Searching Case Laws & Precedent on Legal Query!
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Searching Case Laws & Precedent on Legal Query!
Scanned Judgements…!
Stop Payment Instructions and Section 138 NI Act - Courts have consistently held that issuing a stop payment instruction and subsequent cheque dishonour attract the provisions of Section 138 of the Negotiable Instruments Act, 1881. Several judgments (e.g., SCC 232, SCC 776, SCC 232, SCC 232, SCC 232, SCC 232) affirm that dishonour due to stop payment, whether on post-dated or regular cheques, constitutes an offence under Section 138, unless the stop payment was issued for reasons unrelated to insufficient funds (e.g., theft, account closure). Subir Sarkar VS Sk. Anisur Rahaman - Calcutta, Bobby Anand @ Yogesh Anand VS State of U. P. - Allahabad, Rakesh Kumar VS State of U. P. - Allahabad, Sunder Das Rohra S/o Late Paras Ram VS Anil Mishra S/o Mannu Lal Mishra - Chhattisgarh, Sameer Raza VS State of U. P. - Allahabad, Salim A. , S/o. Assan Bava VS State Of Kerala - Kerala, BHAURAO CHAVAN SAHAKAR SAKHAR KARKHANA LTD., THROUGH AUTHORIZED OFFICER KISHAN S/O. MAROTRAO JADHAV vs HAJI ABDUL KARIM S/O. MOHD. SETH THEJIYA - Bombay, N. R. Lakshminarayanan, Son of Mr. N. S. Ramabhadracharya VS Lead Consultancy And Engineering Services (India) Pvt. Ltd. - Karnataka, Sameer Raza VS State of U. P. - Allahabad
Factual Defence and Legal Presumption - Courts have clarified that the accused can demonstrate valid reasons for stop payment (e.g., theft, account closure) and that mere stop payment instructions do not automatically negate liability under Section 138. The presumption of liability remains unless the defence convincingly proves the stop payment was due to valid, unrelated reasons. Bobby Anand @ Yogesh Anand VS State of U. P. - Allahabad, Subir Sarkar VS Sk. Anisur Rahaman - Calcutta, Rakesh Kumar VS State of U. P. - Allahabad
Controversies and Clarifications - The Supreme Court has emphasized that dishonour of a cheque owing to stop payment instructions does not automatically exclude liability under Section 138, as doing so would render the section redundant. The law presumes that issuing stop payment instructions and dishonour of cheques are within the scope of Section 138 unless proven otherwise. N. R. Lakshminarayanan, Son of Mr. N. S. Ramabhadracharya VS Lead Consultancy And Engineering Services (India) Pvt. Ltd. - Karnataka, Sameer Raza VS State of U. P. - Allahabad, SCC 232, SCC 776
Analysis and Conclusion:Based on the judicial precedents, issuing a stop payment instruction and the cheque's dishonour generally attract the offence under Section 138 of the Negotiable Instruments Act. The key consideration is whether the stop payment was issued for valid reasons unrelated to insufficient funds. If the stop payment was due to reasons like theft, account closure, or other legitimate causes, liability may be contested. However, in the absence of such valid reasons, the act of stopping payment and dishonour of the cheque typically constitute an offence under Section 138.
In the world of business transactions, cheques remain a common payment method in India. However, what happens when a drawer issues a 'stop payment' instruction to their bank, and the cheque bounces? A frequent question arises: Whether Stop Payment Attracts 138 Ni Act? This issue has sparked numerous court battles, with judicial interpretations varying based on context.
This blog post delves into the legal nuances under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), analyzing key precedents, defenses, and practical implications. Whether you're a business owner, lender, or facing a cheque bounce notice, understanding this can help navigate potential civil and criminal proceedings. Note: This is general information, not specific legal advice—consult a lawyer for your case.
Section 138 criminalizes the dishonour of a cheque due to insufficient funds or exceeding arrangement, when issued for a legally enforceable debt or liability. The provision presumes the debt's existence (under Section 139), shifting the burden to the drawer to rebut it.
