Searching Case Laws & Precedent on Legal Query.....!
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Searching Case Laws & Precedent on Legal Query.....!
Scanned Judgements…!
Dishonour of cheque due to payment stopped by the drawer - The Supreme Court has consistently held that dishonour of a cheque on the ground that the payment has been stopped by the drawer constitutes an offence under Section 138 of the Negotiable Instruments Act, regardless of whether the stoppage was with or without notice to the bank or drawer. It is recognized as a valid ground for dishonour that triggers liability ["Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala"] ["Subir Sarkar VS Sk. Anisur Rahaman - Calcutta"] ["Sheikh Owais Tariq, S/o Sheikh Tariq Ahmad vs Satvir Singh S/o. Joginder Singh, R/o. House No. 79 Malikpora Merran Sahib Jammu - Jammu and Kashmir"] ["Sheikh Owais Tariq VS Satvir Singh - Current Civil Cases"] ["Man Singh VS State of U. P. - Allahabad"] ["N. M. Minerals India Private Ltd. VS P. K. Raju - Kerala"] ["Chloride Power Systems & Solutions Limited VS State of West Bengal - Calcutta"] ["Rajiv Kumar Rai VS State of U. P. - Allahabad"] ["Lakshmi Industries VS Subir Dass - Punjab and Haryana"] ["SALIM A. vs STATE OF KERALA - Kerala"] ["Rajendra Singh S. V. v. M/s. Lahari Recording Co. Pvt. Ltd. - Karnataka"] ["Rajiv Kumar Rai VS State of U. P. - Allahabad"] ["Agri Best India Ltd. VS State of Haryana - Punjab and Haryana"] ["Jatan Kumar Singh VS State of U. P. - Allahabad"] ["Jamuna Pd. Bunker v. Sanjay Kumar - Madhya Pradesh"] ["K.C.HAMZA vs V.V.ABDULLAH - Kerala"].
The legal principle that payment stopped by the drawer is a recognized and sufficient reason for dishonour under Section 138 - The courts have clarified that such dishonour is punishable, and the mere fact that the stoppage was without notice does not negate the offence ["Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala"] ["Subir Sarkar VS Sk. Anisur Rahaman - Calcutta"] ["RAJAMANI vs THE PONNANI CO-OP URBAN BANK LTD - 2023 Supreme(Online)(Ker) 56293"] ["K.C.HAMZA vs V.V.ABDULLAH - Kerala"].
The expression amount of money... is insufficient in Section 138 is a genus, with reasons such as account closed, payment stopped, or signatures do not match being specific species that also amount to dishonour ["Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala"] ["Subir Sarkar VS Sk. Anisur Rahaman - Calcutta"] ["Sheikh Owais Tariq VS Satvir Singh - Current Civil Cases"] ["Man Singh VS State of U. P. - Allahabad"] ["Jatan Kumar Singh VS State of U. P. - Allahabad"] ["Jamuna Pd. Bunker v. Sanjay Kumar - Madhya Pradesh"].
Once the bank returns the cheque with the reason payment stopped by the drawer, a legal presumption of dishonour is established, and the offence under Section 138 can be invoked if the drawer fails to make payment after receiving the statutory demand notice within the stipulated period ["Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala"] ["Subir Sarkar VS Sk. Anisur Rahaman - Calcutta"] ["RAJAMANI vs THE PONNANI CO-OP URBAN BANK LTD - 2023 Supreme(Online)(Ker) 56293"] ["Rajendra Singh S. V. v. M/s. Lahari Recording Co. Pvt. Ltd. - Karnataka"].
The courts have rejected arguments that stopping payment or account closure exempts the drawer from liability under Section 138, emphasizing that such reasons are explicitly recognized as species of dishonour within the scope of the Act ["Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala"] ["Subir Sarkar VS Sk. Anisur Rahaman - Calcutta"] ["Lakshmi Industries VS Subir Dass - Punjab and Haryana"] ["K.C.HAMZA vs V.V.ABDULLAH - Kerala"].
Analysis and Conclusion:The consistent legal stance, supported by Supreme Court judgments and case law, is that dishonour of a cheque on the ground that the payment was stopped by the drawer is a valid and punishable offence under Section 138 of the Negotiable Instruments Act. The reason payment stopped by the drawer is explicitly recognized as a valid ground for dishonour, and such dishonour, coupled with the drawer's failure to pay after legal notice, constitutes an offence. Therefore, a cheque dishonoured on this ground should be treated as an offence under Section 138, and the ground itself does not provide a valid defence against prosecution.
