Stop-payment instructions and premature complaint bar Section 138 prosecution where cheque was already incapable of encashment.

Prior stop-payment instructions, coupled with a cheque already reported lost and rendered incapable of encashment, may prevent the essential ingredients of Section 138 of the Negotiable Instruments Act from being made out; in that situation, dishonour on a later presentation does not sustain prosecution and the statutory presumption under Section 139 cannot override the factual basis showing the cheque was disabled. A complaint is also premature if filed before expiry of the statutory period after demand notice, particularly where actual service of notice is not proved by acknowledgment or equivalent material. On those facts, cognizance cannot be sustained and continuation of proceedings is legally unsustainable.

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Issues: (i) Whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 could continue when stop-payment instructions had been issued before the alleged issuance and presentation of the cheque. (ii) Whether the complaint was premature for want of proof of service of statutory notice and accrual of cause of action.

Issue (i): Whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 could continue when stop-payment instructions had been issued before the alleged issuance and presentation of the cheque.

Analysis: The cheque stood reported lost, and stop-payment instructions had been given to the bank much before the alleged date of issuance. The bank record confirmed that the instructions were acted upon and the cheque was rendered incapable of encashment. In that situation, the later presentation of the cheque and its dishonour on the ground of insufficient funds did not satisfy the essential ingredients of Section 138. The presumption under Section 139 could not override the admitted factual foundation showing that the cheque was already disabled for encashment.

Conclusion: The prosecution under Section 138 was not maintainable on these facts and continuation of the proceedings was unwarranted.

Issue (ii): Whether the complaint was premature for want of proof of service of statutory notice and accrual of cause of action.

Analysis: The record did not disclose proof of actual service of the statutory demand notice by acknowledgment or equivalent material. The complaint had been filed before expiry of the statutory period for payment after notice, so no cause of action had accrued on the date of institution. A complaint filed before the expiry of the statutory period is premature and the court cannot take cognizance of it.

Conclusion: The complaint was premature and legally unsustainable.

Final Conclusion: The complaint and consequential proceedings were held to be an abuse of process and were quashed.

Ratio Decidendi: Where a cheque has been rendered incapable of encashment by prior stop-payment instructions and the complaint under Section 138 is instituted before the statutory notice period has expired, no offence is made out and cognizance cannot be sustained.

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