Legality of providing a cheque along with a promissory note

Querist : Anonymous (Querist) 25 May 2021 This query is : Resolved
Kindly advice me, whether there is any legal complication in providing a promissory note along with a signed blank cheque (as an additional security) for taking a loan of 25 lakh from a friend urgently.

The proposed draft is, as follows:

On demand, I promise to pay to Mr X, address or order the sum of Rs 25 lakh (Rupees --- only) with 9 per cent interest, from the date hereof until payment, for value received.

To facilitate the repayment of my debt on account of this instrument I am enclosing an undated but signed cheque no ----- of SBI, at ----, as well which would serve as an alternate security as well.

Dated this the day 21st day of May 2021

Sd/
Mathew Varghese
Address

Kindly advice me whether I need to make any change in the draft..

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T. Kalaiselvan, Advocate (Expert) 25 May 2021
A Security Cheque is a cheque issued to a drawee as security or surety, for using in case the drawer fails to meet the future obligations arising during course of business or any other such transactions.
The interest rate 9% is to be specifically mentioned that whether it is per month or per annum.
A promissory note is a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date. A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer's signature.
A promissory note includes a specific promise to pay, and the steps required to do so (like the repayment schedule).

P. Venu (Expert) 26 May 2021
There is no harm in providing the cheque, if so insisted by the lender. But the unsigned cheque provides no additional security. Provisions NI 138 are not applicable cheque issued as security.