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Understanding 'Stop Payment' on Cheques: Legal Implications in India
Receiving a returned cheque with the endorsement 'payment stopped by drawer' or similar can be frustrating for the payee and alarming for the drawer. But does this mean there is a stop on the cheque that triggers criminal liability? In most cases under India's Negotiable Instruments Act, 1881 (NI Act), yes—it often leads to proceedings under Section 138, a penal provision for cheque dishonour. This blog breaks down the law, drawing from key judicial precedents, to explain what it entails.
We'll explore the meaning, legal consequences, presumptions, defences, and practical takeaways. Note: This is general information based on case law; consult a lawyer for specific advice as outcomes vary by facts.
What Does 'Stop Payment' on a Cheque Actually Mean?
When a bank returns a cheque unpaid with remarks like 'stop payment', 'instructions for stop payment', or 'payment stopped by drawer', it indicates the drawer (issuer) instructed the bank not to honour it, despite sufficient funds possibly being available. This differs from 'insufficient funds' or 'account closed', but courts treat it similarly under law.
- Key Point: Stop payment doesn't absolve liability if the cheque was issued for a debt or liability. As per precedents, merely issuing stop instructions after giving the cheque suggests dishonest intent if funds were inadequate initially or no valid reason exists. Bimal Singh Kothari VS State of Goa - 2007 Supreme(Bom) 1273
In everyday terms:
- Drawer issues cheque for discharge of debt.
- Payee presents it within validity (usually 3-6 months).
- Bank dishonours due to stop payment.
- Payee sends demand notice within 30 days.
- No payment within 15 days? Offence under Section 138.
Legal Framework: Section 138 of the NI Act
Section 138 makes dishonour of a cheque a criminal offence if due to:
1. Insufficient funds.
2. Exceeding arrangement with bank.
3. Stop payment instructions (judicially interpreted to include this).
Courts have consistently held that stop payment + consequent dishonour attracts Section 138. The Supreme Court clarified:
Merely because drawer issues notice to drawee or to bank for stoppage of payment, it will not preclude an action under Section 138 of the Act by holder to cheque. Vivek Jain VS State of U. P. Vivek Jain VS State of U. P.
Presumption under Section 139: Once dishonour is proven, the cheque is presumed issued for a legally enforceable debt. Burden shifts to drawer to rebut (e.g., prove no liability or misuse). Failure leads to conviction, typically 2-year imprisonment or fine up to twice cheque amount (compensation to payee). Subiksha Trading Services (P) Limited & Another VS Century Flour Mills Limited - 2004 Supreme(Mad) 1337
Essential Conditions for Offence
To succeed, payee must prove:
- Cheque presented within validity period to drawee's bank (not just any bank). N. M. Minerals India Private Ltd. VS P. K. Raju - 2024 Supreme(Ker) 1041
- Dishonour memo received.
- Demand notice within 30 days of memo.
- No payment within 15 days of notice.
Stop payment alone doesn't negate this; it's the failure to pay post-notice that seals liability. Construction Engineers VS V. K. Sood - 2013 Supreme(P&H) 401
Key Supreme Court and High Court Rulings
Indian courts, especially the Supreme Court, have shaped this area through cheque bounce cases:
1. Stop Payment = Dishonour Attracting Liability
In multiple rulings:
It is essential that to issue stop payment instructions there must be funds in account. But even with funds, if no debt discharge intent, offence holds unless rebutted. Vivek Jain VS State of U. P.
The Apex Court emphasized:
If cheque is drawn and given to a payee without there being sufficient fund and immediately after issuance of cheque, stop payment is requested... probable inference is the dishonest intention. SNOW WHITE HI-TECH LAUNDERETTE, BANGALORE VS SHAMANTHA R. HARIHARAN - 2002 Supreme(Kar) 627
2. Burden on Accused
Presumption operates in payee's favour:
The burden to prove non-existence of any debt or liability... lies on accused which can be discharged... during trial. Vivek Jain VS State of U. P. Salim A. , S/o. Assan Bava VS State Of Kerala - 2024 Supreme(Ker) 952
Defences like cheque stolen/misused need proof (e.g., FIR, prior stop payment). Mere allegation insufficient at quashing stage. Sunder Das Rohra S/o Late Paras Ram VS Anil Mishra S/o Mannu Lal Mishra - 2022 Supreme(Chh) 560 GAURAV AGARWAL vs STATE OF UTTARAKHAND - 2025 Supreme(Online)(UK) 976043
3. Company/Director Liability (Section 141)
If company cheque, directors liable only if averred they managed affairs during offence. Signatory alone? Process may quash if no company notice. Bimal Singh Kothari VS State of Goa - 2007 Supreme(Bom) 1273
4. Territorial Jurisdiction
Payee's bank location (where presented) often confers jurisdiction, not drawer's. Construction Engineers VS V. K. Sood - 2013 Supreme(P&H) 401
5. Recent Amendments: Section 148
Appellate courts must direct 20% deposit of compensation to curb delays. Retrospective; non-compliance risks bail cancellation. Rajesh Sharma VS Gagan Fibres Pvt. Ltd. - 2022 Supreme(P&H) 714
Other cases reinforce: Even 'account closed' or 'signature mismatch' with stop payment triggers probe. Vijay Kumar VS State of Uttar Pradesh - 2024 Supreme(All) 848 A.C.Krishnamurthy S/O Late Chikkaiah vs M.L. Jawaharlal S/o Lakkaiah - 2025 Supreme(Kar) 818
Common Defences and When They Fail
Drawers often claim:
- No liability: Prove with documents (e.g., full payment receipts). Presumption strong otherwise.
