Cheques have been the most commonly used tool for repayment of loan, payments towards salaries, payments towards bills, payments towards purchasing and similar transactions. However, we have witnessed a rapid growth in the instances of cheques issued for repayment of legal debt being dishonoured upon presentation. The Negotiable Instruments Act, 1881(hereinafter “the Act”) is the sole enacted statute to redress the aggrieved drawees of such dishonoured cheques. The laws relating to dishonour of cheque has been laid down from Section 138 to 142 of the Act as amended from time to time.

What is meant by Cheque Dishonoured/Cheque Returned/ Cheque Bounced?


When the cheque is presented to the bank, and the bank refuses to pay (honour) the amount mentioned in the cheque, to the payee, for either of the two reasons, i.e. “insufficient funds” or “exceeded the arrangement” the cheque is said to be “dishonoured”. However, there are certain essential ingredients that needs to be present for holding the drawer of the cheque liable for committing the offence of dishonour of cheque.

Contingencies for Dishonour of Cheque- “insufficient funds” or “exceeded the arrangement

Essential ingredients of Dishonour- when the offence of dishonour of cheque is committed?

  • The cheque – issued for the discharge of a debt or any other kind of legal liability in whole or part;
  • The cheque – dishonoured for the reasons of “insufficiency of funds” or “exceeded the arrangement”;
  • The cheque – must be presented within a period of three months from the date the cheque becomes payable in case of post-dated cheque or within 30 days from the date of its issuance.
  • The payee or holder to issue a notice in writing to the drawer within a period of 30 days of the receipt of the return memo from the bank;
  • Such notice should specifically make the allegations of dishonouring of cheque for the reason of insufficiency of funds and the notice should also specify that the notice so issued is by virtue of Section 138 of the Negotiable Instruments Act, 1881;
  • The notice should contain the date, the number of the cheque, the name of the banker upon whom the cheque is drawn, the amount for which the cheque is drawn and the date of issue of the cheque in case of post-dated cheque and anti-dated cheque
  • The notice should also mention the consequences the accused may be held liable to face and the notice should specifically mention the amount so demanded in the cheque;
  • After receiving such a notice from the holder of the prescribed course of time, the drawer has failed to pay the cheque within a period of 15 days of receiving the said notice.


Will a Mismatch of Signature of the drawer of the cheque be a good ground for initiating proceedings under section 138 of the Act for dishonour of Cheque?

The answer is YES.

In addition to the aforesaid two reasons/contingencies for dishonour of cheque, a cheque is also said to be dishonoured when the signatures of the drawer differs from the specimen signature available on records of the drawee bank. In such circumstances a case of dishonour of cheque may be made against the drawer subject to the presence of other necessary conditions(discussed above).

The division bench of the Supreme Court comprising of Justice T.S. Thakur and Justice Gyan Sudha Misra recently held in Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375 : 2013 Cri LJ 3288,( that a cheque is deemed to be dishonoured if the signatures on the cheque drawn by the drawer, and the specimen signature available with the bank differs, subject to the presence of other essential ingredients as envisaged in Section 138 of the Act.

Facts of the Case

One of the respondents in the case issued several cheques signed by its authorised signatory in favour of Laxmi Dyechem. Several of these cheques (117 to be precise) were dishonoured by the bank on the ground that the signatures on the cheques were incomplete or that the signatures of the drawer did not match the specimen signatures available with the bank. The cheques remained unpaid despite notice being served upon the respondents under Section 138 of the Act. The trial court took cognizance of the matter and one of the signatories of the cheque filed a Special Criminal Application before the Gujarat High Court.

The High Court in its judgment gave a narrow and strict interpretation to Section 138 of the Act and held that dishonour of cheque on grounds of mismatch of signatures will not attract ingredients of Section 138 of the Act and insufficient fund as a ground for dishonour of cheque.

Key Concern before the Supreme Court:

The Key Concern before the Court was whether dishonour of a cheque would constitute an offence only in one of the two conditions mentioned under Section 138 of the Act and not in case where signatures on the cheque mismatch the specimen signatures available with the bank.

Judgment of the Court:

The Supreme Court relying on its own judgment in NEPC Micon Ltd. v. Magma Leasing Ltd. (AIR 1999 SC 1952) held that “the expression “amount of money…….is insufficient” as appearing in Section 138 of the Act is a “genus” and dishonour of cheque on grounds such as “account closed”, “payment stopped”, “referred to the drawer” inevitably result into dishonour of cheques issued by the drawer and thus such grouds are different “species” of that genus.” The Supreme Court gave similar interpretation to dishonour of cheques due to mismatch of signature or due to “image is not found” and held that these grounds are also different specie of the aforementioned genus.

The Supreme Court further held that “there may be a situation where the drawer of the cheque changed his signature with a fraudulent intention that such change in signature would result in dishonour of cheque. In such situation mismatch of signature of drawer on cheque with the specimen signatures would constitute dishonour within the meaning of Section 138 of the Act subject to the condition that the drawer fails to make payment within the stipulated time despite receiving statutory notice under Section 138 of Act.”


In my opinion, it would be safe to conclude that even if Drawer’s Signature on the cheque differs from the sample signature with the bank, it would be covered under the offence contemplated under section 138 of the Act, provided the other ingredients of offence are present and such offence of dishonour of cheque is punishable under the penal provisions of the Negotiable Instruments Act.


Shruti Verma Biswas

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