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Section 138 also applicable to "Stop Payment" of cheques

The Hon'ble Supreme Court once again reiterated in PULSIVE TECHNOLOGIES P. LTD.  Vs STATE OF GUJARAT & ORS. that - "Even “stop payment” instructions issued to the bank are held to make a person liable for offence punishable under Section 138 of the NI Act in case cheque is dishonoured on that count.

The Hon'ble court was hearing an appeal against squashing of a criminal complaint.

The fact behind the matter is that the appeallant/complainant  is a private limited company. In the course of its business, the accused received bulk orders from Gujarat Informatics Limited (“GIL”), a Government of Gujarat Company for supply of desktop computers, printers, UPS and other products. The complainant being one of the approved vendors on the list of the GIL, the accused, placed various purchase orders with the complainant and the complainant sold and supplied the same as per the demand and specifications. During the course of business, the accused made part payments regularly. For the remaining outstanding legitimate dues of the complainant, the accused handed over a post-dated cheque bearing No.387176 dated 15/07/2006 for Rs.11,80,670/- drawn on HSBC Bank, Bangalore in favour of the complainant. 
The complainant presented the cheque twice for collection through its bankers viz. Bank of Baroda, Jetalpur Branch. It was returned unpaid on 3/10/2006 for the reason “Payment stopped by drawer”. The complainant on 13/10/2006 sent a demand notice to the accused asking them to pay the cheque amount  within a period of 15 days from the date of the receipt of the notice. The accused failed to pay the amount to the complainant. 

On 15/11/2006 the complainant filed a complaint being Criminal Complaint No.6076/06 in the Court of Chief Judicial Magistrate, Vadodara, Gujarat against the accused under Sections 138/142 of the NI Act. The Chief Judicial Magistrate, Vadodara, by order dated 15/11/2006 issued summons to all the accused. 

The accused filed applications before the High Court under Section 482 of the Code Criminal Procedure for quashing of the said complaint case. The High Court by the impugned order dated 8/9/2011 allowed the petition and quashed the said complaint. Being aggrieved by the said order the complainant has approached this Court. 

The Hon'ble court while setting aside the order of the High Court also cited an earlier judgment in Modi Cements v. Kuchil Kumar Nandi[(1998) 3 SCC 249] wherein this Court made it clear that even if a cheque is dishonoured because of “stop payment” instructions given to the bank, Section 138 of the NI Act would get attracted.

This Court further observed that once the cheque is issued by the drawer a presumption under Section 139 must follow and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under Section 138 of the NI Act by the drawee or the holder of the cheques in due course. 

Again in M.M.T.C. Ltd. and anr. v. Medchl Chemicals and Pharma (P) Ltd. and anr.[(2002) SCC 234] this Court reiterated the same view. What is more important is the fact that this Court declared that the complaint cannot be quashed on this ground. Relevant observations of this Court read as under: 
“… … …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.” 

We find that the High Court has relied on M.M.T.C. Ltd. and Modi Cements and yet drawn a wrong conclusion that inasmuch as cheque was dishonoured because of “stop payment” instructions, offence punishable under Section 138 of the NI Act is not made out. The High Court observed that “stop payment” instructions were given because the complainant had failed to discharge its obligations as per agreement by not repairing/replacing the damaged UPS system. Whether complainant had failed to discharge its obligations or not could not have been decided by the High Court conclusively at this stage.

The High Court was dealing with a petition filed under Section 482 of the Code for quashing the complaint. On factual issue, as to whether the complainant had discharged its obligations or not, the High Court could not have given its final verdict at this stage. It is matter of evidence. This is exactly what this Court said in M.M.T.C. Ltd. Though the High Court referred to M.M.T.C. Ltd., it failed to note the most vital caution sounded therein. 

The High Court also erred in quashing the complaint on the ground that the contents of the reply sent by the accused were not disclosed in the complaint. Whether any money is paid by the accused to thecomplainant is a matter of evidence. The accused has ample opportunity to probabilis his defence. On that 
count, in the facts of this case, complaint cannot be quashed. 

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