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When amount is borrowed on the security of blank cheque , the lender has authority to fill up and present it before bank : Kerala High Court

  • January 20, 2025
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Kerala High Court in Nakulan v. State of Kerala and another [CRL.A NO. 1739 OF 2007] held that When amount is borrowed giving a blank cheque as security for repayment, on default of repayment, the holder of the cheque gets authority to fill it up and to present it before the bank – So, if at all it was issued without putting any date, when the repayment was defaulted, the complainant had every authority to fill up the date, and to present it before the bank.

The appellant advanced an amount of Rs. 200,000/- on the security of cheque dated 10.10.2005. On presentation of the   cheque, it was  returned dishonoured for the reason ‘insufficient funds’.  Though lawyer notice was sent intimating dishonour of the cheque and demanding the cheque amount, the amount was not repaid. Since the lender was working abroad, his brother filed the complaint on the strength of his power of attorney. Before trial court ( Judicial Magistrate of First Class) under Section 138(b) of Negotiable Instruments Act 1881

At the trail , the borrower had admitted receipt of Rs.2 lakh and issued  cheque in order to secure repayment of that amount. However he contented  that a blank cheque given by him to the complainant for business purposes, was misused for filing this complaint. No defence evidence was adduced.  The borrower also contented before the trail court that the power of attorney holder had no authority to present the cheque before the bank or to issue lawyer notice under Section 138(b) of the NI Act.  the trial court acquitted the accused( borrower).

The accused is admitting receipt of Rs.2 lakh from the complainant on 05.04.2004, and also issuance of Ext.P1 cheque in order to secure repayment of that amount. So, if at all it was issued without putting any date, when the repayment was defaulted, the complainant had every authority to fill up the date, and to present it before the bank. Otherwise, that cheque is nothing but a worthless paper. When amount is borrowed giving a blank cheque as security for repayment, on default of repayment, the holder of the cheque gets authority to fill it up and to present it before the bank. Otherwise, there is no purpose in receiving the cheque as a security for repayment.

There is nothing to show that Ext.P1 cheque was issued by the accused under any threat or coercion and Ext.P7 reply notice clearly shows that, he voluntarily issued that cheque to the complainant. There is nothing to show that there was an understanding to the effect that, the amount would be repaid on or before 05.04.2006 only, so as to say that, presentation of the cheque before the bank in October 2005 was premature.

For presenting the cheque before the bank of the payee, for encashment through his account, physical presence of the payee is not necessary. There is no provision in the NI Act which says that, only the payee can present the cheque before the bank. The Reserve Bank of India guidelines also do not prescribe any such restriction in presenting/depositing the cheque before the bank for encashment/collection. Even Kiosks for depositing cheques are seen installed in banks for depositing cheques, for convenient and efficient way of encashing cheques. These self service machines known as Cheque Deposit Machines (CDMs) allow users to deposit cheques at any time, without the assistance of bank staff. The bank may not and cannot verify who deposited thatcheque, the payee himself or any other person, on his behalf. That itself will show that physical presence of the payee is not necessary for presenting/depositing a cheque before his bank for encashment/collection. The power of attorney holder can institute suit.

 

Cases Referred:

Bir Singh v. Mukesh Kumar [2019 (1) KLT 598(SC)]

Moideen v. Johny (2006 KHC 1055),

Damodar S. Prabhu v. Sayed Babalal H. [2010 (2) KHC 428] ( SC)

Kaushalya Devi Massand v. Roopkishore Khore [2011 KHC 281] ( SC)