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ashok kumar (Social Worker)     31 December 2012

Stop payment by the drawer-section 138


The drawer of the Cheque sends a notice to the holder in due course that he has made stop payment of the Cheque. The holder in due course replies to the notice saying that it is the liability of the drawer to fulfill his obligation and sends the Cheque for collection to the drawers Bank.

The Cheque bounces with the remark “Payment stopped by the drawer”. It is for sure that Seciton 138 of the NIA is applicable.

Can anyone cite some case laws of SC dealing with the STOP PAYMENT matters?


Ashok Kumar


 12 Replies

AEJAZ AHMED (Legal Consultant/Lawyer)     31 December 2012


In the matter of  Hemant Chemicals vs Ackme Industrial Park, the Bombay High Court's Aurangabad bench has ruled that even stop payment of cheque could be punishable under Section 138 of the Negotiable Instruments Act, 1881.

"If due to stopping of payment a cheque is dishonoured, that case is also covered under Section 138 of the Negotiable Instruments Act, if other requirements of that Section are complied with. This is settled position of law," Justice TV Nalawade observed while citing a Supreme Court verdict.

Go through the attached files and, in addition that see the below file on give websites:

Goa Plast (P) Ltd vs Chico Ursula D'Souza)

Goa Plast (P) Ltd vs Chico Ursula D'Souza

( M/s Modi Cements Ltd. Versus Shri Kuchil Kumar Nandi)

Attached File : 167760617 hemant chemicals vs all r o 508, ackme industrial park on 3 october, 2012.pdf, 167760617 goa plast (p) ltd vs chico ursula d, 167760617 goaplast pvt. ltd vs shri chico ursula d downloaded: 879 times

A . K . SETH (ADVOCATE--LEGAL ADVISOR)     31 December 2012

M/s Laxmi Dyechem Vs. State of Gujrat & Ors. (decided onNovember 27, 2012); 2 M/s Modi Cements Ltd. Vs. Shri Kuchil Kumar Nandi— AIR 1998 SC 1057 ; 3. K. I. George Vs. Muhammed Master-1999 (97) Comp Cas 664; 4.Hiten P. Dalal Vs. Bratindranath Banerjee ---July 11, 2011 ; 5. K. N. Beena Vs. Muniyappan & Anr.--SC—October 18, 2001; 6. M.S.Narayana Menon @ Mani Vs. State of Kerala & Anr.-- Supreme Court of India --- July 04, 2006 ; 7. Ram Krishan Urban Co-Op. Credit Vs. Rajendra Bahgchand--- Bombay High Court ---Decided on 03-02-2010 ; 8.Joseph Vilangadan Vs. Phenomenal Health Care Services Ltd. &Anr.-- Bombay High Court ---Decided on 20-07-2010 ; Feel Free to Contact on

YOGESHWAR. (ADVOCATE HIGH COURT-criminal /civil     01 January 2013

The recent 2012 SC citation covers all such possibilities and directed that cheque bounce due to any such reasons will attract NI 138 provisions.


However many litigants get misguided by such higher court citations since ultimately it will be evidence in the lower court and skill of  the defense advocate to decide the case.


If you can not prove legal liability  than none of higher court decisions will be  of any help.

ashok kumar (Social Worker)     01 January 2013

Thanks to all my fellow member friends for being so kind in terms of guidance!

Yogeshwarji, when u are saying about the 2012 decision, do you mean the M/s Laxmi Dyechem Vs. State of Gujrat & Ors. (decided onNovember 27, 2012) decision or any other decision?

Let me have teh citation if it is any other decision.

Yes I understand it goes without saying that all other elements of teh crime must exist in order to have a case under Section 138 of NIA. I do understand that if there is no legal liability then STOP PAYEMNT would not be of any avail

VIPIN KUTUMBALE (NIL)     01 January 2013

Here I would like to know,  If sufficient balance is there at the time of Stop Payment,  and liability is disputed, then   section 138 attract ?

