2020 (8) TMI 134 - DSC - Indian Laws

Invalid cheque under Negotiable Instruments Act due to ambiguity in amount stated in words. Section 138 offence not committed. Trial court order set aside.

M/s. Shree Tyres, Sarang Ramesh Gupta, Partner M/s Shree Tyres, Devendra Kanhaiyalal Newaskar, Versus State, M/s Bridgestone India Pvt. Ltd.,

The court found that the instrument in question did not meet the criteria of a valid cheque under the Negotiable Instruments Act due to ambiguity in the ... Dishonor of Cheque - amount in words and figures differs - the amount written in words is also uncertain - ambiguity in amount to be paid - very factum of the instrument in dispute - valid cheque or not - application seeking discharge was moved - application for discharge was dismissed and the framing of notice u/s 251 Cr.P.C. was ordered - HELD THAT:- In view of section 6 of the NI Act, a cheque is a bill of exchange which is drawn on a specified banker and is payable otherwise than on demand. Therefore to be a cheque, an instrument has to satisfy the conditions of being a bill of exchange first and thereafter, if it is a valid bill of exchange and directed to a banker, it will become a cheque. 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 the certainty of the amount to be paid - However, as per the scheme of the NI Act 1881, an instrument does not become invalid merely because the amount ordered to be paid is stated differently in figures and in words. Therefore, as per the provisions of section 18 NI Act, merely because the amount to be paid as stated in figures and words is different, a cheque or an instrument does not become invalid and the amount stated in words shall be considered to be amount undertaken or ordered to be paid - In the usual course of things, if a cheque has ambiguity with regard to the amount, it can be settled by falling back upon the amount written in words and that amount shall be considered to be the amount undertaken or ordered to be paid through that instrument or cheque. The effect of section 18 NI Act is that in case of 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. In the present case, there is an uncertainty with regard to the amount which has been ordered to be paid through the instrument in question. However, in view of section 18 of NI Act, it can still be a valid instrument if, on the basis of the amount written in words, a certainty can be arrived at with regard to the amount ordered to be paid. Surprisingly, in the present case, the amount written in words is “forty four lacs eighteen lacs eight hundred and ninety six only.”. This amount cannot be said to be a certain amount of money as it is an absurdity which makes that amount unquantifiable. 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. Once there is a difference in the amount in the instrument as written in words and figures, the amount written in figures becomes immaterial and cannot be resorted to find what was the intended sum of money ordered to be paid through such instrument. 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. If such an instrument was presented and dishonoured, would it amount an offence u/s 138 of the NI Act? - HELD THAT:- The offence u/s 138 NI Act is stated to be committed by a person when a cheque issued by him, in discharge of a legally recoverable debt or liability, is dishonoured and such dishonour is on account of insufficiency of funds or on account that it exceeded arrangements with the bank. Further, the drawer of the cheque despite receipt of a legal notice within the stipulated time, fails to pay the amount of the cheque. It is to be seen that the entire section 138 of NI Act talks about a cheque. The word ‘cheque’ used in section 138 of NI Act carries the same meaning as defined u/s 6 of the NI Act. Thus, the offence u/s 138 NI Act can only be said to have been committed if, the instrument that was presented and dishonoured was a cheque as defined by section 6 of the NI Act - In the present case, as discussed above, the instrument which was presented to the bank was not a valid cheque for lack of certainty as to the amount that was ordered to be paid and the bank had also refused to honour this instrument only on the ground that cheque was irregularly drawn / amount in words and figures differed. The material presented before the trial court was sufficient to conclude that as the instrument on the basis of which complaint was filed was not a valid cheque within the definition of section 6 of NI Act, no notice u/s 251 Cr.P.C could have been framed against the accused/ revisionists - the application of the revisionists/ accused seeking discharge was dismissed and notice for the offence u/s 138 NI Act was ordered to be framed, cannot be sustained. Impugned order is set aside - The revisionists stand discharged. Issues Involved:1. Validity of the cheque under Sections 5 and 6 of the Negotiable Instruments Act (NI Act).2. Applicability of Section 18 of the NI Act.3. Whether the dishonoured instrument amounts to an offence under Section 138 of the NI Act.4. Interpretation and application of the judgment in Laxmi Dyechem v. State of Gujarat.5. Legality of the trial court's order dismissing the application for discharge.Issue-wise Detailed Analysis:1. Validity of the Cheque under Sections 5 and 6 of the NI Act:The court examined whether the instrument in question met the criteria of a valid cheque as defined under Sections 5 and 6 of the NI Act. Section 6 defines a cheque as a bill of exchange drawn on a specified banker and payable on demand. Section 5 defines a bill of exchange as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to a certain person or the bearer. The court found that the instrument satisfied all conditions except the certainty of the amount to be paid, as the amount written in words ('Forty Four Lacs Eighteen Lacs Eight Hundred and Ninety Six only') was ambiguous and unquantifiable.2. Applicability of Section 18 of the NI Act:Section 18 of the NI Act states that if the amount undertaken to be paid is stated differently in figures and words, the amount stated in words shall be considered. The court noted that Section 18 is mandatory and gives no choice to the courts to prefer the sum mentioned in figures over the amount mentioned in words. However, in this case, the amount in words was absurd and unquantifiable, rendering the instrument invalid as a cheque.3. Whether the Dishonoured Instrument Amounts to an Offence under Section 138 of the NI Act:Section 138 of the NI Act pertains to the dishonour of cheques due to insufficient funds or exceeding arrangements with the bank. The court emphasized that the offence under Section 138 can only be committed if the instrument presented and dishonoured was a valid cheque as defined under Section 6 of the NI Act. Since the instrument in question was not a valid cheque due to the ambiguity in the amount, it could not be considered an offence under Section 138.4. Interpretation and Application of the Judgment in Laxmi Dyechem v. State of Gujarat:The respondent argued that the case was covered by the judgment in Laxmi Dyechem, which dealt with the dishonour of cheques for various reasons such as insufficiency of funds, exceeding arrangements, and others. However, the court clarified that the judgment in Laxmi Dyechem did not address the issue of dishonour of an invalid instrument. The court concluded that the judgment in Laxmi Dyechem could not be applied to this case as the instrument was invalid on its face due to the uncertainty of the amount.5. Legality of the Trial Court's Order Dismissing the Application for Discharge:The court found that the trial court had erred in dismissing the application for discharge and ordering the framing of notice under Section 251 Cr.P.C. The trial court failed to recognize that the instrument was not a valid cheque under Section 6 of the NI Act. Consequently, the court set aside the trial court's order and discharged the revisionists.In conclusion, the court held that the instrument in question was not a valid cheque due to the ambiguity in the amount stated in words, and therefore, no offence under Section 138 of the NI Act was committed. The trial court's order was set aside, and the revisionists were discharged.