Table of Contents
Introduction
Cheque transactions are among the most common methods of making payments in the present times, whether they are commercial or personal dealings. The Negotiable Instruments Act, 1881 also known as the NI Act, 1881 provides legal protection to cheque holders. The act also aims to maintain trust and credibility in banking transactions. Section 138 of the NI Act, 1881 was introduced to penalise the dishonour of cheques due to insufficient funds or other specified reasons.
Certain issues arising before the court is whether a person can be convicted under Section 138 of the NI Act when the cheque presented for payment was originally a blank signed cheque. Most of the time, accused persons argue that they had issued the blank signed cheque and the complainant misused it by filling in the amount or date without authority.
However, the mere fact that a cheque was blank when signed does not automatically relieve the drawer from liability. Indian law accepts the validity of blank signed cheques in certain situations and provides legal presumptions in favour of the cheque holder. However, the accused also has the right to challenge these presumptions by showing that there was no legally enforceable debt or liability for which the cheque was issued.
What is a Blank Signed Cheque?
A blank signed cheque refers to a cheque in which the drawer has signed the cheque but left the other details incomplete, such as:
- Amount payable
- Date on which the cheque is to be issued
- Name of the payee
- Other particulars
Usually, these kinds of cheques are issued as security or as assurance of repayment of a loan or other financial transactions. For instance, a borrower may provide a blank cheque to a moneylender as security at the time of taking a loan. This may allow the lender to recover the outstanding amount if the borrower fails to repay the loan.
A blank cheque is not an unsigned or incomplete cheque. The signature of the drawer is the most important element because it indicates consent and authorisation for payment.
The main legal question is:
If the drawer voluntarily signs and hands over a blank cheque, can the holder fill the details and present it for payment?
The answer depends upon the circumstances of the transaction and the application of statutory presumptions under the NI Act.
Is a blank signed cheque legally valid?
Yes, a blank signed cheque is legally valid under the Negotiable Instruments Act, 1881.
Section 20 of the Negotiable Instruments Act, 1881 deals with the inchoate stamped instruments. It legally provides that when a person delivers a stamped instrument, he gives an authority to the holder to complete it for an amount not exceeding the amount covered by the stamp.
However, although section 20 specifically refers to stamped instruments, courts have recognised that a person who voluntarily signs the cheque and delivers it cannot escape the liability by saying that certain details were filled later.
In Bir Singh v. Mukesh Kumar (2019), the Supreme Court held that the person who signs the cheque and hand over it to another person gives implied authority to fill it. The particulars of a cheque, if filled by the payee, do not automatically invalidate the cheque if it is signed voluntarily by the drawer. It also clarified that even if the accused claims that the cheque was blank when signed, this defence alone is insufficient. The accused must show evidence that the cheque was not issued towards a legally enforceable liability. Therefore, a signed blank cheque is not automatically invalid. The person who signs the cheque must understand that handing over a signed cheque creates legal consequences.
However, this does not mean that every blank cheque case will result in conviction. The complainant must still establish the existence of a legally enforceable debt or liability.
Can the Payee fill the Amount and Date?
Yes, if the drawer voluntarily signs and hands over the cheque to the payee he/she can fill the remaining details and present it for payment.
The reasoning behind this principle is that the drawer by voluntarily signing and delivering the cheque, authorises the holder to complete the instruments.
If the payee fills an unreasonable amount, commit fraud, or misuses the cheque for a liability that does not exist, the accused may rebut the presumption and avoid liability.
Applicability of Sections 20, 118, 138 and 139 of the Negotiable Instruments Act
Section 20 – Inchoate Instruments
This section provides legal recognition to incomplete negotiable instruments. According to this provision, when a person signs and delivers an incomplete instrument, such person authorises the holder to complete it. The person signing remains liable on the instrument to the extent permitted by law.
According to Section 20, in cases of blank cheques, the drawer cannot simply deny liability by stating that the details of the cheque were filled by the payee or by another person.
Section 118 – Presumption Regarding Negotiable Instruments
This section creates certain presumptions regarding negotiable instruments.
Section 118 creates presumptions regarding:
- The cheque was drawn for consideration
- The cheque was issued on the date mentioned on it
- The holder obtained the cheque in a lawful manner.
Section 138 – Dishonour of Cheque
This section makes the dishonour of a cheque a criminal offence when:
- A cheque is issued for the discharge of a legally enforceable liability
- The cheque is returned unpaid by the bank due to some reason recognised under law
- The payee sends a legal notice within a prescribed period
- The drawer fails to make payment within the statutory time limit
Section 139 – Presumption in Favour of Holder
This section provides that the court shall presume that the holder of the cheque received it for the discharge of a legally enforceable debt or liability.
This presumption is a significant feature of cheque dishonour cases. Once the accused admits his signature on the cheque, the burden shifts upon him to rebut the presumption.
