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Mahesh (clerk)     16 January 2011

Cheque dishonored due to issuence of stop cheque order

I gave a cheque to the builder but later issued stop cheque order to my bank. The cheque has thus been dishonored by the bank stating the reason as stop cheque issued by me. I stopped cheque after finding out after inspection of the construction site that the builder has breached the contract. Now the builder has sent me a letter threatening legal action against the dishonoring of cheque and has warned me to release payment when he presents the cheque again on 15th Jan 2011. Please note that there were more than sufficient funds in the account and the cheque was dishonored due to the issuance of stop cheque order by me. The cheque was dated 24th dec 2010 and stopped on 27th dec 2010.

The builder says that this is a statutatory offence. Please advise as I don't want to pay him due his breach of contract.



Learning

 32 Replies

Mahesh (clerk)     16 January 2011

Please also note the cheque was not issued by me who is in contract witht the builder. The cheque was issued by my relative on my behalf from his bank account. Neither have I issued the cheque nor have I issued the stop cheque. This relative who has issued the cheque on my behalf has no contract whatsoever with the builder. No where in the cheque or the receipt recieved is mentioned my name.

N.K.Assumi (Advocate)     16 January 2011

This is very interesting and clever query.However, there is a ruling of the Apex Court that even if the cheque is dishonoured because of "stop payment' instrutions to the bank, Section 138 would be attarcted. 1996 (1) SUPREME-744-SC. I am also of the view that no one should issue cheque and agin instruct his banker to stop payment, otherwise the provisions would be menaingless.

Mahesh (clerk)     16 January 2011

Also note that the builder has not provided the goods and services promised by him in the contract. The possession of the flat was to be given in march 2010 but has since been delayed.

Mahesh (clerk)     16 January 2011

Thanks for your reply Mr Assumi. But should the builder not have refused to take payments from any other person other than me? Shouldn't he have refuced to accept the cheque.

Mahesh (clerk)     16 January 2011

Originally posted by :N.K.Assumi
"
 I am also of the view that no one should issue cheque and agin instruct his banker to stop payment, otherwise the provisions would be menaingless.
"

If that is true then what is the meaning of having the facility of stopping cheque. no bank should ever entertain requests to stop cheques.

N.K.Assumi (Advocate)     16 January 2011

Apex court has clinched that issue.

N.K.Assumi (Advocate)     16 January 2011

If he request you not to present the cheque after he issued the cheque, the matter would have been different, but issuing cheque and intsructing the banks not to honor the cheques is quiet different matters of law.

Mahesh (clerk)     16 January 2011

Sir would you then advise to allow the payment when the cheque is presented again?

N.K.Assumi (Advocate)     16 January 2011

The cheque has been dishonoured by the bank but you can present it more than once so present it to the bank again and thereafter issue notice and  take  action accordingly. All the best.

Mahesh (clerk)     16 January 2011

I request more opinions on this matter.

I would again re-iterate the fact that the person who issued the cheques had nothing to do with the builder. The person who issued the cheque had no obligations with the builder. The person who issued the cheque was in no contract with the builder. Then would he still be held liable by the law?

Mahesh (clerk)     16 January 2011

This is the summary of my case

1) My relative issued a cheque from his own account to a builder. I am customer of this builder.
2) The cheque was issued as part payment for my flat.
3) My relative issued stop cheque.
4) Builder is threatening to take legal action.
5) My relative has no debt/liability with the builder. It is me who has debt/liability with the
builder.

6)Builder has breached the contract that he has with me in the following way

a) No given possession of flat on the agreed date

b) constructed illegal building obstructing sunlight and air violating the approved construction plan.

Is me or my relative liable in any way?

N.K.Assumi (Advocate)     16 January 2011

Do you mean to say that you are only the beneficiary of the cheque and not the payee of the drawer? If so you are in a sad position. Just be clear of yourself who is the drawer/ drawee and the payee and where you figured in that instruments and things will be clear for you OK.

Mahesh (clerk)     16 January 2011

payee is builder

drawer is my relative

house/flat is in my name

stop cheque issued by my relative

the cheque in question is drawn from my relative's account

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     16 January 2011

for  MAHESH N :


1.  The question that would arise during "Trial", in Court, would be whether the cheque that was issued to the builder by the relative would consitute as "legally enforceable debt / liability".


2.  What would the relative say in the Court, during cross examination.  Would he say that he issued cheque to builder on your behalf or on his own behalf and FOR WHAT ?      (Gift, Donation, Charity etc.... or WHAT )

(NON-debt & NON-liability cheques are not within the prosecution perview of the N.I.Act )


3.  What would consitute "privity of contract" between the relative and the builder  AND what made the relative issue cheque to the builder.


4.  IF the relative admits that he issued the cheque to the builder on your behalf,  THEN what defence the relative would have for stopping payment of cheque,  irrespective of the fact that there may be sufficient balance in the relatives (drawers) account.


5.  Stopping payment for incomplete contract is no justification under the N.I.Act.  Violation of the Contract or Agreement is to be aggrieved under other Acts and sections.


Keep Smiling .... Hemant Agarwal 
 


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