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NOTICE UNDER SECTION SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT DEMANDING LOAN AMOUNT IS NOT INVALID IF IT IS SAME AS CHEQUE AMOUNT: Supreme Court

Team SoOLEGAL 19 Apr 2019 12:27pm

NOTICE UNDER SECTION SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT DEMANDING LOAN AMOUNT IS NOT INVALID IF IT IS SAME AS CHEQUE AMOUNT: Supreme Court

In the case of Vijay Gopala Lohar (Vijay Gopala Lohar vs Pandurang Ramchandra Ghorpade), the complainant had advanced a loan of Rs. 50,000/- to the accused. Both the cheques which were issued by the accused got bounced. Thereafter legal notices were sent and complaints were filed, both two in number.

The accused was convicted by Bombay High Court with a holding that the demand was actually the 'cheque amount'. The Court observed that:

"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." 

The accused relied upon clause (b) of the proviso to Section 138 of the NI Act and contended before the Apex Court that when any such demand is made, it should pertain to the cheque amount and not the loan amount. Much reliance was placed on several judgments of Supreme Court wherein it has been held that 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.

The Supreme Court bench comprising of Justice L. Nageswara Rao and Justice MR Shah made an important observation that a demand notice which is 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).

The bench held that the judgment on which the accused relied, did not apply to the present case. It 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/-." 

Tagged: Supreme Court   Cheque Bounce   Section 138   Negotiable Instruments Act   Justice L. Nageswara Rao   Justice MR Shah  
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