The accused does not always have to prove his defence beyond reasonable doubt. He only needs to establish a probable defence based on evidence or circumstances.
Presumption in Favour of the Holder of the Cheque
Under Section 139 of the NI Act, once the execution of the cheque is admitted by the accused, the court presumes that the cheque was issued for the discharge of a legally enforceable debt or liability.
This presumption of law operates in favour of the complainant because proving the complete details of the financial transaction can be difficult. That’s why, the law places the initial burden of proof on the accused.
For example:
A person signed a cheque and hands over it to another person. The cheque is dishonoured due to insufficient funds. During trial, the accused admits that the signature on the cheque belongs to him but the cheque was blank and was misused. The court presumes that the cheque was issued for a valid debt. The accused must then provide evidence to rebut this legal presumption of court.
The accused can prove that:
- There is no liability exists
- The Cheque was misused
- The amount mentioned was incorrect
Burden of Proof on the Accused
Normally, in criminal cases, the prosecution has the burden of proving guilt beyond reasonable doubt. However, cheque dishonour cases operate differently because presumption are created under Section 118 and 139 of the NI Act.
Once the complainant proves:
- The cheque belongs to the accused
- The signature on the cheque is admitted
- The cheque is dishonoured
- Legal notice was properly issued
After that, the court raises a presumption that the cheque was issued towards a legally enforceable debt.
Now, the burden of proof shifts to the accused. The accused can rebut the presumption through:
- Direct evidence
- Documentary evidence
- Cross-Examination of the complainant
The accused is not required to prove his defence beyond reasonable doubt. The standard is that of preponderance of probabilities. This basically means the accused only needs to show that his explanation is more likely to be true than false.
Key Supreme Court Judgments
- Bir Singh v. Mukesh Kumar (2019) 4 SCC 197
Facts:
The accused has signed a blank cheque which was later filled by the complainant. The argued that the cheque was misused by the complainant.
Supreme Court held that:
- A person who voluntarily signs and hands over a cheque can escape liability merely because the cheque was filled by another person
- The payee can fill necessary details in a signed cheque
- A blank signed cheque is not invalid
Importance:
The court observed that once a cheque is signed and voluntarily handed over, the presumption under section 118 and 139 of the NI Act applies. And the defence of a blank cheque cannot defeat a complaint under Section 138.
- Rangappa v. Sri Mohan (2010) 11 SCC 441
Facts:
The accused challenged conviction under Section 138 by arguing that the cheque was not issued towards legally enforceable debt.
Supreme Court’s Decision:
The Supreme Court held that Section 139 includes a presumption regarding the existence of a legally enforceable debt or liability.
The court clarified that:
- The presumption under Section 139 is mandatory
- The accused can rebut it by raising a defence
Importance:
The judgment strengthened the position of cheque holders by recognising the presumption in their favour.
- Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16
Facts:
The accused denied liability after dishonour of cheque proceedings were initiated.
Supreme Court’s Decision:
The Court held that statutory presumptions under Section 118 and 139 are mandatory. However, these presumptions are rebuttable. The accused can challenge it by producing the evidence.
Importance:
The judgment established that courts must presume the existence of consideration and liability unless the accused proves otherwise.
- Basalingappa v. Mudibasappa (2019) 5 SCC 418
This judgment explained how an accused can rebut the presumption under Section 139.
Supreme Court’s Decision:
The Court held:
- The accused can rebut the presumption through direct and circumstantial evidence
- The accused does not need to prove his defence beyond reasonable doubt
- The accused only needs to raise a probable doubt regarding the non-existence of debt
Importance:
This case balances the rights of both parties by protecting genuine cheque holders while allowing accused persons to establish misuse or absence of liability.
- Kalamani Tex and Another v. P. Balasubramanian (2021) 5 SCC 283
Facts:
The accused claimed that the cheque was not issued for any legally enforceable debt.
Supreme Court’s Decision:
The Supreme Court held that once signatures on the cheque are admitted, the presumption under Sections 118 and 139 comes into operation. The accused must provide convincing evidence to rebut this presumption.
Importance:
The judgment reaffirmed that merely claiming misuse of a signed cheque is insufficient without supporting evidence.
Common Defences in Blank Cheque Cases
Although a blank signed cheque can create liability, the accused has several possible legal defences.
1. No Legally Enforceable Debt
The accused may argue that there was no legally enforceable debt or liability when the cheque was presented.
Example: – A person gives a cheque as a security deposit, but the transaction is complete and no payment is due. If the cheque is misused later, the accused may challenge the claim.
2. Misuse of Security Cheque
The accused may argue that the cheque was issued only as security deposit and was presented without any legally enforceable liability.
However, courts have repeatedly held that even a security cheque can attract Section 138 if a legally enforceable debt exits.
- Fraudulent Filling
If the complainant changes important details without authority, the accused can challenge the validity of the cheque.