Issuing a cheque is a common business practice, but what happens when it's dishonoured due to 'payment stopped by drawer'? Many drawers believe stop instructions shield them from liability. However, courts have consistently ruled otherwise. In this post, we explore judgments on grounds for dishonour due to payment stopped by the drawer, under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). This analysis draws from key precedents, helping payees and drawers understand their rights and obligations.
Disclaimer: This is general information based on judicial precedents and not specific legal advice. Consult a lawyer for your case.
The question often arises: judgmnt on ground for dishonour paymnt stopped by drawer. Courts have clarified that dishonour due to stop payment instructions constitutes an offence under Section 138 NI Act. This triggers the presumption under Section 139 that the cheque was issued for discharge of a debt or liability. Proceedings cannot be quashed merely on this ground; the drawer must rebut the presumption at trial. Modi Cements VS Kuchil Kumar Nandi - 1998 2 Supreme 471M. M. T. C. Ltd. VS Medchl Chemicals & Pharma P. Ltd. - 2001 8 Supreme 227
Section 138 applies when a cheque is returned unpaid for reasons like insufficiency of funds, exceeding arrangements, or stop payment. The Supreme Court held: Once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee (Payee) or to the Bank for stoppage of the payment it will not preclude an action under Section 138 of the Act by the drawee, (Payee) or the holder of a cheque in due course. Modi Cements VS Kuchil Kumar Nandi - 1998 2 Supreme 471
Similarly: Dishonour of cheque—Essential ingredients—Once a cheque is drawn by a person of an account maintained by him for payment of any amount or discharge of liability or debt or is returned by a bank with endorsement like refer to drawer, exceeds arrangements and instruction for stop payment and like other usual endorsement, it amounts to dishonour within meaning of Section 138. LAFARGE AGGREGATES & CONCRETE INDIA PVT. LTD. VS SUKARSH AZAD - 2014 2 Supreme 549
Under Section 139, courts presume the cheque was for a legally enforceable debt. Stop payment does not exempt the drawer. Even if proceedings are challenged under Section 482 CrPC, courts refuse quashing: even though the cheque is dishonoured by reason of ‘stop payment’ instruction an offence under Section 138 could still be made out. It is held that the presumption under Section 139 is attracted in such a case also... the accused can thus show that the 'stop payment' instructions were not issued because of insufficiency or paucity of funds. M. M. T. C. Ltd. VS Medchl Chemicals & Pharma P. Ltd. - 2001 8 Supreme 227M. M. T. C. LTD. VS Medchl Chemicals And Pharma Private LTD. - 2001 8 Supreme 227
The drawer bears the burden to prove sufficient funds and a valid, non-dishonest reason at trial. Mere stop instructions or liability denial won't suffice early on. This upholds the NI Act's goal of promoting banking efficacy and punishing evasion. M. M. T. C. Ltd. VS Medchl Chemicals & Pharma P. Ltd. - 2001 8 Supreme 227
The rule applies to post-dated cheques stopped before maturity: Section 138 of the Negotiable Instruments Act will be attracted to a case in which a person issuing a post dated cheque stops its payment by issuing instructions to the drawee bank before the due date of payment and cheque is returned with the endorsement ‘present again.’ Goaplast Pvt. Ltd. VS Shri Chico Ursula D’Souza & Anr. - 2003 2 Supreme 536Goaplast Pvt. LTD. VS Chico Ursula D''''Souza - 2003 2 Supreme 536
Stop payment erodes payee confidence in negotiable instruments, justifying prosecution.
