Incomplete or Mismatching Signatures on Cheques under Section 138 of the Negotiable Instruments Act, 1881

Incomplete or Mismatching Signatures on Cheques under Section 138 of the Negotiable Instruments Act, 1881

1. Introduction

Dishonour of cheques owing to the inscription “drawer’s signature incomplete/illegible/differs/required” on the bank return memo has long generated controversy in Indian banking and criminal law. At the heart of the debate lies the question whether such dishonour attracts penal liability under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter “N.I. Act”). The Supreme Court’s decision in Laxmi Dyechem v. State of Gujarat[1] settled the issue in favour of criminal liability, overruling earlier views such as Vinod Tanna v. Zaher Siddiqui[2]. Nevertheless, lower-court decisions show that residual uncertainty persists. This article critically examines the statutory text, judicial evolution, and theoretical underpinnings of liability where a cheque is returned on the ground of incomplete or mismatching signature of the drawer.

2. Statutory Framework

2.1 Section 138: Elements of the Offence

Section 138 criminalises failure to honour a cheque on presentation, subject to three cumulative conditions in the proviso: timely presentation, statutory notice within thirty days of dishonour, and failure to pay within fifteen days of receipt of notice. While the main clause refers to “amount of money … insufficient” or “exceeds the amount arranged”, judicial interpretation has treated the catalogue not as exhaustive but illustrative.[3]

2.2 Section 139: Presumption of Legally Enforceable Debt

Once issuance of the cheque and its dishonour are proved, Section 139 erects a rebuttable presumption that it was issued “for the discharge, in whole or in part, of any debt or other liability”. The burden then shifts to the accused to rebut the presumption on a preponderance of probabilities.[4]

2.3 Meaning of “Drawer” and “Signature”

The Act defines “drawer” as the maker of a cheque (s. 7). Case-law clarifies that a “signature” requires both the physical act of writing and an intention to authenticate the instrument.[5] Consequently, a cheque that bears no signature of the account-holder—but perhaps an initial, a forged mark, or an unauthorised scribble—poses doctrinal questions on whether the instrument is validly “drawn” at all, and if not, whether Section 138 can apply.

3. Doctrinal Evolution

3.1 Early Narrow Approach: Vinod Tanna (2002)

In Vinod Tanna, the Supreme Court quashed complaints where cheques were returned with the remark “signature incomplete”. The Court reasoned that Section 138 specifically mentions only insufficiency of funds or excess of arrangement; signature defects fell outside the statutory text. The ruling, though brief, encouraged several High Courts to dismiss complaints at the threshold whenever a bank endorsement pointed to signature mismatches.[6]

3.2 Paradigm Shift: Laxmi Dyechem (2012)

A Constitution Bench was unnecessary for what the three-judge bench achieved in Laxmi Dyechem. Emphasising the penal-regulatory object of Chapter XVII, the Court held that the categories enumerated in Section 138 are illustrative; any act “attributable to the drawer” that causes dishonour is covered. Signature discrepancies, stop-payment instructions, and account closure are deliberate or negligent acts that erode cheque credibility and therefore invite Section 138 liability.[7] The Court expressly disapproved Vinod Tanna, restoring more than forty complaints dismissed by the Gujarat High Court.

3.3 Reinforcement of the Presumption Doctrine: Bir Singh v. Mukesh Kumar (2019)

In Bir Singh, the Supreme Court reaffirmed that once execution and dishonour are shown, Section 139 presumption operates even in fiduciary relationships. Though not directly about signature mismatches, the decision underscored that the burden on an accused is substantive and cannot be discharged by mere denial.[8]

3.4 Post-Laxmi Dyechem Dissonance in High Courts

Despite the authoritative pronouncement, some High Courts continued to cite Vinod Tanna to quash complaints (e.g., Subir Sarkar v. Sk Anisur Rahaman, 2023 Cal HC). Conversely, others applied Laxmi Dyechem to uphold convictions, e.g., Santosh Nayak v. Haribhai Patel, 2020 Kar HC, and Aditya T.J. v. Vijayakumar S.K., 2024 Kar HC. The divergent outcomes illustrate that factual nuances—such as whether the accused ever signed the cheque—remain decisive.

