Section 138 of the NI Act: Notice requiring “loan amount” not invalid if it is the same as “check amount”: SC [Read Order]


The Supreme Court observed that a notice of formal notice issued under section 138 of the Negotiable Instruments Act, claiming the “loan amount”, does not become invalid if it is identical to the amount covered by the refused check (s). In this case (Vijay Gopala Lohar v Pandurang Ramchandra Ghorpade), the accused took out a loan of Rs. 50,000 from the plaintiff. Two checks were issued by …

The Supreme Court observed that a notice of formal notice issued under section 138 of the Negotiable Instruments Act, claiming the “loan amount”, does not become invalid if it is identical to the amount covered by the refused check (s).

In that case (Vijay Gopala Lohar vs. Pandurang Ramchandra Ghorpade), the accused took out a loan of Rs. 50,000 from the complainant. Two checks were issued by the accused which were bounced. Two legal opinions were issued and later two complaints were filed.

The trial court ruled that the notices were flawed on the grounds that the notices mentioned the amount of the loan and not the amount of the check.

The Bombay High Court convicted the accused, ruling that the demand was in fact the “amount of the check”. The High Court observed: “Just because the “loan amount” is required in two notices, it does not become a claim for double the loan amount. No one can understand the opinion in this sense. It is absurd and unreasonable to conclude that since in both opinions there was a reference to “loan amount“; the complainant had requested double the amount of the loan. “

In the Apex Court, the accused, relying on clause (b) of the conditional clause of section 138 of the NI Act, argued that the demand by the notice should only be the amount of the check and not the loan amount. He also relied on several judgments of the SC which ruled that the notice under section 138 of the NI Act can only be issued for the amount of the check and not for another amount greater than the amount of the check. According to him, the complainant could only have demanded an amount of 25,000 rupees / ¬ in each of the two cases.

Considering that the said judgments are not applicable in the present case, the chamber comprising Judge L. Nageswara Rao and Judge MR Shah dismissed the appeals and noted:

“There is no dispute over the proposition that the notice issued under section 138 of the NI Act should be only for the amount of the check and not for any other amount greater than the amount of the check. In the judgments mentioned above, the notice issued under section 138 of the NI Act referred to loan amounts that were much greater than the check amounts. Whereas in this case the loan amount and the check amount are the same ie 50,000 rupees / -. “

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