How to recover part payment of cheque

Recovery of part payment 

The court outlined the following procedure for cases involving part payments on cheques:

1. **Adherence to Section 56 of the Negotiable Instruments Act, 1881**: When part payments have been made on a cheque, the payee must endorse these payments on the cheque itself. Section 56 specifically requires that any part payment must be noted on the cheque to reflect the remaining balance.

2. **Filing a Suit in a Court of Plenary Jurisdiction**: If the payee fails to make the necessary endorsements as required by Section 56, they cannot simply present the cheque for encashment or file a suit under Order XXXVII, Rules 1 and 2, Code of Civil Procedure, 1908 (which provides for summary procedure suits). Instead, they must file a suit in a court of plenary jurisdiction (a regular civil court) to recover the balance amount.

3. **Returning the Plaint for Presentation in the Appropriate Court**: In this case, the trial court should have returned the plaint to the appellant to file it in a court of competent jurisdiction, such as a civil court, which handles suits for recovery of the balance amount when part payments have been received but not endorsed correctly.

4. **Limitation Consideration**: The appellant must consider the limitation period for filing such suits, as delays might impact the admissibility of the suit.

In essence, the procedure involves ensuring proper endorsement of part payments on the negotiable instrument and filing the recovery suit in the appropriate court if such endorsements have not been made.

The case revolves around a dispute between Muhammad Afzal and Binyameen Sajid concerning a cheque payment. Muhammad Afzal filed a suit under Order XXXVII, Rules 1 and 2, Code of Civil Procedure, 1908, seeking to recover Rs.11,800,000 from Binyameen Sajid based on a cheque issued by the latter.

During the trial, it was revealed that Muhammad Afzal had received several cheques from Binyameen Sajid, including the one in question. The court noted that Muhammad Afzal had cashed other cheques from the same chequebook, even when Binyameen Sajid was abroad. The court referred to Section 56 of the Negotiable Instruments Act, 1881, which outlines procedures for endorsing part payments on negotiable instruments.

Since Muhammad Afzal failed to follow the procedure outlined in Section 56 for endorsing part payments on the cheque, the court ruled that he was barred from presenting the cheque for encashment and from filing a suit under Order XXXVII, Rules 1 and 2, Code of Civil Procedure, 1908. Instead, the court directed Muhammad Afzal to pursue the matter in a civil court for recovery of the balance amount.

In summary, the case underscores the importance of following legal procedures outlined in relevant statutes and acts, and it highlights the consequences of failing to do so in matters involving negotiable instruments like cheques.

Yes, a recovery case can be filed even if there has been a part payment. In the case you provided, the court ruled that the appellant was barred from presenting the cheque for encashment and from filing a suit under a specific rule because he failed to follow the procedure outlined in Section 56 of the Negotiable Instruments Act, 1881, for endorsing part payments on the cheque. However, the court directed the appellant to pursue the matter in a civil court for recovery of the balance amount. This implies that even though part payment was made, the appellant still has the option to seek recovery of the remaining balance through a civil court.

Stereo. H C J D A 38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT LAHORE

JUDICIAL DEPARTMENT

R.F.A.No.11759 of 2021

Muhammad Afzal Versus Binyameen Sajid

J U D G M E N T

Date of Hearing: 16.05.2024

Appellant by: Chaudhry Mohsin Iftikhar Gujjar, 

Advocate

Respondent by: M/s Mehboob Rasool Awan and 

Imran A. Mian, Advocates

SHAHID BILAL HASSAN, J. Tersely, the 

appellant instituted a suit under Order XXXVII, Rules 

1 and 2, Code of Civil Procedure, 1908 for recovery of 

Rs.11,800,000/- against the present respondent on the 

basis of cheque No.3685676 pertaining to A/C 

No.0061583724121, KASB Bank to be encashed on 

21.09.2016, which was duly contested by the present 

respondent after seeking leave to appear and defend 

the suit. Divergence in pleadings of the parties was 

summed up into issues and evidence of the parties in 

pro and contra was recorded. On conclusion of trial, 

the learned trial Court vide impugned judgment and 

R.F.A.No.11759 of 2021

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decree dated 26.11.2020 dismissed the suit; hence, the 

instant appeal.

2.

Heard.

3.

Considering the arguments and going 

through the record, it is observed that the appellant 

while appearing in the witness box as P.W.1, during 

cross examination, admitted that he got different 

cheques of the cheque book of the respondent. Ex.D2 

to Ex.D13 are encashed cheques of different amounts

by the appellant and the cheque in question is also of 

the cheque book of the said encashed cheques and 

admittedly at the time of encashment of the cheques 

Ex.D2 to Ex.D13, the respondent was living abroad; 

meaning thereby the above said cheques were 

encashed by the present appellant. When the position 

remained as such, here comes, section 56 of the 

Negotiable Instruments Act, 1881, which specifically 

provides for an endorsement on a Negotiable 

Instrument with regards to part-payment and the 

instrument can there-after be negotiated for the 

balance amount. If the drawer and the payee of the 

cheque adopt the procedure given in section 56 of the 

Act, 1881, then it would be open to the payee of the 

cheque to present the cheque for payment of only the 

endorsed balance amount, due to him. However, 

R.F.A.No.11759 of 2021

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without adopting the procedure as provided in section 

56 ibid, the cheque cannot be presented for 

encashment and suit under Order XXXVII, Rules 1 

and 2, Code of Civil Procedure, 1908 cannot be filed, 

rather a suit for recovery of balance amount of cheque 

before a Court of plenary jurisdiction has to be 

instituted. Therefore, when it is established from 

evidence on record that the appellant has received part 

payment out of the disputed amount and he did not 

adopt the procedure as provided under section 56 of 

the Act, 1881, therefore, he was barred from 

presenting the cheque in question in the bank for its 

encashment and instituting suit under Order XXXVII, 

Rule 1 & 2, Code of Civil Procedure, 1908. The proper 

forum in this regard is Court of plenary jurisdiction i.e. 

civil Court for getting his grievance redressed. 

Therefore, the learned trial Court should have returned 

the plaint under Order VII, Rule 10, Code of Civil 

Procedure, 1908 for its presentation before the Court 

of competent jurisdiction, obviously, keeping in view 

the barricade of limitation.

4.

Crux of the discussion above is that the 

appeal in hand is allowed, impugned judgment and 

decree is set aside, consequent whereof, the learned 

trial Court is directed to return the plaint of the suit to 

R.F.A.No.11759 of 2021

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the appellant/plaintiff for its presentation before the 

Court of competent jurisdiction, if so desired and 

advised. No order as to the costs.

(Shahid Bilal Hassan)

Judge

Approved for reporting.

Judge

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