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Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     20 February 2010

Collateral or Blank cheques cannot bounce: HC

Dear All,

This was reported in  "Times of India,  dated 20 February'2010, Mumbai edition, page 01".
(read article, as reproduced below)




1.  N.I.Act is not applicable to Blank or Post-Dated cheques.

2.  N.I.Act is not applicable to third-party cheques given towards debt repayment of the original debt of another person.

3.  Anticipatively,  in near future,  all institutional (Bank, NBFC, Credit Society, etc...)  loan recovery cheques may have to be filed before the "Debt Recovery Tribunal"  and may not be covered under the N.I.Act.   - OR -   even worse, since the loan is not a total debt, then maybe classified as a Civil debt, recovery of which may be filed before the Civil court,  to recover the loaned amount.

4.  This may be a Judicial ploy  to segregate or weed out or reduce the huge backlog of  N.I.Act cases, which run into lakhs of cases, just in Mumbai alone.


Keep Smiling .... Hemant Agarwal



Collateral cheques can’t bounce: HC

(reported in  "Times of India,  dated 20 February'2010, Mumbai edition, page 01")


Mumbai:   The Bombay high court has ruled that banks cannot prosecute borrowers under the stringent anti-cheque bouncing laws if blank post-dated cheques issued by them as collateral security are dishonoured.


   “It is doubtful if the provisions of Section 138 of the Negotiable Instruments Act can apply to a case in which a blank or post-dated cheque is obtained by a bank or money lender before or while sanctioning or disbursing loan amounts as security for the loan,’’ said Justice P R Borkar. The order is likely to come as a huge setback to lending agencies who ask borrowers to deposit blank post-dated cheques as security.


   “Law-makers must not have intended or imagined that money lenders or banks would obtain blank or post-dated cheques while sanctioning/disbursing loans as securities and would use them to make debtors/borrowers repay the loan under threat of prosecution and punishment (under the cheque-bouncing law),’’ added the judge.


   The court upheld the acquittal of Ahmednagar resident Rajendra Warma, who was prosecuted after a blank cheque issued by him for a loan was dishonoured.


‘Law is not meant for speedy loan recovery’


Mumbai: The Bombay high court has upheld the all-clear to Ahmednagar resident R a j e n d r a Warma in a blank cheque bouncing case. Ramkrishna Urban Cooperative Credit Society (RUCCS) had given a loan of Rs 2 lakh to Warma in 2000.     Warma had issued 10 blank post-dated cheques at that time as security. One of these cheques, dated January 2008, bounced, following which RUCCS lodged a criminal complaint against Warma.   The magistrate’s court held that Warma was not guilty under the Negotiable Instruments Act and acquitted him. It also held that while Warma had receipts to prove that he had repaid the entire loan amount in 2005, the bank failed to produce records after 2003.


   The object of the law was “to encourage all major transactions, including commercial or business transactions through cheques, and to enforce credibility and acceptability of cheques in settlement of liability in general’’, the court said, adding: “The object was not to provide effective and speedy remedy for recovery of loans.’’


 24 Replies

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     20 February 2010

This judgment shall definitely reduce the harassment in various false cases but shall adversly affect eclonomi cenvornment of the cournty which is based upon post dated cheques.



Sunil (Manager)     17 October 2010

How does the judgment in the Warma case apply in my wife's situation :


Here is my wife's situation :

Since my brother denied me any rights into my father's hereditary property after my father passed away, I filed a case in the High Court for getting my share of the hereditary property. My brother even denied me the access to all my important documents, contained in a briefcase which was in the safe custody of my father.  He is now misusing those documents, including my bank cheque (some blank signed checks) books to forge my signatures and depositing cheques in his name.  These are bank accounts which have not been used for the last 10 years.  My brother even may have gotten hold of some blank signed cheques which were returned by financial institutions whose loans I paid off and which were returned by registered mail to my father's address.  Can he fill out those balnk signed cheques in his name?

He is threatening to sue me under 138, by making up stories that he had given personal loans to me and my cheques are bouncing now.  What can I do to protect myself?

From your article, it appears that blank signed cheques, which he may have obtained fraudulently, are in any case not valid instruments and section 138 does not apply to them.

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     18 October 2010

1.  Section 7 of the N.I.Act = Maker or Drawer of Cheque and NO OTHER PERSON.
A "blank"  cheque instrument is the "property" of the Drawer.
A blank cheque is a cheque without any "material alteration".  Such "material contents"  can ONLY & ONLY be filled by a "Maker or Drawer of Cheque and NO OTHER PERSON"

HOWEVER  "no other person"  COULD include the legal representatives of the "drawer"  (i.e. his authorised staff, relatives and so on)

2.  Receipt of Blank cheque by "drawee"  EQUALS to  = Violation of Section 7 of N.I.Act
A drawee cannot retain or hold on to somebody elses "property alias blank cheque"
A "filled" cheque  can be held by the "drawee", in the capacity of a Trustee,  till executed (i.e. deposited for encashment)

3.  IF a "drawee"  fills in the cheque with his own hand-writing THEN he himself will be termed as a "MAKER or DRAWER".  It would also come within the parameter of "material alteration" by drawee as defined under the N.I.Act.

