Dishonour of Cheques on the Ground “Drawer’s Signature Differ”: Contemporary Indian Jurisprudence under Section 138 of the Negotiable Instruments Act, 1881

Dishonour of Cheques on the Ground “Drawer’s Signature Differ”: Contemporary Indian Jurisprudence under Section 138 of the Negotiable Instruments Act, 1881

1. Introduction

The exponential growth of cheque-based transactions in India has correspondingly escalated litigation under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”). While parliamentary intent clearly criminalises dishonour “for insufficiency of funds etc.,”[1] Indian courts have long grappled with whether endorsements such as “drawer’s signature differ” fall within the statutory net. This article critically traces the jurisprudential journey from early restrictive readings to the Supreme Court’s purposive expansion in Laxmi Dyechem v. State of Gujarat[2], evaluates allied questions of proof and limitation, and identifies the residual doctrinal controversies.

2. Statutory Framework

2.1 Section 138: Ingredients

Criminal liability is attracted when: (a) a cheque is drawn by a drawer on an account maintained by him; (b) it is returned unpaid “for insufficiency of funds or any other reason”[1]; (c) statutory notice is issued within fifteen days; and (d) payment is not made within fifteen days of receipt.

2.2 Definitions and Presumptions

  • Drawer – “the maker of a bill of exchange or cheque” (s. 7). Corporate draw­ers act through authorised signatories, yet the NI Act maintains a conceptual distinction between the juristic person (drawer) and the natural person (signatory).[14]
  • Presumption of liability – s. 139 presumes the cheque is issued towards a legally enforceable debt, reversing the evidential burden (subject to rebuttal on a “preponderance of probability”[9]).

3. Evolution of Judicial Approaches

3.1 Restrictive Phase: Vinod Tanna and High Court Divergence

In Vinod Tanna v. Zaher Siddiqui[3] the Supreme Court quashed proceedings where the cheque bore “incomplete/illegible” signatures, observing that the Modi Cements ratio on “stop payment” instructions could not be transposed. Several High Courts, notably Gujarat in Tytan Organics[12], followed suit, ruling that a mismatch of signatures lay outside s. 138 because the defect was not fund-related.

3.2 Purposive Re-alignment: NEPC Micon

NEPC Micon Ltd. v. Magma Leasing Ltd.[4] expressly applied s. 138 where the account was “closed,” reading “account closed” as a species of fund insufficiency. The Court emphasised purposive construction, warning against interpretations that “defeat the efficacy of cheques.” Though not a signature-mismatch case, NEPC Micon laid the interpretive groundwork for widening the expression “etc.”.

3.3 Authoritative Clarification: Laxmi Dyechem

Rejecting the Gujarat High Court’s reliance on Vinod Tanna, a three-judge bench in Laxmi Dyechem[2] held that dishonour owing to signature discrepancy is prima facie within s. 138. Key holdings:

  • “Insufficiency of funds or any other reason” is broad enough to cover deliberate acts that prevent realisation, including signature mismatch.
  • The mischief rule (Heydon’s Case) mandates interpretation advancing statutory remedy; narrow readings embolden dishonest drawers.
  • Liability remains rebuttable under s. 139; the accused may adduce expert evidence to disprove authorship (see P. Ponnusamy[16]).

3.4 Subsequent Affirmations

  • Santosh Kumar Gupta v. State[11] (Delhi HC) and Rajkumar Shukla v. Subodh Agrahari[10] (MP HC) adopted Laxmi Dyechem, stressing that signature variation is often intentional to evade payment.
  • Karnataka High Court in M. Nagaraj v. A. Anjini[13] observed that “drawer’s signature differ” per se triggers s. 138, shifting a “heavy burden” on the accused to establish forgery.
  • P&H High Court in Kuldeep Singh v. Jasvir Singh[21] echoed that unless the accused shows availability of funds, the plea of forgery is untenable.

