Stop payment of Cheque by drawer and applicability of Section 138 of Negotiable Instruments Act 1881

After issuing a cheque to party, the payment may be stopped due to many reasons like misplace of cheque, issue of alternate cheque, discharge of liability by paying in other modes etc. One of the most important point is sometimes the drawer of a cheque may stop payment due to supply of inferior goods or poor service which violates the agreements or terms agreed by the other party. In such cases aggrieved party is the customer, Eventhough the other party have the option to pressurize the drawer of the cheque to make payment. But in many cases stop payment is being used to escape from liability of payment and to avoid proceedings under section 138 of Negotiable Instruments Act 1881.

Treatment for in case of stop payment of cheque is not clearly defined in the Negotiable Instruments Act. But to file a case under Negotiable Instruments Act, the following conditions should be satisfied.

1. The cheque is drawn on a bank for the discharge of a legally enforceable debt or other liability.

2. The cheque has returned by the bank unpaid.

3. The cheque is returned unpaid because the amount available in that account is insufficient for making the payment of the cheques.

4. The payee gives a notice to the drawer claiming the amount within 15 days of the receipt of the information by the Bank and

5. The drawer fails to make payment within 15 days of the receipt of notice.
Form the above mentioned conditions point No. 3 clearly indicates that if the amount is available in the bank account and stop payment is made due to some other reasons, the case may not be registered under section 138 of the Negotiable Instruments Act.

But point No. 5 remain constant and if the drawer fails to make payment within 15 days of receipt of notice the case will come under section 138 of Negotiable instruments Act 1881.

According to a Supreme Court version even if the cheque is bounced because of stop payment, if the bank account is having sufficient balance to meet the cheque amount, and if the person who gives stop payment is having valid and sufficient reasons for giving such instructions, the accused can be acquitted. This means that the drawer have to establish during trial that there is no legally enforceable liability for the cheque taken by them and because of that reason only you have stopped the cheque from payment.

In nutshell whatever may be the reason or ground for dishonor of a cheque by bank whether it may be payment stopped by drawer or any other reason, offence under this section is made out and the drawee has the full right to initiate proceedings. The court may also examine whether the payment has been made by the drawer within 15 days of notice issued by the drawee after dishonor of the cheque.