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2025 Supreme(Online)(UK) 2713
REPORTABLE
HIGH COURT OF UTTARAKHAND AT NAINITAL
Criminal Misc. Application No.2431 of 2019
Gaurav Agarwal ………Applicant
Versus
State of Uttarakhand and another ………Respondents
Presence:-
Mr. Tapan Singh, Advocates for the applicant.
Mr. S.S. Chauhan, learned Deputy Advocate General for the State.
Mr. Mohd. Alauddin, Advocate for respondent no.2.
Judgment Reserved on 16.07.2025
Judgment delivered on 26.09.2025
Hon'ble Pankaj Purohit, J. (Oral)
Criminal proceedings for cheque dishonour are not maintainable if the cheque was rendered incapable of encashment via stop-payment instructions prior to its issuance, or if the complaint was filed prematurely before the expiration of the statutory 15-day notice period.
Headnote:(A) Negotiable Instruments Act, 1881 - Section 138, 139, 142(b) - Code of Criminal Procedure - Section 482, 204(2) - Criminal proceedings for dishonour of cheque - Stop payment instructions - Premature complaint - Mandatory service of notice.
(B) Where a cheque is reported lost and stop-payment instructions are issued prior to its alleged date of issuance, no offence is committed as there is no valid issuance in the eye of law.
(C) A complaint filed before the mandatory 15-day period following the service of a statutory notice expires is premature and the court is incompetent to take cognizance thereof as no cause of action has accrued. (Paras 16, 17, 18, 19)
Facts of the case:
The applicant challenged the criminal proceedings initiated for the dishonour of a cheque. It was contended that the cheque had been reported lost and a stop-payment instruction was issued by the bank well before its alleged issuance date. Furthermore, the complainant failed to produce evidence of service of the statutory demand notice, and the complaint was instituted before the lapse of the statutory 15-day period provided for payment.
Findings of Court:
The court observed that the contemporaneous bank records confirmed the stop-payment request had been processed prior to the date on the cheque. As such, the foundational requirement of a legally enforceable debt and valid issuance of a cheque was absent. The court also held that, in the absence of proof of service of the demand notice, the complaint was filed prematurely without an accrued cause of action.
Issues: The main issues were whether criminal liability arises when a cheque is stopped prior to issuance and whether a complaint filed before the expiry of the statutory notice period is maintainable.
Ratio Decidendi: The court concluded that a cheque rendered incapable of encashment by prior stop-payment instructions cannot be the basis for criminal liability. Additionally, adhering to settled legal principles, the court emphasized that a complaint filed before the expiry of the statutory 15-day period for payment is legally unsustainable and constitutes an abuse of the process of law.
Result: Application allowed.
By means of present C482 application, applicant has put to challenge the order dated 13.02.2017 as well as the entire proceedings of complaint case no. 26 of 2017, Sumit Kumar Vs. Gaurav Agarwal, pending in the court of learned Additional Chief Judicial Magistrate, Laksar, District Haridwar, under section 138 of the Negotiable Instrument Act, 1881 (for short “the Act,1881”).
2. The brief facts of the case are that the applicant was maintaining a bank account in the Indian Overseas Bank, Srinagar Garhwal. Two cheques, bearing numbers 724483 and 724484, were lost while the applicant was at Nainital. The applicant immediately approached the Indian Overseas Bank, Nainital Branch, and on 12.07.2016, submitted an application requesting stoppage of payment in respect of the said cheques. Subsequently, by report dated 15.07.2016, the bank confirmed that stop payment instructions had been carried out and the said cheques had been rendered incapable of encashment. The bank further debited the requisite charges for such stop-payment from the account of the applicant. It was alleged by the applicant that the said cheques, which had been reported lost, were in fact stolen and misused by the respondent no.2 after leaving employment. On the basis of such alleged misuse, the respondent no.2 instituted the complaint, alleging that on account of cordial relations between the parties, the applicant had issued a cheque bearing no. 724484 dated 05.12.2016 for a sum of ₹5,00,000/-in his favour. The cheque, when presented, was dishonoured on 15.12.2016 with the endorsement “insufficient funds.” On the complaint so filed, the learned Magistrate took cognizance and summoned the applicant to face trial by order dated 13.02.2017. Non-bailable warrants were thereafter issued, and the applicant was arrested on 14.06.2019. He was later released on bail. Hence, this C482 applicant.
3. The learned counsel for the applicant submits that the entire proceedings amount to a gross abuse of the process of law. The cheque in question had already been reported lost on 12.07.2016, and stop-payment instructions were duly issued by the bank on that very date. He submits that once payment had been stopped, the cheque could never have been validly presented in December 2016, nor could it have been dishonoured on the ground of “insufficient funds.” It is argued by the learned counsel for the applicant that the respondent no.2, in collusion with certain bank officials, misused the cheque which was already the subject of stop-payment instructions. The dishonour memo indicating “insufficient funds” is contrary to the contemporaneous record and casts serious doubt on the bona fides of the complaint.
4. The learned counsel for the applicant placed reliance upon the judgment of the Hon’ble Supreme Court in Raj Kumar Khurana v. State (NCT of Delhi), (2009) 6 SCC 72, wherein it was held that where a cheque has been reported lost and stop-payment instructions were given prior to its alleged issuance, there is no “issuance” in the eye of law and, therefore, no offence under Section 138 NI Act is made out. The learned counsel for the applicant contends that the present case is in alignment with the above judgment, as the cheque was rendered incapable of encashment much prior to the alleged date of presentation, and its subsequent misuse by the complainant cannot give rise to criminal liability.
5. The learned counsel for the applicant further submits that the summoning order dated 13.02.2017 itself is vitiated. The respondent no.2/complainant failed to comply with the mandatory requirement under Section 204(2) Cr.P.C., namely, to file a list of prosecution witnesses along with the complaint. In the absence of such compliance, issuance of process against the applicant was illegal. It is further contended that no offence under Section 138 NI Act is made out, as one of the essential ingredients — dishonour of the cheque on account of insufficiency of funds against a legally enforceable