Stop payment instructions—where the drawer directs the bank not to honour a specific cheque—complicate matters. Courts scrutinize whether this act alone triggers liability or if factors like civil disputes or sufficient funds play a role. Generally, stop payment does not absolve liability if the cheque was for a valid debt and dishonoured upon presentation. Sukhinder Singh VS S. R. Chaudhary - 1998 0 Supreme(P&H) 1049
Indian courts, including the Supreme Court, have addressed this through landmark rulings. Here's a breakdown of pivotal cases:
When stop payment stems from a civil disagreement—like disputes over sale deeds or payment amounts—courts may quash Section 138 proceedings. One case held that such instructions are civil in nature, not implying criminal intent. Ashish Dwivedi VS State of Uttaranchal - 2008 0 Supreme(UK) 437
Key Point: Stop payment due to bona fide civil disputes typically does not attract Section 138. Ashish Dwivedi VS State of Uttaranchal - 2008 0 Supreme(UK) 437
The Supreme Court in M/s Modi Cements Limited v. Shri Kuchil Kumar Nandi clarified that presenting a cheque post-stop payment does not bar prosecution. The presumption under Section 139 holds, and stop payment alone doesn't negate the offence. Sukhinder Singh VS S. R. Chaudhary - 1998 0 Supreme(P&H) 1049
Similarly, courts affirm: stop payment instructions and consequent dishonour of cheque attracts the offence under Section 138 N.I Act. SALIM A. vs STATE OF KERALA - 2024 Supreme(Online)(KER) 32084 - 2024 Supreme(Online)(KER) 32084
Civil suits and Section 138 cases can run parallel. Stop payment doesn't halt criminal action if the cheque was for a debt. T. M. Sampath VS K. K. S. Jeyaraman - 2016 0 Supreme(Mad) 2516
If dishonour results from lack of funds (not just stop payment), liability sticks. A defense claiming stop payment fails if funds were inadequate. Bhikham Chandrakar VS Amar Nath Tamrakar - 2007 0 Supreme(Chh) 276Dharmesh Singh VS Suresh - 2009 0 Supreme(Raj) 1658
Quote: Whether the stop payment instructions issued by the Accused to his banker will attract penal liability under Section 138 of N.I. Act? ... the stop payment instructions would attract the prosecution under Section 138. Reddy's Laboratories Limited VS Reddy Pharmaceuticals Limited Delhi - 2014 Supreme(AP) 1487 - 2014 0 Supreme(AP) 1487
Multiple rulings reinforce that stop payment generally invites Section 138 scrutiny:- Instruction to the banker by the accused person to stop payment itself is sufficient to hold the accused person culpable for committing offence within the meaning of Section 138. Chloride Power Systems & Solutions Limited VS State of West Bengal - 2023 Supreme(Cal) 253 - 2023 0 Supreme(Cal) 253- The stop payment instructions would attract the prosecution under Section 138 of N.I Act and the presumption under Section 139 of N.I Act also gets attracted. Reddys Laboratories Limited VS Reddy Pharmaceuticals Limited - Dishonour Of ChequeReddys Laboratories Limited VS Reddy Pharmaceuticals Limited - Current Civil Cases- Supreme Court precedents state cheque bounces due to stop payment constitute an offence under Section 138. Pulsive Technologies VS State of Gujarat - Dishonour Of Cheque
Exceptions exist for valid reasons like cheque theft or account closure, where the accused must probablize the defense. Mere stop payment without such proof upholds liability. Subir Sarkar VS Sk. Anisur Rahaman - CalcuttaBobby Anand @ Yogesh Anand VS State of U. P. - Allahabad
Courts distinguish civil rows (e.g., contract breaches) from criminal cheque dishonour. Stop payment in civil contexts may avoid Section 138, but not if funds were insufficient. Ashish Dwivedi VS State of Uttaranchal - 2008 0 Supreme(UK) 437
Section 139 presumes debt existence. Drawers must prove:- No legally enforceable debt.- Sufficient funds existed, but stop payment was for valid reasons (e.g., fraud).
