LCI Learning
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Rohit Kumar   19 December 2019

Cheque is not for Security or Collateral.

i want to know that under which judgement hon'ble SC/HC had clarified/order that a cheque is the mode of payment or repayment. No one can take blank security cheque for guarantee or collateral purpose..


Learning

 6 Replies

SHIRISH PAWAR, 7738990900 (Advocate)     19 December 2019

Dear sir,

Taking security cheque is business practice and there is no judgment restricting it.

Regards,

G.L.N. Prasad (Retired employee.)     19 December 2019

It is the lender's right to get adequate and enough security for repayment of amount lent, and it all depends only on borrower's willingness.  There are no such judgments on the mode of repayment, and in practice, if the repayment is through cheque the evidence value is strong and substantial rather than paying in cash.

G.L.N. Prasad (Retired employee.)     19 December 2019

Consideration is the presumption, and NI Act gives authority to fill the cheque to the payee.  (inchoate instrument)

saherin khan   21 December 2019

Dear Sir, it seems there has been a misunderstanding. The Hon’ble Apex Court in the case of Bir Singh vs Mukesh Kumar held that a blank cheque after signing if it is voluntarily presented for some payment, the payee would fill up the amount and other particulars and such a situation would not invalidate the cheque. The burden would still lie over the accused to prove that cheque wasn’t in the discharge of a debt or liability by adducing of evidence. As our learned expert has already mentioned earlier taking security cheque is a business practice and as such, there is no judgment where it is restricted as it acts as a collateral- https://bit.ly/34IsjZ6

 

G.L.N. Prasad (Retired employee.)     21 December 2019

Originally posted by : saherin khan

Dear Sir, it seems there has been a misunderstanding. The Hon’ble Apex Court in the case of Bir Singh vs Mukesh Kumar held that a blank cheque after signing if it is voluntarily presented for some payment, the payee would fill up the amount and other particulars and such a situation would not invalidate the cheque. The burden would still lie over the accused to prove that cheque wasn’t in the discharge of a debt or liability by adducing of evidence. As our learned expert has already mentioned earlier taking security cheque is a business practice and as such, there is no judgment where it is restricted as it acts as collateral- https://bit.ly/34IsjZ6

Absolutely correct.specific to the query. 

(There was a distraction in replies on as to whether a judgment by the same Judge can be recalled or revisited for patent errors and not on clerical/arithmetical mistakes. This new issue is not pertinent to this specific query)
 

 

P. Venu (Advocate)     05 January 2020

It appears that the query in the light of the criminal proceedings as provided under Section 138 of the Negotiable Instruments Act. Now it is more or less the settled position that a blank sgned cheque if given as collateral security when filled up and presented for collection and if dishonoured does not fall under the presumption under Section 139 and hence no action is posible under Section 138. As regards to blank unsigned cheque issued in lieu of a debt or loan the legal position is far from settled.

There is larger problem in that more than 90% of such proceedings are sham. The complaints are false and concocted and the defence lawyers adopt inchoate defence. These proceedings have become a convenient tool for the blade mafia and loan sharks masquerading as Chit Funds. Courts have been rendered helpless and the decisions (even of the Supreme Court) are inconsistent.


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register