CHEQUE NOT A VALID INSTRUMENT IF THE AMOUNT IS NOT SPECIFIED

1.    Introduction:

The Delhi High Court has 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 will not draw any legal consequences under the “Negotiable Instruments Act. The observation was made by Additional Judge Praveen Singh of the Patiala House Court while hearing the revision petition of an accused in proceedings under section 138 of Negotiable Instruments” Act.

In this case, a cheque was drawn in favor of the respondent“Forty Four Lacs Eighteen Lacs Eight Hundred and Ninety Six only”. Thus, it was dishonored for the reason that“either cheque was drawn irregularly or the amount differs in words and figures “by the bank.

The Revisionist contended that the aforesaid amount could not be ascertained and thus the document which was presented before the bank was neither a Bill nor a cheque under section 5 and 6 of the NI Act, respectively and the offense under section 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 filed an incorrect and incoherent amount in the cheque while describing the words with, mala fide intention.

It was also pointed despite a valid legal notice was served upon the Revisionist, still, neither he paid the amount, nor proposed to issue a replacement cheque and therefore, it was held that the judgment of Supreme Court in M/s Laxmi Dyechem vs. the State of Gujarat (2012) 13SCC375 could be referenced squarely for this case.

2.    Findings of the Court:

The court observed that for an instrument to be a cheque, it had to satisfy the following five conditions of being valid under the NI Act.

i.    Such an instrument must be in writing;

ii.    Shall contain an unconditional order signed by the maker;

iii.    Shall contain a direction for the person to pay;

iv.    Must involve a certain sum of money;

v.    Only to, or order of a certain person or to the bearer of the instrument.

When it comes the condition no.4 above, the court had noted the direction should pay a “certain sum of money”. However, in the present case, it was found to be ambiguous.

3.    Judgment:

The learned counsel stated ”There could be no dispute about the instrument being a cheque within the definition of section 6 of the NI Act but for its failure to meet the condition of certainty of the amount to be paid, the court stated.

The amount stated to words is absurd and thus the certainty which is required by section 5 & 6 of the NI Act with regard to the amount to be paid is missing in this instrument. Therefore,  it was held that the instrument was invalid in nature when presented to the bank.

4.    Absurdity in Instrument doesn’t qualify under S.18 of the Act:

It has been specifically provided under the S.18 of the NI Act that in cases where the amount is stated differently in words and figures, such amount stated in figures will be regarded irrelevant and only the amount stated in words shall be considered relevant. As there were ambiguities, in this case, it was held that section 18 of the Act shall not be attracted. Thus, the court stated that in this case even section 18 cannot be applied to the instrument in question, due to the absurdity of the amounts as mentioned in words in the instrument as per the Court statement.

Author:

eStartIndia Team