Jail term if cheque bounces because signature differs

Next time you write a cheque, double rather triple check the signature. Dishonouring of a cheque due to a signature mismatch — with the one submitted as a specimen to the bank — can now invite a prison term and a hefty fine.

Next time you write a cheque, double rather triple check the signature. Dishonouring of a cheque due to a signature mismatch — with the one submitted as a specimen to the bank — can now invite a prison term and a hefty fine.

The Supreme Court has ruled that a mismatch of signatures will be treated on par with insufficiency of funds, “payment stopped” and “closure of account”, which are offences under Section 138 of the Negotiable Instruments Act, 1881, in case a cheque bounces.

“So long as the change is brought about with a view to preventing the cheque being honoured, the dishonour would become an offence under Section 138…” a bench of justice TS Thakur and justice Gyan Sudha said.

In such cases, the account holder — as required under the act — must be given a notice and an opportunity to arrange the money before the launch of criminal proceedings, the court said.

Section 138 makes a cheque-bounce offence punishable with two-year imprisonment and fine that can be double the cheque amount. The ruling is likely to burden the justice system, particularly the magisterial courts. Introduction of Section 138 in 1988 had led to 25 lakh cases being filed, a government report in 2008 said.

The SC set aside the Gujarat high court's ruling that criminal proceedings could be initiated if the cheque was dishonoured because of lack of enough funds in the account or the amount exceeded the money available in the account.