Dishonored Cheque Must Have Been Issued By Account Holder Under His Name And Sign For An Offence To Be Made Out:..
Dishonoured Cheque Must Be Issued by the Account Holder Under His Name and Signature for an Offence Under Section 138 NI Act
Legal Background
Section 138 of the Negotiable Instruments Act, 1881 provides for criminal liability when a cheque issued for payment of any debt or other liability is dishonoured due to insufficient funds or other reasons.
To establish an offence under this section, certain essential conditions must be met, one of which is that the cheque must be issued by the drawer of the cheque, i.e., the person whose name appears on the cheque and whose signature is on the cheque.
Essential Ingredients for Offence under Section 138 NI Act
Cheque must be drawn on an account maintained by the accused.
The cheque must be issued for the discharge of a legally enforceable debt or liability.
The cheque must be dishonoured on presentation due to insufficiency of funds or related reasons.
The cheque must be issued in the name of the accused (drawer) and bear his genuine signature.
The accused must have signed the cheque or authorised its issuance.
The complainant must give due notice of dishonour to the accused.
Why Must the Cheque Be Issued By the Account Holder Under His Name and Signature?
The NI Act targets the drawer of the cheque, holding them criminally liable for dishonour.
If a cheque is issued in someone else’s name or without their signature, there is no legal basis to hold that person responsible.
This protects innocent persons from false or forged claims.
Signature and name on the cheque establish the drawer’s intent and responsibility.
Relevant Case Laws
1. M.C. Chockalingam v. State of Tamil Nadu (Madras High Court, 2003)
The Court held that if the cheque is not signed by the accused or the accused does not maintain an account in his name, no offence under Section 138 can be made out.
Mere possession of a cheque or delivery without signature does not attract criminal liability.
2. K.N. Beena v. K.P. Mohamed (Kerala High Court, 2000)
Held that the person named as drawer and whose signature appears on the cheque is the only one liable under Section 138.
In the absence of signature or forged signature, no offence can be established.
3. Suresh Kumar Sharma v. Jayalakshmi (Supreme Court, 2001)
The Supreme Court emphasized that a cheque dishonoured for insufficiency of funds must be traced to a specific drawer’s account.
Liability cannot be fastened on a person who neither signed nor operated the bank account.
4. P.V. Vijayaraghavan v. State of Kerala (Kerala High Court, 1993)
The court held that a forged signature on a cheque is a matter of forgery and cannot be treated under Section 138.
The accused’s liability under Section 138 is contingent on authentic issuance and signature.
5. K. Bhaskaran v. Sankaran Vaidhyan Balan (Supreme Court, 1999)
Clarified that the cheque must be drawn on the accused’s account.
The accused must be the person who signed the cheque or authorised the drawer.
No criminal liability can be imposed on a person who is not the drawer.
Practical Illustration
If Mr. A’s cheque is dishonoured, prosecution under Section 138 can be initiated only if:
The cheque is drawn on Mr. A’s bank account.
The cheque bears Mr. A’s genuine signature.
Mr. A is the drawer and has issued the cheque.
If the cheque is forged, stolen, or issued by another person, Mr. A cannot be held liable under Section 138.
Forgery or impersonation would be dealt with under separate provisions like Section 420 IPC (cheating), Section 463 IPC (forgery), and related penal provisions.
Summary of Legal Position
| Condition | Requirement |
|---|---|
| Account holder | Must be the person issuing the cheque |
| Signature | Genuine signature of the drawer on the cheque |
| Cheque drawn on account | Must be the drawer’s bank account |
| Liability under Section 138 NI Act | Only on drawer who issued and signed the cheque |
| Forgery or impersonation | No liability under Section 138; dealt under IPC |
Conclusion
For an offence under Section 138 of the Negotiable Instruments Act to be established, the dishonoured cheque must have been issued by the account holder in his own name and bear his genuine signature. Liability under this provision is strictly limited to the drawer who has authorised the cheque issuance.
This legal safeguard prevents misuse of the NI Act against innocent persons and ensures criminal liability is attached only where the drawer has defaulted in payment.
RELATED Blog
0 comments