Similar principles extend to other dishonour grounds, reinforcing Section 138's broad scope. For instance, dishonour due to 'account closed' attracts Section 138 and Section 139 presumption, unless rebutted at trial. Courts dismiss quashing pleas, as disputed facts like cheque misuse require evidence. Vijay Kumar VS State of Uttar Pradesh - 2024 Supreme(All) 848
In cases of multiple dishonours including stop payment by drawer or court order, the presumption holds despite account issues like seizure. The accused must disprove liability. Harpal Singh VS State of Haryana - 2023 Supreme(P&H) 398
Non-matching signatures or 'payment stopped' also fall under Section 138, as these are species of the 'insufficient funds' genus. Fraud claims or post-resignation defenses are trial matters, not for quashing. LAXMI DYECHEM VS STATE OF GUJARAT - 2012 8 Supreme 274LAXMI DYECHEM VS STATE OF GUJARAT - 2012 Supreme(UK) 517
Even for security cheques from guarantors, stop payment triggers liability if principal debt exists. Moment Principal Debtors fail to make payment, liability of petitioner as a guarantor will come into operation. D. Napolean VS M. V. M. Traders - 2018 Supreme(Mad) 3839
However, if the accused rebuts with proof of sufficient funds and valid stop reason (e.g., no debt), no offence lies—but only at trial. G. Murali Bajaj, Proprietor, Maya Electronics, rep. by its Power of Attorney S. Saravanan, S/o Sitaraman, Erode VS Selvaraj, Proprietor, Southern Electronics, Erode - 2009 Supreme(Mad) 2505
Drawers may defend by showing:- Sufficient funds in the account.- Valid stop reason unrelated to insufficiency or no liability (e.g., no existing debt). Modi Cements VS Kuchil Kumar Nandi - 1998 2 Supreme 471M. M. T. C. Ltd. VS Medchl Chemicals & Pharma P. Ltd. - 2001 8 Supreme 227
Mere stop notice or prior non-presentation doesn't grant immunity. Courts have overturned quashing orders based solely on stop payment. Full evidence is needed; threshold challenges fail. Modi Cements VS Kuchil Kumar Nandi - 1998 2 Supreme 471
In one case, acquittal was upheld where stop payment coincided with sufficient funds and a legitimate dispute over goods, rebutting the presumption. G. Murali Bajaj, Proprietor, Maya Electronics, rep. by its Power of Attorney S. Saravanan, S/o Sitaraman, Erode VS Selvaraj, Proprietor, Southern Electronics, Erode - 2009 Supreme(Mad) 2505
Cheque dishonour via stop payment underscores the need for financial responsibility. Payees should act swiftly on notices, while drawers prepare robust defenses. Stay informed on NI Act updates to navigate these cases effectively.
References:1. Modi Cements VS Kuchil Kumar Nandi - 1998 2 Supreme 471: Stop payment no bar to Section 138.2. M. M. T. C. Ltd. VS Medchl Chemicals & Pharma P. Ltd. - 2001 8 Supreme 227: No quashing; trial rebuttal.3. LAFARGE AGGREGATES & CONCRETE INDIA PVT. LTD. VS SUKARSH AZAD - 2014 2 Supreme 549: Stop payment as valid dishonour.4. M. M. T. C. LTD. VS Medchl Chemicals And Pharma Private LTD. - 2001 8 Supreme 227: Reiterates non-quashing.5. Goaplast Pvt. Ltd. VS Shri Chico Ursula D’Souza & Anr. - 2003 2 Supreme 536: Post-dated applicability.6. Goaplast Pvt. LTD. VS Chico Ursula D''''Souza - 2003 2 Supreme 536: Post-dated confirmation.
#ChequeBounce, #NIAct138, #StopPaymentCheque
Shri.Kuchil Kumar Nandi [(1998) 3 SCC 249] a question arose before the Apex Court as to whether dishonour of a cheque on the ground that the drawer had stopped payment was a dishonour punishable under Section 138 of N.I. Act. ... (MANU/SC/1030/2012) the Hon'ble Apex Court held thus: “The net effect is that dishonour on the ground that the payment has been stopped, regardless whether such stoppage is with or without notice to the drawer#HL_E....
The question was whether dishonor of a cheque on the ground that the drawer had stopped payment was a dishonor punishable under Section 138 of the Act. Relying upon two earlier decisions of this Court in Electronics Trade & Technology Development Corporation Ltd. v. ... Just as dishonor of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatu....
Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that ... on account of account closed, payment stopped by the drawer, signature mismatch and image not found, as it would fall within the first contingency as provided under the Act. ... (ii) That th....
Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that the specimen signatures ... (ii) That the Revisional Court has not considered this aspect of the matter that even the complaints for dishonour of cheques on account of ‘Closed Account’ or ‘Payment Sto....
Bank memo dated 14-5-2018 showing cause of dishonour of the cheque as "payment stopped by drawer. 3. Bank memo dated 25-6-2018 showing cause of dishonour of the cheque as "payment stopped by drawer". 4. Copy of legal notice bearing date as 27-7-2018. ... The payment was again stopped by the drawer as per memo of the bank. ... The cheque was returned back unpaid with an endorsement of the bank that payment stopped by the ....