4. Analytical Issues

4.1 Is a Cheque Without a Complete Signature “Drawn”?

Critics argue that an unsigned instrument is legally inchoate; hence the statutory phrase “cheque drawn by a person” is not satisfied. However, Laxmi Dyechem treats the bank’s inability to verify the signature as an “occurrence” of dishonour attributable to the drawer, not as proof that the cheque was never drawn. The ratio hinges on the policy of protecting the payee who relies on apparent authenticity. If the drawer intentionally or negligently issues a cheque with an incomplete or variant signature, he is estopped from asserting invalidity.

4.2 The Mens Rea Debate

Section 138 is a strict-liability offence with presumptive culpability. Nonetheless, an accused may rebut the presumption by showing, for example, that the cheque was lost and misused, or that the signature was forged. Genuine forgery negates both execution and the statutory presumption (T.N. Devi v. A.C. Haridas, 2004 Ker HC). The burden of establishing forgery, however, lies on the accused once the complainant proves presentation and dishonour.

4.3 Corporate Drawers and Authorised Signatories

Section 141 extends liability to persons in charge of the company. Recent dicta in Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Deshmukh (2024) clarify that interim compensation under Section 143A is payable by the “drawer”, not by authorised signatories in their personal capacity. Nevertheless, for final conviction under Section 138 read with Section 141, signatories may still be vicariously liable.

4.4 Evidentiary Considerations

  • Bank Memo: The endorsement “signature differs/incomplete” is prima facie evidence of dishonour but not conclusive of liability.
  • Expert Opinion: Where forgery is alleged, handwriting expert evidence becomes material (Luxmi Kant Shukla v. State of U.P., 2010 All HC).
  • Section 139 Presumption: Courts must apply the presumption even when the ground of dishonour is signature mismatch; the accused must produce positive evidence to rebut.[9]

5. Policy and Comparative Perspectives

The Indian approach aligns with international trends that criminalise deliberate interference with cheque clearance. By broadening Section 138, the Supreme Court enhanced transactional security and banking efficiency. At the same time, safeguards—statutory notice, rebuttable presumption, and opportunity for defence—mitigate the risk of unjust conviction.

6. Conclusion

The jurisprudence culminating in Laxmi Dyechem authoritatively recognises that dishonour of a cheque owing to incomplete or mismatching signature of the drawer falls within the ambit of Section 138 of the N.I. Act. The decision harmonises statutory purpose with commercial reality, imposes due-diligence obligations on drawers, and reinforces the presumption of indebtedness under Section 139. Subsequent rulings, especially Bir Singh, have fortified this stance. Persisting contrary dicta at the High-Court level should be viewed as per incuriam. Ultimately, liability will turn on factual matrices—particularly whether the accused executed the cheque and whether credible evidence rebuts the statutory presumption. Yet the doctrinal message is clear: the integrity of negotiable instruments cannot be compromised by strategically defective signatures.

Footnotes

  1. Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375.
  2. Vinod Tanna v. Zaher Siddiqui, (2002) 7 SCC 541.
  3. See NEPC Micon Ltd. v. Magma Leasing Ltd., (1999) 4 SCC 253 (stop-payment instructions covered).
  4. Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16; Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197.
  5. Luxmi Kant Shukla v. State of U.P., 2010 (Allahabad HC) (collecting common-law definitions).
  6. e.g., Bharatsingh v. Ismail Kha, 2016 (MP HC); Padma Ispat Trading (P) Ltd. v. Pramod Agrawal, 2007 (MP HC).
  7. Laxmi Dyechem, supra note 1, at ¶¶15-22.
  8. Bir Singh v. Mukesh Kumar, supra note 4.
  9. Santosh S/o Nagesh Nayak v. Haribhai Patel, 2020 SCC OnLine Kar 5001.