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Section 138 NI Act: Cheque Not Valid If Amount Written Is Uncertain, Holds Delhi Court [Read Order]

Akshita Saxena
3 Aug 2020 8:31 AM GMT
Section 138 NI Act: Cheque Not Valid If Amount Written Is Uncertain, Holds Delhi Court [Read Order]
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A Delhi Court has recently held that an instrument cannot be termed as a cheque, if it does not specify a "certain amount" of money to be paid to a certain person. Thus, if the amount written on the instrument is "absurd", the same cannot be called a 'cheque' and it will not draw any legal consequences under the Negotiable Instruments Act.

The observation was made by Addl. Sessions Judge, Praveen Singh, of the Patiala House Court, while hearing the revision petition of an accused in proceedings under Section 138 of NI Act.

In the present case, the cheque in question was drawn for an amount of "Forty Four Lacs Eighteen Lacs Eight Hundred and Ninety Six only". Thus it was dishonored by the Bank with the reason "cheque irregularly drawn/ amount in words and figures differ."

The Revisionist had contended that the aforesaid amo;' unt cannot be ascertained and thus the document which was presented before the bank was neither a Bill nor a cheque under Sections 5 and 6 of the NI Act, respectively and the offence u/s 138 NI Act could not have been attracted.

The Respondent-complainant on the other hand contended that the Revisionist cannot take advantage of his own wrong when he had filled an incorrect and incoherent amount in the cheque while describing the amount in words, with "malafide intention".

It was also pointed out that a valid legal notice was served upon the Revisionist and despite that, it neither paid the amount, nor offered to issue a fresh cheque and therefore, the judgment of Supreme Court in M/s Laxmi Dyechem v. State of Gujarat, (2012) 13 SCC 375, squarely covers this case.

Findings

The Court observed that for an instrument to be a cheque, it has to satisfy the following five conditions of being valid under the NI Act:

  1. 1.an instrument in writing;
  2. 2.containing an unconditional order signed by the maker;
  3. 3.directing a certain person to pay;
  4. 4.a certain sum of money and;
  5. 5.only to, or to the order of, a certain person or to the bearer of the instrument.

When it comes the condition no. 4, the Court noted, the direction should be to pay a "certain sum of money". However in the present case, the instrument is "ambiguous".

"There could have been no dispute about this instrument being a cheque within the definition of section 6 of the NI Act but for its failure to meet condition of certainty of the amount to be paid," the Court remarked.

It added,

"The amount stated in words is absurd and thus the certainty which is required by sections 5 & 6 of the NI Act with regard to the amount to be paid is missing in this instrument. That being the case, this instrument was not a valid cheque when presented before the bank."

Section 18 of NI Act does not apply in case of absurdity in instrument

Section 18 of the NI Act provides that in case amount is stated differently in words and figures, the amount stated in figures would be immaterial and it is only the amount stated in words that has to be considered.

Since in the present case, the ambiguity is in the words, the Court held that Section 18 of the NI Act will not come into play.

"It is correct that if the amount written in figures when read had made a sense, it would have become a certain amount and could have satisfied the condition of certainty as to the amount as required by section 5 of NI Act. In the present case, even section 18 of NI Act cannot be applied to the instrument in question. This is because of the absurdity of the amount as mentioned in words in the instrument," the Court observed.

Not an offence under Section 138 of NI Act

The Respondent had argued that the Revisionist should be held accountable for non-compliance of the legal notice. However, the Court held that this argument does not hold much water as "for a notice u/s 138 NI Act to fulfill the requirements of that section, the primary condition that has to be satisfied is that the dishonoured instrument was a valid negotiable instrument, which could be considered to be a cheque within the definition under section 6 of NI Act."

The Court held,

"In the present case, as instrument presented was not a cheque with the definition of section 6 of NI Act, a notice for subsequent dishonour of such instrument will not impose any liability upon the drawee either for non compliance or for non issuance of a fresh cheque."

SC's verdict in Laxmi Dyechem case not applicable

As mentioned above, the Respondent had relied on the judgment in Laxmi Dyechem (supra) where the Supreme Court had expanded the scope of the expression "amount of money…is insufficient" as appearing in Section 138 of the Act to include dishonour of cheques due to mismatch of signature.

The Respondent in effect sought that uncertainty in amount to be paid should also be viewed within the purview of this expression. However, distinguishing the present case from the precedent, the Court clarified,

"Judgments cited therein dealt with situations where a cheque would be dishonoured for the reasons of insufficiency of funds, exceeding arrangement with the bank, stopping of payment of the cheque by the drawer, closing of account after the cheque had been drawn, signatures mismatch etc. However, the applicability of Section 138 NI Act on the basis of dishonor of an invalid instrument / cheque was neither considered nor decided upon." (emphasis supplied)

The Court added,

"the cheque was invalid on the face of it because of uncertainty as to the amount written in words. It is not the case that the receiver could not have known the defect of the cheque when he received it or, where due to some future act on the part of the drawee that the cheque was dishonoured. Thus, the judgment of Laxmi Dyechem (supra) cannot come to the aid of the respondent in this case."

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