Tuesday, September 22, 2009

Stopping a cheque payment illegal

Stopping a cheque payment illegal: HC

Mumbai: Asking your bank to stop payment on a cheque could cost you dearly. The Bombay High Court last week ruled that this could attract criminal action under the stringent provisions of the Negotiable Instruments Act (NIA), which are otherwise invoked mostly in instances where a cheque bounces due to insufficiency of funds.

Citing several Supreme Court orders, Justice SA Bobde said if stop payment orders on cheques were kept out of the purview of criminal law, it would “shake the confidence that a cheque is otherwise intended to inspire regarding payment being available on due date”. He also observed that if one was not allowed to take action against people who first issue a cheque and then give a stop payment order to the bank, it would “provide a handle” to those trying to avoid paying up.

The HC was hearing the case of Rukmini Shendge, whose plea was that the criminal proceedings against her in the trial court be stopped. Shendge had issued a cheque in March 2006 to the complainant Shriniwas Burudkar and then asked her bank to stop payment on it. She was subsequently booked under Section 138 of the NIA.

Shendge’s lawyer argued that the stringent provisions of NIA were attracted only in cases where a cheque was dishonoured by a bank due to insufficiency of funds. Burudkar’s grouse, he said, was not that the cheque had been dishonoured because of insufficiency of funds, but the fact that Shendge had issued a stop payment order.

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