No. A stop-payment instruction does not, by itself, end liability under Section 138. A case may still arise if an enforceable debt and the other legal requirements are present.
In cases involving a lost or stolen cheque, misuse, or a disputed transaction, instructing the bank to stop payment may be useful, but keep a record of the actual reason and when the instruction was given. Stopping payment and the absence of the underlying debt are two different things. Ignoring a notice may prevent you from raising an important defence in time.
What should you do now?
- Give the bank the correct reason for the stop-payment instruction in writing and obtain an acknowledgement.
- Collect documents relating to the underlying transaction, repayments, and the dispute.
- Provide an appropriate response to the notice or summons and respond to the court proceedings.
Which documents should you keep?
The stop-payment request, bank records, agreement, proof of payment, and notice.
Do not make this mistake
Making a false report that a cheque was lost to avoid repaying a loan may create a separate legal risk.
A hypothetical example
The drawer issued a cheque for a genuine debt and then stopped payment. The fact that the stop-payment instruction was recorded by the bank does not make the underlying liability disappear. In a different situation, if the debt had already been repaid, proof of repayment may provide a separate defence.
Does a bank stop-payment instruction mean you have won the case?
No. A bank stopping payment and a court determining liability are separate processes.
Legal basis and useful sources
- Negotiable Instruments Act, 1881 — Sections 118, 138–142, 147
- Supreme Court — stop-payment instruction and Sections 138–139 of the NI Act
This is general legal information. Advice may differ depending on your facts, the applicable law, and state rules.