instances where more than one cheque has been dishonoured as part of the dispute. Rejecting payments because you have a case is not the objective. It is usually about recovering what is owed to you. The objective should be to receive payments wisely, keep meticulous records and not destroy a legitimate claim by poor evidence. Yes, but the time of payment is important. Payment received before cheque presentation to the bank involves different considerations under Section 56 and Section 138, than if payment is made after the cheque is dishonoured. BK Singh Advocate can help you review when money was received from the accused and how to word the balance owed. No. Just because the accused paid you 10,000 it does not necessarily mean that the liability is fully settled or compounded. Continuation of proceedings will depend on the amount left unpaid, stage reached in the statutory process and any agreement entered into by the parties. Caution is required in this situation. If part of the liability was discharged before cheque presentation, but the cheque given for the remainder was not for a legally enforceable debt when presented, Section 56 will apply. See this Supreme Court decision. The payment of a small amount will not usually be deemed payment of the whole statutory demand. Acknowledge that payment was made and reduce the amount of money claimed from the original cheque amount. BK Singh Advocate will be able to review the evidence and advise on its effect based on when it was made and what was said in the statutory notice. Whenever you receive money it is good practice to provide a receipt. If you mark the receipt as “payment in full and final settlement” when this is not true, you could face difficulties later if you try to recover the remainder. Make sure that the receipt accurately reflects what happened. If a part-payment was made by the accused, just say that in the receipt. The accused can ask you to withdraw the complaint, but you are not obliged to allow it just because the first instalment has been paid. Allowing the withdrawal or compounding of the offence should be related to what actually happened, and the stage that proceedings have reached. Yes. Section 147 of NI Act provides that offences which are punishable under the NI Act are compoundable. If there is a settlement between the parties it is important that any terms are recorded correctly so that both parties are aware of what, if anything, is left to be paid. It could be used as evidence against the accused, but part-payment of the cheque will not on its own prove your case. You will need to link the payment received to the account or liability in question. Messages, emails or account entries can help make this connection. You should consider the facts of the transaction, limitation period, your documents and what remedy you want to recover when deciding if a civil recovery is also appropriate. Civil recovery suits and Section 138 proceedings are separate legal processes and should not be treated as alternative to each other. You should consider contacting BK Singh Advocate if: Money was paid to you before presentation; You need to send a statutory notice but have received a token amount; Payment of the entire liability was split into instalments; The Accused is demanding immediate withdrawal after paying one instalment; The cheque amount no longer corresponds with the liability alleged to be owed. Don’t let a plaintive waiting for money lose heart just because the accused is offering a token first instalment. But the complainant ought to know what legal effect accepting that money has. Sometimes the critical question is not how much has been paid, but when. Did a pre-presentation payment change the nature of the legal liability which the cheque acknowledges? Dashrathbhai, decided by the Supreme Court last week, makes this issue particularly relevant. Did a payment made after dishonour change the legal position? Clearly. Did a payment made during the statutory notice period change anything? Again clearly. Did a compromise effected during the pendency of the case change anything? For this reason, I always like to keep transactions on a neat chronology:Cheque Bounce Recovery When Accused Offers Small Part Payment
Why Does Small Part-Payment Matter in Cheque Bounce Cases?
Quick Facts
What Does "Part-Payment" Mean in a Cheque Bounce Recovery Case?
Does a Small Payment After the Cheque Bounces Cancel the Case?
Can an Accused Use a Token Payment to Delay the Complainant?
Can the Complainant Accept Part-Payment Without Withdrawing the Case?
Should the Complainant Give a Receipt for Part-Payment?
Can a Small Payment Be Used as Evidence of Liability?
Which Documents Become Important After Part-Payment?
What Should the Complainant Avoid Doing?
When Should You Consult a Cheque Bounce Lawyer?
How Can Cheque Bounce Lawyer Help?
Frequently Asked Questions
1. Can I accept part-payment from the accused in a cheque bounce case?
2. Does accepting 10,000 from the accused extinguish the Section 138 Case?
3. What if I received part-payment from the accused but the cheque was not yet deposited?
4. The accused sends me a cheque for 10,000 after I send the statutory demand for 2 lakh. What happens now?
5. Do I need to provide a receipt for part-payment of the cheque amount?
6. The accused has paid the first instalment. Can he/she ask me to withdraw the case?
7. Can proceedings under Section 138 be compounded?
8. Will part-payment of the cheque help me prove that the accused has acknowledged his debt?
9. Can I file a civil recovery suit for balance amount?
10. When should I contact BK Singh Advocate?
Final Thoughts
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