Dishonor Of Cheque Due To Incomplete Signature Would Constitute An Offence U/S 138 Of NI Act: J&K&L High Court

The Jammu and Kashmir and Ladakh High Court has held that the dishonor of a cheque for the reason that there were incomplete signatures appearing on the cheque, constitutes an offence under Section 138 of the Negotiable Instruments Act.

This assertion came from the bench of Justice Sanjay Dhar, which was dealing with a plea filed by Parvaiz Ahmad Bhat and another challenging the complaint filed against them for offence u/s 138 of NI Act r/w S. 420 IPC as the cheque issued by them got dishonored on account of an incomplete signature on the cheque.

Contentions raised

It was the contention of the petitioners/accused that in the instant case that an offence under Section 138 of the NI Act was not constituted because the cheques were dishonored on account of incomplete signatures and not for the reason of insufficiency of funds or exceeding the arrangement and thus, for that reason, no complaint was maintainable.

The petitioners relied upon the Apex Court's ruling in the case of Vinod Tanna Vs. Zaheer Siddiqui, (2002) 7 SCC 541 to support their contention. In Vinod Tanna, it was held by the Apex Court that dishonor of cheque for the reason that the signature of the cheque drawer was incomplete, would not constitute an offence under Section 138 of the NI Act.

Court's observations

At the outset, the Court referred to Section 138 of NI Act to observe that at first blush, it appears that it is only in two situations that Section 138 of the NI Act is attracted, firstly when there are insufficient funds available in the bank account of the person who is drawing the cheque and secondly, it exceeds the amount arranged to be paid from that account by an agreement made with that bank.

However, the Court further added that this provision has been interpreted by the Supreme Court in a number of judgments in a manner so as to include within its ambit even the cases where the dishonor of cheque has taken place for reasons other than the aforesaid two reasons.

Further, referring to the Judgment of Apex Court in the Laxmi Dyechem vs. State of Gujarat and others, (2012) 13 SCC 375, the Court noted that in this case, the Judgment of SC in Vinod Tanna case (relied upon by the petitioners) was held to be per incuriam.

[NOTE: Here, it may be noted that in Laxmi Dyechem, the Apex Court was dealing with a case in which the cheques were dishonored by the bank on the ground that the drawer's signatures were incomplete and that no image was found or that the signatures did not match.

In this case, the Court had come to the conclusion that criminal prosecution against the accused in such cases should be allowed to proceed, and the judgment and orders passed by the High Court quashing the criminal proceedings were set aside.]

The Court also noted that the judgment rendered in Laxmi Dyechem's case was latest in point of time, and therefore, the Court CONCLUDED that as per the law of precedents, the ratio laid down in Laxmi Dyechem's case has to be followed.

Accordingly, the Court dismissed the instant plea by holding thus:

"...as per the ratio laid down in Laxmi Dyechem's case, the contention of the petitioners that in the instant case offence under Section 138 of the NI Act is not constituted because the cheques were dishonoured on account of incomplete signatures and not for the reason of insufficiency of funds or exceeding the arrangement, deserves to be rejected."

Case title - PARVAIZ AHMAD BHAT & ANR. v. FIDA MOHAMAMD AYOUB
Case Citation: 2022 LiveLaw (JK) 2

Click Here To Read/Download Order