- Cheque as security/misuse: Needs evidence like blank cheque proof or pre-dishonour stop. Courts reject if inconsistent. Rajesh Kumar vs State Govt. of NCT of Delhi - 2025 Supreme(Del) 229
- Stolen cheque: FIR + bank records essential; post-theft misuse rare without proof. Narendra Singh VS Jas Karan Lal Verma - 2023 Supreme(All) 2142
Failure Example: Trial court acquitted relying on unproven stop payment prior to issuance, but appellate court reversed for ignoring presumption. A.C.Krishnamurthy S/O Late Chikkaiah vs M.L. Jawaharlal S/o Lakkaiah - 2025 Supreme(Kar) 818
Practical Steps for Parties
For Payees (Complainants):
- Present cheque promptly.
- Send statutory notice via registered post.
- File complaint in proper court within 1 month of notice period.
- Preserve all memos/notices.
For Drawers (Accused):
- Respond to notice explaining (pay if possible).
- Gather rebuttal evidence early.
- Comply with deposit orders in appeals.
Bullet-point Key Takeaways:
- Stop payment typically means offence under Section 138 if for debt discharge.
- Presumption favours payee; rebut with strong proof.
- Courts loathe delays—deposit 20% in appeals.
- Prevention: Avoid issuing cheques without funds; use other modes.
Conclusion: Proceed with Caution
Does 'stop payment' mean there is a stop on the cheque that spells legal trouble? Generally, yes—it signals potential criminal liability under Section 138 NI Act, backed by presumptions and strict timelines. Cases like those emphasizing transparency in banking and accountability show courts prioritize cheque credibility. Bhakti Garments VS Subhash B. Vishwakarma - 2009 Supreme(Bom) 986
However, facts matter: Valid disputes (e.g., no debt) can succeed at trial. Outcomes depend on evidence, not just endorsement.
Disclaimer: This post summarizes case law (e.g., Associate Builders VS Delhi Development Authority - 2014 8 Supreme 225, Chlorophyl VS Cotton County Retail Limited - 2023 Supreme(P&H) 2638) for education. Not legal advice. Laws evolve; seek professional counsel for your case. Varies by jurisdiction and facts.
Stay informed, honour commitments—cheques remain powerful yet perilous instruments in commerce.
Search Results for "Does 'Stop Payment' on Cheque Mean Offence? (48 chars)"
1990 0 Supreme(SC) 567 • India - Supreme Court
J.S.VERMA, R.M.SAHAI
bunch of matters - Held, Non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions ... is unnecessary for us to go into that question also since order, we are making, governs the case of all Government counsel in the ... of renewal of tenure, claimed by the petitioner, can also be gone Into - Appeals and writ petitions are allowed. ... It is in consonance with our commitment to openness which implies scrut....
1986 0 Supreme(SC) 115 • India - Supreme Court
D.P.MADAN, A.P.SEN
section, it does not follow that it thereby ceases to be an instrumentality or agency of the State. ... if there is an instrumentality or agency of the State which has assumed the garb of a Government Company as defined under this ... There can thus be no doubt that the corporation is “the State” within the meaning of Article 12 of the Constitution, as held in the ... what executive function means and implies. ... It#HL_EN....
2014 8 Supreme 225 • India - Supreme Court
RANJAN GOGOI, ROHINTON FALI NARIMAN
for any other items or damages – Arbitrator correctly construing and applying this clause to claims 2, 3 and 4 and not applying it ... It was ultimately completed only in 34 months, the contractor completing 166 Middle Income Group houses and 36 Lower Income Group ... flouted the audi alteram partem principle, a fundamental juristic principle, as contained in Sections 18 and 34 (2)(a)(iii) and which is ... Its juxtaposition with an equally illusive concept, public policy, indicates that it is#....
1996 8 Supreme 581 • India - Supreme Court
KULDIP SINGH, A.S.ANAND
It is aggravated by the fact that it is committed by person who are supposed to be the protectors of the citizens. ... Does a citizen shed off his fundamental right to life, the moment a policeman arrests him? ... (Para 18) ... How do we check the abuse of police power? ... that there is no way to heal it. ... of the State is the supreme law) co-exist and are no....
