Section 138 NI Act: Notice Demanding 'Loan Amount' Not Invalid If It Is Same As 'Cheque Amount': SC [Read Order]

Section 138 NI Act: Notice Demanding Loan Amount Not Invalid If It Is Same As Cheque Amount: SC [Read Order]

"Notice issued under Section 138 of the NI Act has to be only for the cheque amount and not for any other amount more than the cheque amount."

The Supreme Court has observed that a demand notice issued under Section 138 of the Negotiable Instruments Act, claiming 'loan amount', does not become invalid, if it is same as the amount covered under the dishonoured cheque(s).

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

The Trial Court held that the notices were defective on the ground that the notices mentioned loan amount and not the cheque amount.

The Bombay High Court convicted the accused holding that the demand was actually the 'cheque amount'. The High Court had observed: "Simply because the 'loan amount' is demanded in two notices, it does not become a claim for double the amount of loan. Nobody can understand the notice in that sense. It is absurd and unreasonable to hold that since in both the notices, there was a reference to the 'loan amount'; the complainant had demanded double the amount of loan. "

Before the Apex Court, the accused, relying upon clause (b) of the proviso to Section 138 of the NI Act, contended that the demand by the notice should be only the cheque amount and not the loan amount. He also relied upon several SC judgments which have held that the notice under Section 138 of the NI Act can be issued only for the cheque amount and not for any other amount more than the cheque amount. According to him, the complainant could have demanded only an amount of Rs.25,000/¬ in each of the two cases.

Holding that the said judgments are not applicable in the present case, the bench comprising Justice L. Nageswara Rao and Justice MR Shah dismissed the appeals and said:

"There is no dispute regarding the proposition that the notice issued under Section 138 of the NI Act has to be only for the cheque amount and not for any other amount more than the cheque amount. In the judgments referred to above the notice issued under Section 138 of the NI Act referred to loan amounts which were much higher than the cheque amounts. Whereas, in the instant case, the loan amount and the cheque amount is the same i.e., Rs.50,000/-."

Read Order