Stop Payment

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Querist : Anonymous

Querist : Anonymous (Querist)

17 June 2011 What are the consequences of Stop Payment???

Liability of Cheque Drawer in case it
stops Payment??

CA Ankit Gulgulia (Jain)

CA Ankit Gulgulia (Jain) (Expert)
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17 June 2011 Section 138 of Negotiable Instruments Act can be Invoked in either Case.

Querist : Anonymous

Querist : Anonymous (Querist)

17 June 2011 Please explain in detail,

Also what is the difference between Dishonour of Cheque & Stop Pymnt in legal sense>>>

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Sure! Let me explain **Stop Payment** vs **Dishonour of Cheque** and the legal consequences, especially under **Section 138 of the Negotiable Instruments Act, 1881**.

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### 1. **What is Stop Payment?**

* **Stop Payment** means the drawer of a cheque instructs the bank **not to honor** (not to pay) a cheque already issued.
* This can be done if the cheque is lost, stolen, or the drawer wants to cancel payment for some reason.
* The bank will **not clear the cheque** when presented.

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### 2. **What is Dishonour of Cheque?**

* **Dishonour of Cheque** means a cheque is **presented for payment** but **payment is refused** by the bank.
* Common reasons for dishonour:

* Insufficient funds in the drawer’s account.
* Signature mismatch.
* Account closed.
* Stop payment instructions by drawer.
* Post-dated cheque presented before date.

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### 3. **Legal Difference Between Stop Payment & Dishonour**

| Aspect | Stop Payment | Dishonour of Cheque |
| ------------- | ------------------------------------- | ------------------------------------------ |
| Who initiates | Drawer instructs bank to stop payment | Bank refuses payment when cheque presented |
| Reason | Intentional cancellation by drawer | Insufficient funds, account issues, etc. |
| Nature | Proactive instruction by drawer | Bank’s refusal based on account status |
| Result | Cheque not paid when presented | Cheque returned unpaid |

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### 4. **Liability of Cheque Drawer in case of Stop Payment**

* **Section 138 of Negotiable Instruments Act** applies to both **dishonour due to insufficient funds** and **dishonour due to stop payment**.
* Even if drawer instructs stop payment, it is treated as **cheque dishonour**.
* If cheque bounce notice is served and payment is not made within 15 days, drawer is **criminally liable**.
* Drawer can be prosecuted and penalized with **fine up to twice the cheque amount** or imprisonment up to 2 years or both.

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### 5. **Consequences of Stop Payment**

* Payee can issue **legal notice** demanding payment within 15 days.
* If payment is not made, payee can file complaint under **Section 138**.
* Legal proceedings can lead to:

* Criminal prosecution.
* Imprisonment.
* Monetary penalty.
* It also affects the drawer’s creditworthiness and reputation.

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### Summary

| Situation | Legal Consequence under Section 138 |
| ---------------------- | ----------------------------------------------------------------------- |
| Stop Payment by Drawer | Treated as cheque dishonour; criminal liability possible |
| Dishonour by Bank | Same as above, if due to insufficient funds or stop payment instruction |

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**So, stopping payment on a cheque is risky and treated like a bounced cheque legally.** Always communicate clearly with the payee to avoid disputes.

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If you want, I can help draft a **legal notice format** for cheque dishonour or explain more about **Section 138 procedure**. Would you like that?

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