4. Key Doctrinal Issues

4.1 Who is the “Drawer” when Signatures Differ?

The 2024 Supreme Court decision in Gurudatta Sugars Marketing (P) Ltd. v. Prithviraj Deshmukh[14] (interpreting s. 143A) reaffirmed that “drawer” denotes the legal person liable on the account, not the authorised signatory. Hence, in signature-mismatch cases liability subsists against the corporate drawer; the signatory’s personal culpability is determined under s. 141 only if he “was in charge of and responsible for” conduct of business at the time of the offence.

4.2 Evidentiary Nuances

  • Expert Opinion: Courts may permit handwriting comparison, but late-stage motions seen as dilatory are routinely refused (P. Ponnusamy[16]; Satinder Goyal[18]).
  • Presumption under s. 20 of the Indian Evidence Act: Bank memos stating “signature differ” are admissible; yet the underlying account mandate and specimen signatures become central exhibits.
  • Rebuttal Standard: Following Rangappa v. Sri Mohan[9], the drawer must raise probable defence — e.g., prove loss/theft of blank cheque, lodge police complaint, or establish non-existence of debt.

4.3 Limitation and Notice

Even where the return memo cites multiple reasons (“funds insufficient” and “signature differ”), a composite notice suffices. The limitation clock runs from the date of receipt of notice, as clarified in Dalmia Cement v. Galaxy Traders[6]. Complainants should annex both return endorsements to obviate technical objections.

4.4 Account Ownership Controversy

Where the drawer disputes ownership of the account (Satinder Goyal[18]), complainants must adduce certified copies of bank statements and KYC records. The Supreme Court in Jugesh Sehgal v. Shamsher Singh[15] held that absence of an account in the accused’s name is fatal; signature mismatch alone cannot fictionally substitute this foundational requirement.

5. Policy Considerations

The liberal construction adopted in Laxmi Dyechem aligns with legislative amendments (1996, 2002, 2018) that progressively fortified s. 138 by introducing summary trials, interim compensation (s. 143A), and deposit mandates during appeal (s. 148). An unduly formalistic insistence on “insufficiency of funds” would undermine these reforms and dilute commercial certainty.

6. Conclusion

The settled position post-Laxmi Dyechem is that dishonour with the endorsement “drawer’s signature differ” falls within the sweep of Section 138, provided all other statutory conditions are met. The drawer may still exculpate himself by rebutting the presumption under s. 139 and demonstrating either (i) forgery coupled with absence of consideration, or (ii) non-maintainability due to lack of account relationship. Future litigation is likely to concentrate on evidential thresholds and the interface between corporate liability and individual culpability rather than on the substantive applicability of Section 138 to signature mismatches.

Footnotes

  1. Negotiable Instruments Act, 1881, s. 138(1).
  2. Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.
  3. Vinod Tanna v. Zaher Siddiqui, (2002) 7 SCC 541.
  4. NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253.
  5. K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510.
  6. Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd., (2001) 6 SCC 463.
  7. Modi Cements Ltd. v. Kuchil Kumar Nandi, (1998) 3 SCC 249.
  8. Goaplast (P) Ltd. v. Chico Ursula D’Souza, (2003) 3 SCC 232.
  9. Rangappa v. Sri Mohan, (2010) 11 SCC 441.
  10. Rajkumar Shukla v. Subodh Agrahari, 2009 SCC OnLine MP 372.
  11. Santosh Kumar Gupta v. State & Anr., 2011 SCC OnLine Del 3336.
  12. Tytan Organics Pvt. Ltd. v. State of Gujarat, 2010 SCC OnLine Guj 2402.
  13. M. Nagaraj v. A. Anjini, 2023 SCC OnLine Kar 5307.
  14. Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Deshmukh, (2024) SCC OnLine SC ###.
  15. Jugesh Sehgal v. Shamsher Singh Gogi, (2009) 14 SCC 683.
  16. P. Ponnusamy v. N. Subramanian, 2018 SCC OnLine Mad 375.
  17. T.N. Devi v. A.C. Haridas, 2004 SCC OnLine Ker 612.
  18. Satinder Goyal v. URS Cooperative NTC Society, 2024 SCC OnLine HP ###.
  19. K. Raghavendra Rao v. State of Maharashtra, 2023 SCC OnLine Bom ###.
  20. Reserve Bank of India, Cheque Truncation System Operational Guidelines, 2019 (clause on signature verification).