Supporting provisions in the NI Act

36. Liability of prior parties to holder in due course.—Every prior party to a negotiable
instrument is liable thereon to a holder in due course until the instrument is duly satisfied.
120. Estoppel against denying original validity of instrument.—No maker of a promissory
note, and no drawer of a bill of exchange or cheque, and no acceptor of a bill of exchange for
the honour of the drawer shall, in a suit thereon by a holder in due course, be permitted to
deny the validity of the instrument as originally made or drawn.
139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved,
that the holder of a cheque received the cheque of the nature referred to in section 138 for the
discharge, in whole or in part, of any debt or other liability.
Case M/s Laxmi Dyechem v. State Of Gujarat & Ors
Court Supreme Court
Citation (2012) 13 SCC 375
Relevant 6 – about the presumption of legal validity of Negotiable Instruments
paragraphs 8, 9 – provisions of NI should be construed liberally.
15 – Ratio of the judgement incorrect signatures fall under the
purview of S. 138.
16
Judgement 6. “a promise that the same shall be honoured for payment. To
that end Section 139 of the Act raises a statutory presumption
that the cheque is issued in discharge of a lawfully recoverable
debt or other liability. This presumption is no doubt rebuttable at
trial but there is no gainsaying that the same favours the complainant
and shifts the burden to the drawer of the instrument (in case the
same is dishonoured) to prove that the instrument was without any
lawful consideration.”
15. 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, 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.
15. 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 subject to other conditions
prescribed being satisfied. There may indeed be situations where a
mismatch between the signatories on the cheque drawn by the drawer
and the specimen available with the bank may result in dishonour of
the cheque even when the drawer never intended to invite such a
dishonour. We are also conscious of the fact that an authorised
signatory may in the ordinary course of business be replaced by a
new signatory ending the earlier mandate to the bank. 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 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.
16. The net effect is that dishonour on the ground that the
payment has been stopped, regardless whether such stoppage is
with or without notice to the drawer, and regardless whether the
stoppage of payment is on the ground that the amount lying in
the account was not sufficient to meet the requirement of the
cheque, would attract the provisions of Section 138.

The precedent laid down in Laxmi Dyechem v. State Of Gujarat & Ors has been upheld to
hold that dishonour due to incomplete signatures (where joint signatures were required) falls
under the purview of S. 138
Case Gatrod Agro Bio-Fuels Private Ltd. v. Garg Distilleries Private Ltd
Court Bombay HC
Citation 2014 SCC OnLine Bom 739
Relevant Pragraph 12, 15
12. The argument of the learned Counsel for Applicants that when
the Cheques had come back with endorsement that joint signature is
required, it was incomplete Cheque and so Section 138, would not
get invoked, has no substance. It is rightly argued by learned Counsel
for Respondent No. 1 that the Complainant did not know that joint
signature would be required and the Accused persons cannot avoid
liability by issuing Cheque with only one signature when joint
signatures were required.
15. Looking to the above observations of the Hon'ble Supreme
Court, even if the Cheques had returned with endorsement that
joint signature was required, Section 138, would still get
attracted and the Applicants-Accused cannot avoid
responsibility. At present, as per Section 139, it will have to be
presumed that they were towards discharge of debt or other liability
of the Applicants-Accused. Contrary can be proved by Applicants-
Accused at the time of trial. The defence being raised in these
Applications would be matter of evidence and I do not think that any
interference is called for in the Orders of process issued.
Further, in Bir Singh v. Mukesh Kumar, the nature of presumption of NI has been
emphasized
Case Bir Singh v. Mukesh Kumar
Court Supreme Court
Citation (2019) 4 SCC 197
Paragraph 33
Judgement 20. Section 139 introduces an exception to the general rule as to the
burden of proof and shifts the onus on the accused. The
presumption under Section 139 of the Negotiable Instruments Act is
a presumption of law, as distinguished from presumption of facts.
Presumptions are rules of evidence and do not conflict with the
presumption of innocence, which requires the prosecution to prove
the case against the accused beyond reasonable doubt. The obligation
on the prosecution may be discharged with the help of presumptions
of law and presumptions of fact unless the accused adduces evidence
showing the reasonable possibility of the non-existence of the
presumed fact as held in Hiten P. Dalal [Hiten P. Dalal v.
Bratindranath Banerjee, (2001) 6 SCC 16 : 2001 SCC (Cri) 960] .
33. A meaningful reading of the provisions of the Negotiable
Instruments Act including, in particular, Sections 20, 87 and 139,
makes it amply clear that a person who signs a cheque and
makes it over to the payee remains liable unless he adduces
evidence to rebut the presumption that the cheque had been
issued for payment of a debt or in discharge of a liability. It is
immaterial that the cheque may have been filled in by any person
other than the drawer, if the cheque is duly signed by the drawer. If
the cheque is otherwise valid, the penal provisions of Section 138
would be attracted.