Blank cheque validity

which law gives the assumption or presumption that a blank cheque can be filled up by the possessor ?

Section 20 of N.I. Act "Inchoate stamped instruments. -Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in 1[India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp.  The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder."

Vide Section 20 of N.I. Act when the drawer of a cheque issue blank cheque to other person he gives an authority to said concerned person to fill up its contents. For the offence u/s 138 it is immaterial that the contents therein are in whose handwriting as per section 20 of N.I. Act. (SEE 2011 (10) LJSOFT 48) [For full text visit www.ljsoft.co.in (FREE to register Free to use)]

Sanjeev,

1. Cheque is not a stamped instrument, so section 20 of NI Act is not applicable.

2. There is no dispute that the cheque can be in multiple handwriting, still it is valid.

But for the real case, following situation may occur...

1. The complainant approaches the court stating that it was blank cheque when received and only after  liability is assessed he filled up the cheque......That is acceptable but in this case he has to prove the liability. 

2. The complainant approaches the court without this pleading that the cheque was blank....now if accused takes the defense that the cheque was blank but fails to prove that it was blank...accused is doomed...but if accused is able to prove that the cheque was blank or filled up by complainant...then accused is safe.

The idea is in general complainant is not required to prove the liability strictly, but if he takes the plea that it was blank cheque then he has to prove the liability strictly. If he does not take the blank cheque plea then accused is at liberty to prove that the cheque was blank...

Ideally S.138 should not be applicable for Blank cheque, because a cheque leaf is not a cheque without mentioning of certain amount at the time of delivery. But then thats a different aspect and our courts generally do not take this approach, which they should.

Sir TrivediJI, What if complainant proves that cheque got filled-up by other person infront of accused after this cheque was signed and handed over? Liability and Signature is not disputed. thanking you

This issue will come only if accused states that cheque was blank and also gives admissible evidence because difference in hand writing is no evidence that the cheque when delivered was blank.

so in this case if complainant is able to prove that the cheque was filled up by X, and after that signed by accused...then the entire execution aspect in favour of  complainant stands proved.

Respected R Trivedi Sir,

This is from M S Parthasarathy's 6th edition 2003(First Edition in 1969)  Chapter 4 Incomplete Cheques Page no. 131

"Section 20 of NIA, which deals with inchoate instruments, including  cheques, says:"

Same book Page no. 132

Stamping

......"Moreover, the section enunciates a basic rule relating to completion, authorised or otherwise, of inchoate instruments, and the rule can not be defeated in its application to cheques because the government has adopted a deliberate fiscal policy of exempting them from stamping."

Thanks , With regards,

87.Effect of material alteration. Alteration by indorsee.Any

material alteration of a negotiable instrument renders the same void

as against any one who is a party thereto at the time of making such

alteration and does not consent thereto, unless it was made in order

to carry out the common intention of the original parties..

89.

Payment of instrument on which alteration is not apparent.

89.Payment of instrument on which alteration is not apparent.

Where a promissory note, bill of exchange or cheque has been

materially altered but does not appear to have been so altered, or

where a cheque is presented for payment which does not at the time of

presentation appear to be crossed or to have had a crossing which has

been obliterated, payment thereof by a person or banker liable to pay,

and paying the same according to the apparent tenor thereof at the

time of payment and otherwise in due course, shall discharge such

person or banker from all liability thereon ; and such payment shall

not be questioned by reason of the instrument having been altered or

the cheque crossed.

For ease both section 87 and 89 of NI Act are copy pasted above. The combined reading of both the sections says that filling the blanks of a Blank Cheque is material alteration......Moreover S.20 is not and cannot be applicable on cheques simply because a cheque is not a stamped instrument and it has no upper limit on the value which can be put on a blank cheque.

Respected Sirs,

Hitenbhai Parekh Proprietor-Parekh Enterprises vs. State of Gujarat and Anr. (06.10.2009 - GUJHC)

…Section 87 Effect of material alteration-

Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;

Alteration by indorsee -

And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.

