A bench of justices TS 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 apex court, however, said that in such cases of dishonouring of cheques, the account holder must be given a notice and an opportunity to arrange the payments before initiation of criminal proceedings against him.
"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 upon and has the opportunity to arrange the payment of the amount covered by the cheque," it said.
"It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable," the apex court said.
The High Court had taken the view that dishonour of a cheque on the ground that the signatures of the drawer of the cheque do not match the specimen signatures available with the bank, would not attract the penal provisions of the Act.
The High Court had said that the provisions of Section 138 were attracted only in cases where a cheque is dishonoured either because the amount of money standing to the credit to the account maintained by the drawer was insufficient to pay the cheque amount or the cheque amount exceeded the amount arranged to be paid from the account maintained by the drawer by an agreement made with the bank.