Negotiable Instruments Act, Section 18

Negotiable Instruments Act, Section 18: Where Amount Is Stated Differently in Figures and Words

Section 18 of the Negotiable Instruments Act, 1881 addresses situations where the amount payable is expressed differently in figures and in words, and it establishes a clear rule to resolve such discrepancies and prevent disputes.

1. Statutory Provision

If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.

This means that when there is a mismatch between the numerical amount and the written amount, the written amount (in words) will prevail.

2. Purpose of Section 18

The primary objective of this provision is to avoid confusion and disputes regarding the payable amount, provide certainty in commercial transactions, reduce the risk of fraud or alteration, and establish a clear rule for banks and courts to follow. 

Since figures are more easily altered than words, the law accords greater reliability to the amount written in words.

3. Application of Section 18

This provision applies to all negotiable instruments governed under the Act, including promissory notes, bills of exchange, and cheques. 

Where the instrument contains inconsistent amounts, the amount stated in words shall prevail.

4. Why Words Prevail Over Figures

The law gives preference to the amount written in words because words are less susceptible to tampering, figures can be easily altered by adding digits, and written amounts provide clearer evidence of the drawer’s intention, thereby enhancing the security of negotiable instruments.

For example, changing “?1,000” to “?10,000” by adding a zero is far easier than altering the words “One Thousand” to “Ten Thousand.”

5. Legal Effect

Courts will enforce payment according to the amount stated in words, and banks processing cheques will likewise rely on the written amount where any discrepancy exists. 

In such cases, the numerical figures will be disregarded, thereby ensuring uniformity in enforcement.

6. Protection Against Fraud

Section 18 plays a protective role by preventing fraudulent enhancement of amounts, safeguarding drawers and makers from unauthorized alterations, and ensuring that financial institutions adhere to a clear legal standard. 

It thereby reduces litigation and strengthens trust in negotiable instruments.

7. Commercial Importance

In banking practice, cheques are required to state the amount both in figures and in words, and banks verify the consistency between the two before processing. 

If any discrepancy exists, clarification is generally sought, thereby ensuring secure and reliable financial transactions in line with Section 18.