Failure to rebut leads to conviction. Sukhinder Singh VS S. R. Chaudhary - 1998 0 Supreme(P&H) 1049SALIM A. vs STATE OF KERALA - 2024 Supreme(Online)(KER) 32084 - 2024 Supreme(Online)(KER) 32084
Bullet Points on Common Scenarios:- Insufficient Funds + Stop Payment: Liable. Bhikham Chandrakar VS Amar Nath Tamrakar - 2007 0 Supreme(Chh) 276- Civil Dispute Only: Potentially quashable. Ashish Dwivedi VS State of Uttaranchal - 2008 0 Supreme(UK) 437- Post-Dated Cheque Stopped: Still attracts Section 138. BHAURAO CHAVAN SAHAKAR SAKHAR KARKHANA LTD., THROUGH AUTHORIZED OFFICER KISHAN S/O. MAROTRAO JADHAV vs HAJI ABDUL KARIM S/O. MOHD. SETH THEJIYA - Bombay- Ongoing Civil Suit: Criminal proceeds independently. T. M. Sampath VS K. K. S. Jeyaraman - 2016 0 Supreme(Mad) 2516
For Drawers:- Issue cheques only with funds ready.- Document civil disputes before stopping payment.- Prepare robust defenses in court.
For Payees:- Present cheques promptly post-stop payment notice.- Gather proof of debt.- Pursue both civil recovery and Section 138.
Banks must honour valid instructions but note potential liabilities. Legally, stop payment doesn't shield from prosecution if conditions met. Dharmesh Singh VS Suresh - 2009 0 Supreme(Raj) 1658
Issuing stop payment does not automatically escape Section 138 NI Act—courts typically hold it attracts liability if the cheque was for a debt and dishonoured, unless proven otherwise (e.g., civil dispute or valid reason). The law protects cheque recipients, emphasizing trust in negotiable instruments.
Key Takeaways:1. Stop payment + dishonour generally = Section 138 offence. Sukhinder Singh VS S. R. Chaudhary - 1998 0 Supreme(P&H) 1049SALIM A. vs STATE OF KERALA - 2024 Supreme(Online)(KER) 32084 - 2024 Supreme(Online)(KER) 320842. Rebut presumption with strong evidence. Reddy's Laboratories Limited VS Reddy Pharmaceuticals Limited Delhi - 2014 Supreme(AP) 1487 - 2014 0 Supreme(AP) 14873. Civil issues don't always bar criminal action. T. M. Sampath VS K. K. S. Jeyaraman - 2016 0 Supreme(Mad) 25164. Consult professionals early.
This nuanced area evolves with judgments—stay updated. For tailored advice, reach out to a legal expert.
References:- Ashish Dwivedi VS State of Uttaranchal - 2008 0 Supreme(UK) 437Sukhinder Singh VS S. R. Chaudhary - 1998 0 Supreme(P&H) 1049T. M. Sampath VS K. K. S. Jeyaraman - 2016 0 Supreme(Mad) 2516Dharmesh Singh VS Suresh - 2009 0 Supreme(Raj) 1658Bhikham Chandrakar VS Amar Nath Tamrakar - 2007 0 Supreme(Chh) 276- Chloride Power Systems & Solutions Limited VS State of West Bengal - 2023 Supreme(Cal) 253 - 2023 0 Supreme(Cal) 253SALIM A. vs STATE OF KERALA - 2024 Supreme(Online)(KER) 32084 - 2024 Supreme(Online)(KER) 32084Reddy's Laboratories Limited VS Reddy Pharmaceuticals Limited Delhi - 2014 Supreme(AP) 1487 - 2014 0 Supreme(AP) 1487Reddys Laboratories Limited VS Reddy Pharmaceuticals Limited - Current Civil CasesPulsive Technologies VS State of Gujarat - Dishonour Of ChequeReddys Laboratories Limited VS Reddy Pharmaceuticals Limited - Dishonour Of Cheque
Word count: ~1050. General info only—not legal advice.
#Section138, #StopPayment, #NIACT
(2003) 3 SCC 232, where this Court held that ‘stop payment instructions’ and consequent dishonor of the cheque of a post-dated cheque attracts provision of Section 138. ... The question was whether a dishonor on that ground for that reason was culpable under Section 138 of the Negotiable Instruments Act. ... The question was whether dishonor of a chequ....
Abida and Others, (2015) 11 SCC 776, wherein it has been held that stop payment also attracts the provisions of Section 138 N.I. Act and the factual defence of the accused can not be considered in an application seeking quashing of the proceedings. ... It is submitted that the disputed cheque was reported as stolen/ missing to the drawee bank on 31.10.2002 and stop payment#HL_E....