4. Lack of Financial Capacity of the Complainant
The accused may question whether the complainant had the financial ability to provide alleged loan amount.
5. Wrongful Amount Mentioned in the Cheque
If the complainant fills an amount greater than the actual liability, the accused can challenge the claim by producing evidence.
Practical Examples to Explain the Law
Example 1: Blank Cheques Issued for Loan Repayment
A borrows 10 lakh rupees from B and provides a blank signed cheque as security. After the repayment period expires, A is not able to repay the loan. B fills in the cheque amount and date and presents it to the bank. The cheque is dishonoured due to insufficient funds.
In this situation:
- The cheque was voluntarily signed and handed over by A.
- B had legally enforceable claim for repayment
- Presumption under Section 118 and 139 of the NI Act will operate in favour of B
A cannot escape liability merely by saying that the cheque was blank when he gave it.
However, A can defend himself by proving that the loan never existed or that the amount claimed by B is incorrect.
Example 2: Blank Cheque Misused Without Any Debt
A gives a signed blank cheque to B as a security during a business arrangement. Later, the business relationship ends and there is no outstanding payment between them. B fills in a large amount and presents the cheque.
In this situation:
- A may challenge the claim by proving that no legally enforceable debt existed.
- Evidence such as agreements, payment records, or communication between parties can help rebut the presumption.
If A successfully proves that there was no liability, conviction under Section 138 may not follow.
Example 3: Security Cheque and Existing Liability
A takes goods from B on credit and provides a signed cheque as security. A fails to clear the outstanding amount. B presents the cheque, which gets dishonoured.
The fact that the cheque was called a “security cheque” will not automatically protect A.
If a legally enforceable debt existed on the date of presentation, Section 138 can apply.
Frequently Asked Questions (FAQs)
1. Is giving a blank signed cheque illegal?
No. Giving a blank signed cheque is not illegal. However, signing and handing over a blank cheque creates legal consequences because the holder may fill in the necessary details and present it for payment.
The drawer should exercise caution before issuing signed blank cheques.
2. Can a person be convicted under Section 138 for issuing a blank signed cheque?
Yes, a person can be convicted under Section 138 of the NI Act even if the cheque was blank when signed, provided that:
- The cheque was voluntarily issued
- A legally enforceable debt or liability existed
- The cheque was dishonoured
- The statutory requirements of Section 138 were fulfilled
3. What if the accused claims that the cheque was misused?
A claim of misuse alone is not enough.
The accused must provide evidence showing that:
- The cheque was not issued towards any liability
- The complainant misused the cheque
- The transaction claimed by the complainant is false or doubtful
The accused can rebut the presumption under Section 139 through evidence.
4. Can the payee fill the amount in a signed blank cheque?
Yes. If the cheque was voluntarily signed and handed over, the payee can generally fill in the required details.
The Supreme Court in Bir Singh v. Mukesh Kumar recognised that filling up the particulars of a signed cheque does not invalidate it.
5. Does a security cheque attract Section 138 of the NI Act?
Yes, a security cheque may attract Section 138 if there is an existing legally enforceable debt or liability on the date when the cheque is presented.
However, if there is no liability and the cheque is misused, the accused may challenge the complaint.
6. Who has to prove that a blank cheque was misused?
Initially, once the signature on the cheque is admitted, the law presumes that the cheque was issued for a valid liability.
The accused must rebut this presumption by producing evidence showing probable misuse or absence of debt.
7. Is handwriting on the cheque important for deciding liability?
No. The fact that someone else filled the cheque details does not by itself invalidate the cheque.
The important factor is whether the cheque was signed voluntarily and whether a legally enforceable liability existed.
Conclusion
The issue of blank signed cheques under Section 138 of the Negotiable Instruments Act involves a balance between protecting genuine financial transactions and preventing misuse of cheque facilities.
Indian law does not treat a blank signed cheque as automatically invalid. When a person voluntarily signs and delivers a cheque, the law recognises that the holder may complete the necessary details. Sections 20, 118, and 139 of the Negotiable Instrument Act create important presumptions in favour of the holder of the cheque.
The Supreme Court has consistently held that the mere defence that a cheque was blank at the time of signing is not sufficient to escape criminal liability. In cases such as Bir Singh v. Mukesh Kumar, Rangappa v. Sri Mohan, and Kalamani Tex v. P. Balasubramanian, the Court has clarified that once execution of the cheque is admitted, the burden shifts to the accused to rebut the statutory presumption.
At the same time, the law do not create automatic guilt for every dishonoured cheque. The complainant must establish that the cheque was issued towards a legally enforceable debt or liability. The accused has the right to prove that the cheque was misused or that no liability existed.
Therefore, a blank signed cheque can lead to conviction under Section 138 of the Negotiable Instruments Act, but only when the legal requirements are satisfied and the accused fails to rebut the presumptions available under the law.