The provisions of this section are subject to those of Sections 20, 49, 86 and 125.

…

9.1 Any material alteration of a negotiable instrument, however, renders it void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless the alteration was made in order to carry out the common intention of the original parties. The provision to that effect contained in Section 87 has to be read in harmony with Section 20 which permits and authorizes the holder of a negotiable instrument to complete the instrument for any amount and renders the drawer liable to the holder in due course to the extent of the amount intended by the drawer to be paid under such instrument. It is clear from plain reading of provisions of Section 20 and 87 that the injunction, under the pain of invalidating a negotiable instrument, against alteration operates only after an inchoate instrument is completed or a complete instrument falls within the definition of 'negotiable instrument'. Therefore, the legally permissible completion of an inchoate instrument cannot be construed as material alteration of a negotiable instrument.

10. The above analysis of the statutory provisions leads to the conclusion that, when a cheque bearing only signature of the drawer is delivered and received by a payee for the discharge, in whole or in part, of any debt or liability, there is an implied authority for the person receiving such cheque to complete it by filling the blanks and the amount having been filled up under such implied authority would be the amount intended by him to be paid thereunder.

The orders of various Hon HC and even Hon SC are full of such gems, what can be done ?? There was a great amount of enthusiasm within HC/SC judges to see the related provisions of NI Act from the payees perspective, but now all that is changing, a start has been made by hon SC itself with that jurisdiction order. Very soon SC will cleanse itself by changing its stand on....

1. Date of Drawn......It is the date on which cheque was delivered.

2. No S.138 if collateral security is with the payee...All related Bank cases must go instantly.

3. Liability Amount is to be proved by complainant. 

Respected Sirs,

Anil Kumar Sawhney vs. Gulshan Rai (11.10.1993 - SC)

14. An offence to be made out under the substantive provisions of Section 138 of the Act it is mandatory that the cheque is presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. It is the cheque drawn which has to be presented to the bank within the periods specified therein. When a postdated cheque is written or drawn it is only a bill of exchange and as such the provisions of Section 138(a) are not applicable to the said instrument. The postdated cheque becomes a cheque under the Act on the date which is written on the said cheque and the six months period has to be reckoned for the purposes of Section 138(a) from the said date.

With Regards and Thanks,

Mr Mittal, I have complete database of these gems by various HC/SC. This order and similar other orders even by Hon SC are perverse and illegal...Pl refer to S.68 of the Indian Stamp Act.....This section is a direct slap on entire legal fraternity on this yellow jaundiced color......how can courts pass such illegal orders...and how can counsels accept the same.......Professional incompetence is one such reason on the part of advocates to accept such orders....moreover read S.46, S.118(b) and S.138(a) of NI Act together with S.68 of The  Indian Stamp Act and educate this forum on your conclusion..

Respected Sirs,

I am not competent/educated enough to educate this forum on my own conclusion, whatever decided by the honorable courts and  are in my knowledge, I have brought to the notice of this forum.

Other experts and Sirs may give their views/opinions on this point, if they like.

With Regards and Thanks,

In a case, one person has left blank cheques duly signed for his chaild, staying farawaya abroad or a choosen benificiary. He presumed that his child, even after late arrival, can, at least, lay hand on all bank balances at a time when he would be know more.

He took such action for the following reasons(1) Even operation of joint account after demise of one of either is made very complecated since all bank employees in his capacity is a rule maker in present scinario in our country(2) Experiences revealed that operation of a joint locker is equally difficult for the reasons, given out in(1) earlier. (3) It is  better to dispose off all immovable assets & convert them into cash at late stage of life & the very question asked here in First Paragraph has come up to see that the Child or the choosen beneficiary can receive the wealth left behind, with least wastage of tme & wasteful running around.

Benificiary will pay all due taxes to Govt as per IT Act.

Kindly advice me on the issue if this is a hurddle free option.