4.  Drawee holding blank cheque DOES NOT IMPLY "ANY"  DEBT.  To imply a legally enforceable debt,  some component of Contract Act has to come to play.  That is a debt-raising transaction has to take place via a  sale-purchase Bill or a duly complied Agreement or Hundi and so on ....

IF such contract or transaction (documentarily) cannot be proved by the prosecution (drawee of cheque),  then there is no "Legally enforceable debt") and such transaction shall be further violative  (or say ILLEGAL non-enforceable debt)  of the Income Tax Act and a host of other acts.

A cheque given in lieu of a friendly loan or a gift or indirect colored extortion etc....  is not a "legally enforceable debt or liability"

Mere holding of a cheque  "DOES NOT"  imply  ANY legally enforceable debt or liability.

5.  HENCE,  ab-initio,  receipt * holding of blank cheque + filling in material (contents) in cheque by drawee's hand-writing + non-compliance of provisions of contract act ALL EQUALS TO  "NON-NEGOTIABLE INSTRUMENT"  and such cheque cannot be used for prosecution u/s's of the N.I.Act.

6.  Contravention or Violation of Law is an illegality and rectification of an illegal act cannot make it legal.

Keep Smiling .... Hemant Agarwal

Sunil (Manager)     22 October 2010

As i posted on another thread under Property Laws :


I am getting ready to file a FIR against my brother for stealing the cheques, cheating, forgery, breach of trust, blackmail and extortion.

Then, according to advice at :


attach the FIR to my strong reply to the legal notice for the bouncing of cheques.

But, I am also confused, because according to the article at :


the Bombay High court has clearly stated that section 138 does not apply to a blank, postdated cheque obtained at the time of giving a loan, in the first place.  So, even if my brother claims that I gave the post dated blank cheque to him (which is clearly a lie) - in which he has filled out an arbitrary amount, will the lower court even accept his petition under section 138.

DEFENSE ADVOCATE.-firmaction@g (POWER OF DEFENSE IS IMMENSE )     07 November 2010

If you can prove age of writting no case can be made out against you and you can file counter criminal action under various provisions.

Sukhvendra singh (M.D.)     09 November 2010


         A false 138 case is filed  against party A by party B and the chq. has been falsely implanted in the case

         because party A was having good friendship in past with party B but currently party  B is not having any type of relationship with party A and due to good relationship party B was in regular touch of party A and in past took a blank chq. signed by party A to deliver to a party for payment but at that time the party went out of station and later party A  forgot to recollect the chq. from party B.( N.B. the payment to the party was given through different chq. ) Now the chq. presented in the court has signature, amount filled in figure & words by party A which is true but the payee name and date are in writing of party B and the time difference between these two writings is of 2.5 years approx.

       Now I  want a expert opinion from a agency ( Say FSL etc) against below mentioned points and court has taken coglegence and party A has been granted bail and at this stage party A has  requested to court for expert opinion about chq. for below mention points: 

       a)        Handwriting on the chq are of how many persons ?

         b)      Whether  the different handwriting on the chq. is of same time if no then how much time difference

                   is there between them.

         c)       Can it be found by carbon dating process or any other method and that report is legally valid or not.    

       the council of party B has stated to court that it is not possible at this stage.

    Kindly reply to me at an earliest for so and please provide any ruling in support of so.




Sunil (Manager)     14 November 2010

What steps can be taken to prove the age of handwriting on a blank cheque?


 Also, what steps can be taken to prove the difference in handwriting of the signature of the account holder and the rest of the entries made by the payee in their handwriting.

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     14 November 2010

to,  Sunil (manager) :

1.  If the Drawee (complainant)   has filled in the Drawer's blank cheque in his own handwriting, THEN the drawer may get a specimen of the complainant's writing as well as the photocopy of the cheque and submit it to a registered hand-writing expert (only via a court order after a proper application to that affect has been moved).  The applicant has to bear the cost of the opinion of the hand-writing expert,  which tentatively is approx. 5000 - 10000 in Mumbai.

2.  However, during trial, using art of cross-examination, if the complainant admits to filling up the cheque in his own handwriting, then you have a near-win situation in the 138 matter.  If the complainant is still very much elusive then move application as mentioned in point no. 01.

