• Stop payment of cheque

Hi, My land in haryana was acquired in june 2016 and i was waiting for the compensation. After so many efforts i was not able to receive my compensation.

 I met with a person through a common friend who promised me that he can get the payment released in 10 days as he had very good contacts with the land acquisition officer. He said that he will charge 20 lakhs for that and payment will be released in 10 days.

 So as a security i issued him a cheque of 20 lakhs with no date mentioned. Apart from the cheque We did not do any paperwork or we didn't sign any document. It was only the cheque that i issued.

 After 20 days(15 th September 2016) also he was not able to get my payment so i stopped the payment on 15th September 2016 by requesting my bank to stop payment. Now today 4th November that person is threatening me that he will put my cheque in the bank and will file a case if payment is stopped earlier.

What is my legal liability in this case as there is no legally executed document between us and cheque was stopped for payment as i didn't receive the services promised by him verbally. Also the cheque is not bounced due to insufficient payment but it is payment stopped by drawer.

What preventive measures can i take to safeguard myself??
Asked 7 years ago in Property Law
Religion: Hindu

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4 Answers

1) send an email to drawee that cheque of Rs 20 lakhs was issued on account of his promise that he would get payment released from land acquisition officer within 10 days time .

2) however since promised compensation has not been released no money is due and payable by you .

3) request drawee to retrun the cheque .

4) in your email or letter rely upon various chat messages or mails exchanged with him in this regard

5) under section 118 of NI act there is presumption thaT cheque was drawn for consideration

6) The presumption can be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. in your case you have to prove that there is no debt due and payable

7) Supreme Court in Goa Plast (Pvt.) Ltd. v. Chico Ursula D'Souza, (2003) 3 SCC 232, wherein it was held:

"Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66 of 1988 with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions. These provisions were intended to discourage people from not honouring their commitments by way of payment through cheques. The court should lean in favour of an interpretation which serves the object of the statute. A post-dated cheque will lose its credibility and acceptability if its payment can be stopped routinely.

Ajay Sethi
Advocate, Mumbai
94689 Answers
7526 Consultations

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observations in M.M.T.C. Ltd. and Anr. v. Medchl Chemicals & Pharma (P) Ltd., (2002) 1 SCC 234 (Para. 19):

"... The authority shows that even when the cheque is dishonoured by reason of stop payment instruction, 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 was 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. ..."

Ajay Sethi
Advocate, Mumbai
94689 Answers
7526 Consultations

5.0 on 5.0

A cheque honoured due to stop payment instructions issued by the drawer has the same legal consequences as would flow if the cheque in question were dishonoured due to insufficiency of the funds in the account of the drawer. There is a presumption that the cheque in question was issued for discharge of a legal liability, which you will have to rebut in the court. If and when he files the case you will have to prove your innocence.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

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1. You have taken a very careless step in issuing the said cheque without collecting any document from him assuring you the said service.

2. However, he won't be able to initiate action u/s138 of N.I. Act since for taking action against you under the said Act, he has to prove your dischargeable liability which he won't be able to prove now.

3. To be in the advantageous position, file a police complaint immediately before he acts, alleging that he has tried to dupe/defraud and cheat you by taking a cheque for Rs. 20 lakhs as a broker/middleman promising release of your compensation which he has failed to do.

Krishna Kishore Ganguly
Advocate, Kolkata
27219 Answers
726 Consultations

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