SC ruling on cheque 'stop payment' case
Even though a cheque issued by a drawer (respondent-private limited concern) is dishonoured by reason of ``stop payment'' instruction, the complaint by the ``payee'' of the cheque for offence under Section 138 of the Negotiable Instruments Act (NI Act) is maintainable, the Supreme Court has reiterated.
``Even when the cheque is dishonoured by reason of `stop payment' instructions, by virtue of Section 139 of the Act, 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,'' a Bench said.
``Of course, this is a rebuttable presumption and the accused (the drawer) can thus show that the `stop payment' instructions were not issued because of insufficiency or paucity of funds,'' the Bench added.
``If the accused shows that there were sufficient funds in his account to clear the amount of the cheque at the time of its presentation for encashment and that the stop payment notice had been issued because of other valid causes, including that there was no existing debt or liability, then offence under Section 138 would not be made out,'' the Bench said citing an early apex court ruling in the `Modi cements case' (1998).
``The important thing is that the burden of so proving would be on the accused'' and ``thus a court cannot quash a complaint on this ground''. Delivering the judgment, Mr. Justice S.N. Variava set aside the verdict of the Madras High Court, which quashed the complaint from a Public Sector Undertaking and another (appellants-payee) under Section 138 of the NI Act against a private limited concern and another (respondent-drawer) for ``dishonour of two cheques by reason of `stop payment' instruction''.
The Bench, which included Mr. Justice K.T. Thomas, in disposing of the appeals, directed the Metropolitan Magistrate, Chennai, concerend to proceed with the complaint against the respondents concerned in accordance with the law.
The Bench made it clear that the ``setting aside of the impugned order will not tantamount to preventing the respondents from taking, at the trial, pleas available to them including those taken herein''.
Pursuant to the Memorandum of Understanding between the appellant - undertaking and the respondent - concerned, two cheques - one dated October 31, 1994 for a sum of Rs. 20,26,995 and another dated November 10, 1994 for a sum of Rs. 22,10,156 were issued by the respondent in favour of the appellant. Both the cheques, when presented for payment, were returned with the endorsement ``payment stopped by drawer''. As the amounts under the cheques were not paid, the appellants lodged two complaints through the manager of the regional office of the appellant.