Cheques Dishonored Due To Stop Payment, Account Closed & Signature Mismatch, All Fall Within Ambit Of S.138 NI Act: J&K&L High Court

The Jammu and Kashmir and Ladakh High Court recently reiterated that the provisions contained in Section 138 of the NI Act must be interpreted in a liberal manner so as to achieve the object for which the said provision has been enacted.

Not only the cases of dishonour of cheques on account of insufficiency of funds or on account of exceeding of arrangement but the cases involving dishonour of cheques on account of "stop payment", "account closed" and "Signature Mismatch" also fall within the ambit of offence under the aforesaid provision, the bench underscored.

bench of Justice Sanjay Dhar was hearing a plea through the medium of which the petitioner had challenged the complaint filed by the respondent against him for offence under Section 138 of Negotiable Instruments Act pending before the Court of Judicial Magistrate, Srinagar, which issued process against the petitioner.

The petitioner had primarily challenged the complaint on the ground that the dishonour of cheque was due to difference in drawer's signatures and, as such, offence under Section 138 of NI Act is not made out against the petitioner

Deciding the matter of controversy the bench observed 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 where it exceeds the arrangement. However, the 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 dishonour of cheque has taken place for the reasons other than the aforesaid two reasons, the bench recorded.

Examining the Apex court precedents on the subject the bench noted that the SC has in Kanwar Singh vs Delhi Administration, AIR 1965 SC 871 and State of Tamil Nadu Vs. M. K. Kandaswami and Others 1974(4) clearly stated that while interpreting a penal provision which is also remedial in nature a construction that would defeat its purpose or have the effect of scrapping it from the statute book, should be avoided and that if more than one constructions are possible, the Court should choose to adopt construction that would preserve the workability and efficacy of the Statute and avoid an interpretation that would render the provision sterile. The Apex court in the matter had accordingly held that when a cheque is returned by the banker of a drawer with the comments "account closed" the same would constitute an offence under Section 138 of NI Act, Justice Dhar recorded.

Dealing with the contention that the dishonour of cheque was due to difference in drawer's signatures and, as such, offence under Section 138 of NI Act is not made out, the bench found it worthwhile to record the observations of SC in Laxmi Dyechem vs. State of Gujarat and others, (2012) wherein SC while dealing with a case in which the cheques were dishonoured by the bank on the ground that drawer's signatures were incomplete and that no image was found or that the signatures did not match, came 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.

For the foregoing reasons, the bench found the petition to be devoid of merit and accordingly dismissed it. Interim order was vacated and trial Magistrate was directed to proceed further in the matter in accordance with law.

Case Title: Mohammad Shafi Wani Vs Noor Mohammad Khan

Citation: 2022 LiveLaw (JKL) 111