3.  Further, it is better to concentrate on the factor of  "legally enforceable debt/liability".   You have to provided conclusive proof that the cheque payment is  NOT  for any  "legally enforceable debt"  and that the cheque was fraudently taken away from your possession.  Compell  the complianant to show as to how it is a legally enforceable debt.  Ask him to produce the contract / agreement / Bills / Invoice / Hundi or whatever,  which shows that the said cheque issued was towards payment of the contract / agreement / bills / invoice / hundi of whatever.

Keep Smiling .... Hemant Agarwal

Jamai Of Law (propra)     14 November 2010

Your quite: A blank cheque is a cheque without any "material alteration".  Such "material contents"  can ONLY & ONLY be filled by a "Maker or Drawer of Cheque and NO OTHER PERSON"



But now a days banks (drawee) don't  fill "material contents" as a hand written text, but are able to print it!!!



Banks (drawee) take blank cheque (as a collateral) for the borrower  with his signature and fill the details partially as a print/typing, and only 'date' is not filled up.



The same printing can be reused to fill-up rest of the details such as date.



There is no technology to prove that 'date was typed by the bank (drawee)laterwards!!!! 

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108)     14 November 2010

to,  "Jamai of Law" :

APOLOGIES,  Untrue to your intentional name, A Jamai of a Banker does not automatically become a Banker.  Similarly your question also portrays your vast obivious limitation to the knowledge of Law.

your quote :
" There is no technology to prove that 'date was typed by the bank (drawee)laterwards!!!!  "

WITH proper application of Mind,  IT won't take technology to prove that data etc.... was typed by the bank.  Common sense & Cross examination techniques is sufficient.  As a routine the bank's do what you have mentioned, with several other borrowers.   You may find out any one such borrower and produce him as evidence to state that his blank cheques too are typed by the Bank.

a)  During Trial,  Cross examine the Bank  LR, asking him if the cheques taken by the Bank from the Borrower, were blank or filled in.

b) IF the Bank LR says that it was filled in by the accused-borrower,  THEN produce the other witness-borrower as witness to the common practice adopted by the bank, pertaining to his blank cheques.  The other customer-borrower will state that he too had issued Blank cheques to the bank and the Bank has typed the material on the blank cheque.

c)  IF the Bank LR says that the borrowers cheque was blank and was typed-filled in by the Bank,  THEN there is no case left u/s 138 and bank has to seek recourse under the CPC (Limitation Act time permitting).
OVERALL, the bank LR won't dare lie in the court for fear of perjury and obivous punishment  without trial..

INCIDENTALLY,  for their EMI's,  some Banks resort to a  "ILLEGAL"  automatic bank debit from borrowers bank account, using a pre-consent authority from the borrowers.  The borrower (account holder) may at anytime direct (in writing) his bank to stop the automatic bank debit and the Lender Bank cannot do anything about it nor file any case under the N.I.Act.

INCIDENTALLY,  in such bank loan cases,  to get around the N.I.Act parameters (legal dragnet),  a drawer may sign on the cheque at the usual place  and also put the current date just below his signature, in dd/mm/yyyy format.  This  "drawn"  cheque will have a legal validity of 6 months from the date the cheque was signed and drawn  AND   ".NOT."  FROM THE DATE PUT ON THE CHEQUE ITSELF (upper right corner).  A legal glitch,  but contradictions to above are challenged.

Keep Smiling .... Hemant Agarwal

sougata mitra (Manager (Law))     08 July 2011

The judgment appears to be per incuriam. See Ashok Yeshwant Badave AIR 2001 SC 1215

which is a 3 judge bench decision of the SC. Also see Goaplast Pvt. Ltd. AIR 2003 SC 2035 as also

other decisions of the supreme court viz. Rangappa v. Sri Mohan AIR 2010 SC 1898. Has the Warma judgment of High court been appealed against ?


S. Mitra

Puneet Bachchan (LAW STUDENT)     27 September 2011

Sounds like the banks are gonna run like anything... one of the great judgement so far of near future...

DEFENSE ADVOCATE.-firmaction@g (POWER OF DEFENSE IS IMMENSE )     27 September 2011

Most of such things can come out only in cross , if not agitated at trial court than no use.

The ahamadnager citation is defferent since the money was paid and than cheque was bounced.


So complainant need not be over confident , it will be next to impossible to win any NI 138 case if contested aggressively by accused from day one since the case has to be proved beyond doubt at many points that is a) there was legal liability b) cheque was actually given by the accused from his account c)cheque was presented during stipulated time to the bank d) cheque was actually returned due to insufficient funds e) legal notice was given f) such legal notice was received g) thereafter proper pleadings are made and documents attached at first instance while filing the case.
Even if the presumptions are there in NI ACT the accused has legal right to rebut them which is more simple , sure and easy., and complainant make mistakes on one or more points/ steps., in over confidence.

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