Published on: December 13, 2023 at 15:33 IST
Court: Supreme Court of India
Citation: M.M.T.C. Ltd. V. Medchl Chemicals and Pharma (P) Ltd. (2002)
Honourable Supreme Court of India has held that Stop Payment Instruction attracts punishment under aegis of Section 138 of the Negotiable Instruments Act, 1881 if there is insufficiency of the funds. It is held that the burden of proving that there was no existing debt or liability was on the respondents at the stage of trial. It is held that the when a cheque is dishonoured by reason of “Stop-Payment” instruction, the Trial 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.
19. Just such a contention has been negatived by this Court in the case of Modi Cements Ltd. v. Kuchil Kumar Nandi. It has been held that even though the cheque is dishonoured by reason of “stop-payment” instruction an offence under Section 138 could still be made out. It is held that the presumption under Section 139 is attracted in such a case also. The authority shows that 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.
Drafted By Abhijit Mishra