SC sets aside verdict of Gujarat HC that criminal proceedings for dishonouring of cheque can be initiated only when the cheque is dishonoured due to lack of sufficient amount
A person may face criminal proceedings if a cheque issued by him gets dishonoured on the ground that his signature does not match the specimen signature available with the bank, the Supreme Court has ruled.
A bench of justices T S Thakur and Gyan Sudha Mishra set aside the verdict of Gujarat High Court which had held that criminal proceedings for dishonouring of cheque can be initiated only when the cheque is dishonoured because of lack of sufficient amount in the bank account and not in case where a cheque is returned due to mismatch of signature of account holder.
“Just as dishonour of a cheque on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138 of Negotiable Instrument Act, so also dishonour on the ground that the ‘signatures do not match’ or that the ‘image is not found’, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act,” the bench said.
The SC, however, said that in such cases, the account holder must be given a chance to arrange the payment before criminal proceedings begin. “Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called and has the opportunity to arrange the payment of the amount covered by the cheque.”