Legal Recourse in Cases of Partial Payments on Negotiable Instruments

In R.F.A. No. 11759 of 2021, the Lahore High Court adjudicated on a dispute where Muhammad Afzal (appellant) sought recovery of Rs. 11,800,000/- from Binyameen Sajid (respondent) based on a dishonored cheque. The court's analysis highlighted critical aspects of the case, leading to the dismissal of the initial suit and directions for appropriate legal recourse.

Key Areas:

Background: Muhammad Afzal filed a suit under Order XXXVII, Rules 1 and 2 of the Code of Civil Procedure, 1908, seeking recovery based on a cheque issued by Binyameen Sajid. The respondent contested the suit after obtaining leave to defend, and the trial court eventually dismissed the suit, prompting the appeal.

Legal Findings: During cross-examination, the appellant admitted to encashing multiple cheques from the respondent's cheque book while the respondent was abroad. This included the cheque in question. The court referred to Section 56 of the Negotiable Instruments Act, 1881, which mandates an endorsement for part-payment on a negotiable instrument. Without such endorsement, presenting a cheque for the remaining amount is improper.

Court’s Decision: The court concluded that since the appellant received part payment and did not follow the procedure under Section 56 of the Negotiable Instruments Act, he was barred from presenting the cheque for encashment and from filing a suit under Order XXXVII, Rules 1 and 2, CPC. Instead, the proper course of action was to file a suit for the balance amount in a court of plenary jurisdiction. The court allowed the appeal, set aside the trial court's judgment, and directed the return of the plaint for presentation in the appropriate civil court, considering the limitations period.

Conclusion: The Lahore High Court's judgment underscores the importance of adhering to procedural requirements under the Negotiable Instruments Act when dealing with partial payments. The decision directs the appellant to seek redress in a competent court for the balance amount.

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