The net effect is that dishonour on the ground that the payment has been stopped, regardless whether such stoppage is with or without notice to the drawer, and regardless whether the stoppage of payment is on the ground that the amount lying in the account was not sufficient to meet the requirement of ... There may indeed be situations where a mismatch between the signatories on the cheque drawn by the drawer and the specimen available with the bank may result in dishonour#HL....
(i) funds insufficient; (ii) payment stopped by Court; and (iii) payment stopped by drawer, but it is revealed that return memos in all the cases (except one) have been issued during June 2015 to September 2015. ... by drawer (ii) Contention is that there are three types of situations arising out of different remarks on Bankers return memos, which are: (i) funds insufficient, (ii) payment stopped by Court order and (ii) payment stopped by drawer, and therefore, all .....
Dhanlaxmi Bank, Cherthala Branch on 20/2/2002, it was returned dishonoured for the reason ‘Payment stopped by the drawer’, as per Ext.P3 dishonour memo dated 25/2/2002. Intimation of dishonour was received by the complainant on 6/3/2002. ... It is trite law that an offence under Section 138 of NI Act will be attracted even if cheque was dishonoured for the reason payment stopped by the drawer. 22. ... The only ground under which the trial court acquitted the accused w....
The cheque was presented by the complainant company on 14th June, 2011 and the same was returne unpaid on 22nd June, 2011 with an endorsement on the cheque return memo “Payment stopped by drawer”. By letter bearing no. ... The accused person in this case has been able to prove that the cheque amount being a sum of Rs. 4,81,309/- was not the legally enforceable debt when the cheque was presented and the payment was stopped under the instruction of drawer. ... L-3:VENUS:COMSN: 11-12:0411 dated 7th July, 2011 the drawee dul....
The said cheque, when presented for encashment, was dishonoured for the reason "payment stopped by the drawer" vide return memo dated 16.03.2022. ... No.919020037480449 on dated 15.03.2022 for encashment but the above said Cheque issued to the complainant has been returned back unpaid by accused banker with the reasons "PAYMENT STOPPED BY DRAWER". vide Bank return memo dated 16.03.2022. 8. ... That immediately on 16.03.2022, the complainant approach to the accused on telephonic call and inform him about the bouncing of C....
On the other hand, the dishonour was on the sole ground of insufficiency of funds at the credit of the drawer. Even otherwise, it appears that, no marked difference could be made out between the signature in Ext.P1 and those admitted by accused. Mere suggestion that the accused did not sign the cheque and it was removed by theft is not a good substitute for reliable evidence. In all other respects, there were no differences as between both signatures admitted and disputed and therefore itself, according to DW1, the ground for dishonour of the cheque indicated in the dishono....
Later the petitioner has issued a post dated cheque dated 15.07.2017 in favour of the respondent for a sum of Rs. 28,54,000/-. When this cheque was presented, the same was dishonoured on the ground "payment stopped by the drawer". Subsequently, statutory notice was issued and a complaint has been filed by the respondent against the petitioner.
11. In Modi Cements Ltd. (supra) a similar question had arisen for the consideration of this Court. Not only that, the decision in Electronics Trade & Technology Development Corporation Ltd. (supra) to the extent the same held that dishonour of the cheque by the bank after the drawer had issued a notice to the holder not to present the same would not constitute an offence, was overruled. That contention was specifically rejected by this Court. The question was whether dishonour of a cheque on the ground that the drawer had stopped payment was a dishonour punishable under Section 1....
The question was whether dishonour of a cheque on the ground that the drawer had stopped payment was a dishonour punishable under Section 138 of the Act. Relying upon two earlier decisions of this Court in Electronics Trade & Technology Development Corporation Ltd. v. Indian Technologists and Engineers (Electronics) (P) Ltd. (1996) 2 SCC 739 and K.K Sidharthan v. T.P. Praveena Chandran (1996) 6 SCC 369, it was contended by the drawer of the cheque that if the payment was stopped by the drawer, the dishonour of the cheque could not constitute an offence under Section 138 of the Act.....
The dishonoured cheque concerned in C.C. No. 380 of 2000 (Crl.A. No. 485 of 2002) has been marked as Exhibit P-2 and the dishonour slip has been marked as Exhibit P-3 in the said calendar case. The dishonour slips issued by the drawee bank in respect of those cheques have been marked as Exhibit P-4 and P-5 in the said calendar case. The reason for such dishonour has been mentioned as ‘payment stopped by the drawer’. The said cheque was also dishonoured as payment was stopped by the drawer.
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