Effect of - S. 138 Negotiable Instruments Act - “stop payment” instructions issued to the bank

Pulsive Technologies P. Ltd. vs State of Gujarat & Ors.

http://judis.nic.in/supremecourt/imgst.aspx?filename=41838

Even “stop  payment”  instructions  issued to the bank are held to make a person liable for  offence  punishable  under Section 138 of the NI Act in case  cheque is dishonoured on that count.   In Modi Cements  v.   Kuchil Kumar Nandi[1] this Court made it clear that  even if a cheque is dishonoured because of “stop payment” instructions  given  to the bank, Section 138 of  the  NI  Act  would  get  attracted.   This  Court further observed that 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 or to the bank  for  stoppage  of  the  payment  it  will  not preclude an action under Section 138 of the NI Act  by  the  drawee  or  the holder of the cheques in due course.  

11.   Again in M.M.T.C. Ltd. and anr.   v.    Medchl  Chemicals  and  Pharma (P) Ltd. and anr.[2] this Court reiterated the  same  view.   What  is  more important is the fact that this Court declared that the complaint cannot  be quashed on this ground.  Relevant observations of this Court read as under:

“… … …Even  when  the  cheque  is  dishonoured  by  reason  of  stop-payment instructions by virtue of Section 139 the court  has  to  presume  that  the cheque was received by the holder for the discharge, in whole  or  in  part, of any debt or liability. Of course this is a  rebuttable  presumption.  The accused can thus show that the “stop-payment” instructions were  not  issued because of insufficiency or paucity of funds. If the accused shows  that  in his account there were sufficient funds to clear the amount  of  the  cheque at the time of presentation of the cheque for encashment at the drawer  bank and that the stop-payment notice had been  issued  because  of  other  valid causes including that there was no existing debt or liability  at  the  time of presentation of cheque for encashment, then  offence  under  Section  138 would not be made out. The important thing is that the burden of so  proving would be on the accused. Thus a court  cannot  quash  a  complaint  on  this ground.”