YOGESHWAR. (ADVOCATE HIGH COURT-criminal /civil     02 January 2013

Yes it will not but again here it will be expertise of defense advocate and not mere submission of higher court rulings. The advocate has to bring on record the non existance or illegality of liability than only the accused will be aquitted other wise not.


Following is the referece SC citation- 



31. A Division Bench of this Court ( Supreme court )  in Bharat Barrel & Drum

Mfg. Co. v. Amin Chand Payrelal albeit in a civil case laid down

the law in the following terms: (SCC pp. 50-51, para 12



12. Upon consideration of various judgments as

noted hereinabove, the position of law which emerges

is that once execution of the promissory note is

admitted, the presumption under Section 118(a)

would arise that it is supported by a consideration.

Such a presumption is rebuttable.


The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the  existence of consideration was improbable or doubtful

or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him

to the grant of relief on the basis of the negotiable instrument.


The burden upon the defendant of

proving the non-existence of the consideration can be

either direct or by bringing on record the

preponderance of probabilities by reference to the

circumstances upon which he relies.


 In such an event, the plaintiff is entitled under law to rely upon

all the evidence led in the case including that of the

plaintiff as well. In case, where the defendant fails to

discharge the initial onus of proof by showing the

non-existence of the consideration, the plaintiff would

invariably be held entitled to the benefit of

presumption arising under Section 118(a) in his



The court may not insist upon the defendant

to disprove the existence of consideration by leading

direct evidence as the existence of negative evidence

is neither possible nor contemplated and even if led,

is to be seen with a doubt.”


This Court, therefore, clearly opined that it is not necessary for

the defendant to disprove the existence of consideration by way

of direct evidence.

ashok kumar (Social Worker)     02 January 2013

Dear Vipinji

If sufficient balance is there at the time of Stop Payment,  it wont matter!

The spirit & soul of this law is such that what the courts see is whether the payment was made after the NOTICE 

However if the liabiity is disputed, then issues would arise!

But you must give a clear details of what do you mean by tthe phrase "and liability is disputed"

What is the kind of dispute?

Has the payee admitted to the dispute? Or it is just the drawer who has said that he disputes teh liability?


U must give brief details of teh matter here!

VIPIN KUTUMBALE (NIL)     03 January 2013

for Example , Drawer,  had issued cheques  towards future transaction and i e he will use the services in future ( towards advance )  and he dont want to avail the services that are to be provided by the  drawee ,  drawer has no trust  in quality of services that would the drawee would provide .

R Trivedi (     03 January 2013

Mr. Ashok Kumar, please clearly tell  What is the issue.


As far as initiating the case  under S.138 is concerned then Stop Payment is no defense. All other issues like why stop payment, balance in account, disputed liability etc will come at the trial stage.

Aditya (administrator)     13 September 2013

if i informed the party about stopped payment requestin not to present the cheque, inspite the party present the same. in that case it attract 138 of NI Act.

Please suggest.

ashok kumar (Social Worker)     15 September 2013

Adityaji Section 138 is applicable

Geetha (Superintendent)     01 February 2014

Received legal notice under section 138 of negotiable instrument act by an advocate for stop payment of cheque. The cause was arised due to one of my cousin filed os for partition and separate possession of properties. The matter was settled outside of the court and i agreed to pay  a sum of Rs 2 lakhs and endosed my signature in 2 Rs bond paper and pay a sum of Rs.20000/- for the advocate (cousin adovate) in behalf of my cousin for withdrawal of the suit filed and issued a cheque for Rs. 2 lakhs.  Further after a few days i prepared an agreement mentioning the above and asked my cousin to sign the paper stating that they have received the amount and further no appealed will be filed by him or his heirs, the same was refused by my cousin, hence stopped payment of the cheque.

Now a leal notice been issued under section 138 mentioning the above facts and circumstances, and stated  to reply within 15 days.  Please kindly advise me, whether asking for an agreement for receipt of payment is legal or not? Help me


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