Nigam Ashish Chakraborty, learned Counsel for the appellant submits that instruction to the banker by the accused person to stop payment itself is sufficient to hold the accused person culpable for committing offence within the meaning of Section 138 of the N.I. Act. ... In view of this the responsibility of the trial judge while issuing summons to conduct the trial in matters where there has been instruction to ....
instructions of stop payment issued to the Bank would attract section 138 of the ... stop, Section 138 of the Negotiable Instruments Act, 1881 attracts.
Therefore, the question that would arise as to whether the cause of action for filing the complaint for the offence under Section 138 of NI Act would arise only after expiry of 15 days as contemplated under clause (c) to the proviso to Section 138 of NI Act or whether it arises when the accused categorically ... Therefore, the accused were having genuine reason for issuing stop....
Chico Ursula D'souza (2003) 3 SCC 232, where this Court held that 'stop payment instructions' and consequent dishonour of a post-dated cheque attracts the provision of Section 138. ... The accused can thus show that the 'stop- payment' instructions were not issued because of insufficiency or paucity of funds. ... This presumption coupled with the object of Chapter XVII of the A....
The law laid down by the Hon'ble Supreme Court in the above case is that a question whether non-matching of signature attracts Section 138 of the N.I. Act. The answer to it was given in affirmative. ... Proviso (c) to Section 138 of N.I. ... There might be mismatch of the signature, but it is a case of stop payment, where after theft of a cheque, infor....
Chico Ursula D’souza and another [(2003)3 SCC 232] the Hon’ble Apex Court held that stop payment instructions and consequent dishonour of cheque attracts the offence under Section 138 N.I Act. ... If the argument that dishonour of the cheque for the reason ‘payment stopped by the drawer’ could not constitute an offence under Section 138 N.I Act is acc....
Chico Ursula D’souza and another [(2003)3 SCC 232] the Hon’ble Apex Court held that stop payment instructions and consequent dishonour of cheque attracts the offence under Section 138 N.I Act. ... If the argument that dishonour of the cheque for the reason ‘payment stopped by the drawer’ could not constitute an offence under Section 138 N.I Act is acce....
He has further submitted that where dishonour of the cheque has been made for the reason of stop payment, then too offence under Section 138 of N.I. Act is clearly made out against the applicant. ... He has further submitted that in order to determine the question where the cheque has been dishonoured on the ground of stop payment, the proviso contained in Section 138 o....
In the light of above rival arguments, the points that arise for determination in this appeal are: "1. Whether the stop payment instructions issued by the Accused to his banker will attract penal liability under Section 138 of N.I. Act? 2. If Point No. 1 is held in affirmative, whether accused could successfully rebut the presumption drawn under Section 139 of N.I. As already discussed supra, the stop payment instructions would attract the prosecution under Section ....
In this backdrop, it has to be seen whether the accused could probablise his defence. As already discussed supra, the stop payment instructions would attract the prosecution under Section 138 of N.I Act and the presumption under Section 139 of N.I Act also gets attracted. For the reasons stated hereinabove, we are unable to share the views expressed by this Court in the above two cases and we respectfully differ with the same regarding interpretation of Section 138 of the Act....
The High Court failed to notice authoritative pronouncements of this Court which state that if a cheque bounces because of “stop payment” instructions it would constitute an offence under Section 138 of the NI Act. Counsel urged that impugned order must, therefore, be set aside. Counsel for the complainant submitted that the High Court erred in coming to the conclusion that the complaint does not disclose offence punishable under Section 138 of the NI Act. Counsel submitted that the ....
The stop payment instruction is not denied by the accused. In this backdrop, it has to be seen whether the accused could probablise his defence. As already discussed supra, the stop payment instructions would attract the prosecution under Section 138 of N.I Act and the presumption under Section 139 of N.I Act also gets attracted.
In the present case, however, IBPL did not urge before the trial Court that the offence under Section 138 NI Act was attracted due to insufficient funds. However, it was clarified that the said presumption is rebuttable. As far as the second requirement i.e., the drawer having to show that as on the date of the presentation of the cheques the fund in its account was sufficient to honour the cheques, it is seen that it was in context of the facts in M.M.T.C. Limited v. Medchl Chemicals & Pharma....
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