1994 0 Supreme(SC) 306 • India - Supreme Court
K.JAYACHANDRA REDDY, S.R.PANDIAN
If there is total noncompliance of this provision the same affects the prosecution case. To that extent it is mandatory. ... If there is non-compliance or if there are lapses like delay etc. then the same has to be examined to see whether any prejudice has ... But if there is delay whether it was undue or whether the same has been explained or not, will be a question of fact in each case ... From ....
2007 0 Supreme(Bom) 1273 • India - Bombay
N.A.BRITTO
favour of complainant for a sum of Rs. 1,50,000/-- Dishonour of cheque-With endorsement cheque returned ’cheque stop’-Notice by ... in question not issued on an account maintained by the said company-Notice to be given to drawer of cheque-Within 30 days of receipt ... have been issued against the accused only because he had signed on behalf of the said company as its authorised signatory. ... in the#HL_EN....
• India - Current Civil Cases
OM PRAKASH VII
Act by holder to cheque—Summoning order was passed on the basis of sufficient material available on record—There is no illegality ... order—There was sufficient amount in account maintained by drawer on date of presentation of cheque—Stop payment instruction was ... Negotiable Instruments Act, 1881—Section 138—Criminal Procedure Code, 1973—Section 482—Dishonour of cheque—Stop payment—Summoning ... admitted between the#HL_E....
• India - Dishonour Of Cheque
OM PRAKASH VII
Act by holder to cheque—Summoning order was passed on the basis of sufficient material available on record—There is no illegality ... payment—Summoning order—There was sufficient amount in account maintained by drawer on date of presentation of cheque—Stop payment ... lies on accused which can be discharged by him during trial—Once cheque is issued by drawer, presumption under Section 139 of the ... admitted betwee....
2013 0 Supreme(P&H) 401 • India - Punjab and Haryana
Mehinder Singh Sullar
(B) Negotiable Instruments Act, 1881, Ss.138 & 142--Dishonour of Cheque ... of the cheque unpaid by the drawee bank; (iv) giving of notice in writing to the drawer of the cheque demanding payment of the cheque ... Coming to the facts of this case, the petitioners issued the cheque in question drawn on Jammu and Kashmir Bank Limited, Srinagar ......
2004 0 Supreme(Mad) 1337 • India - Madras
S.SARDAR ZACKRIA HUSSAIN
408, (1998)3 Supreme Court Cases 249 - The court discussed the dishonor of the cheque, stop payment instructions, and the presumption ... Issues: The issues revolved around the dishonor of the cheque, stop payment instructions, and the disputed liability in respect ... It emphasized that the burden of proof lies on#....
2024 0 Supreme(Ker) 1041 • India - Kerala
SOPHY THOMAS
It, however, does not mean that the cheque is always to be presented to the drawer's bank on which the cheque is issued. ... (b) Does such bank mean the bank of the drawer of the cheque or covers within its ambit any bank including the collecting bank of the payee of the cheque? ... No records were called for by the 1st respondent/accused from the drawee bank to show that even prior to the date of Ext.P1 cheque, he had issued stop payment to that ba....
2022 0 Supreme(All) 1686 • India - Allahabad
RAJEEV MISRA
In view of above, the disputed cheques were not encashed on account of above i.e. the request for stop payment made by drawer. Accordingly, Return Memo dated 31.05.2021 was issued by the concerned Bank with the remark that cheque not encashed on account of stop payment. ... It is however established from the record that applicant-1 had signed the disputed cheque and had also requested for stop payment. Applicant-3 sent an e-mail to the complaint regarding stop payment 48. ... the drawe....
2022 0 Supreme(Chh) 560 • India - Chhattisgarh
RAKESH MOHAN PANDEY
In the present case, the cheque was dishonoured on account of stop payment. There was allegation by respondent about forging of his signature on alleged cheque. ... There might be mismatch of the signature, but it is a case of stop payment, where after theft of a cheque, information was given to the police and bank was also instructed to stop the payment. ... Act there would be presumption in favour of the holder of the cheque, the bank informed the petitioner that th....
2025 Supreme(Online)(UK) 976043 • India - High Court Of Uttarakhand
It is specifically contended that the said cheque had been lost, and immediately thereafter the applicant submitted an application to his bank on 12.07.2016 requesting for stop payment of the lost cheque. ... 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. ... It is argued by the learned counsel for the applicant that the respondent no.2, in collusion with certain bank officials, misused the che....
2024 0 Supreme(Ker) 952 • India - Kerala
M. B. SNEHALATHA
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. ... The accused can establish that stop payment instructions were not issued due to insufficiency or paucity of funds. ... If the accused establishes that there were sufficient funds in his account to clear the amount of the cheque at the time of presentation of cheque for encashment at the drawer bank and that th....
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