Yes, stop payment instructions in respect of cheque amounts to bouncing and the payer can initiate criminal action in terms of the provisions of Section 138 of the Negotiable Instruments Act, 1881 -
138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years’, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.
It is complete defence that the cheque was not drawn against any debt or liability. However, setting up or establishing such defence is beset with many a difficulty because of the provisions of Section 139 -
139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section138 for the discharge, in whole or in part, of any debt or other liability
The above provision makes it possible for an unscrupulous person to set in motion a criminal action once he has signed (may be undated or postdated) but blank cheque in his possession. The action involves no police investigation or report, but only a private complaint supported by an affidavit. Contrary to public notion or belief, it is not that difficult for a seasoned money lender or an unscrupulous person to set up a good story of the imaginary debt or liability on the part of the drawer of the cheque. And once the Court takes cognisance of the offence, the drawer becomes an accused. Rigours like taking out the bail, facing trial and examination u/S 313 CrPC are unavoidable; it is only thereafter that the accused-drawer of the cheque gets the opportunity to put forth his defence. And most defence lawyers would encourage the accused to appear as witness and depose in own defence, the step being a double-edged sword. The procedure in the Court would take a number of years and involve substantial expenditure.
In this context, it is imperative that the queriest take pre-emptive action in issuing stop-payment instructions and also inform the school accordingly, preferably through an Advocate. This action would constitute a proper ground for the querist to reply to the mandatory Notice as required under proviso to Section 138, leaving no cause of action for the School to resort to an action under NI Act Section 138.