Blank Cheque and Promissory note

According to Section 138 of the NI Act, the drawer of a cheque is liable for criminal and civil action if the cheque is
dishonoured due to insufficiency of funds or any other reason. The drawer has to pay the amount of the cheque to
the payee within 15 days of receiving a notice from the payee, otherwise the payee can file a complaint before a
magistrate.

However, the liability may depend on whether he can prove that he did not intend to create any debt or liability by
giving the blank cheque, promissory note and stamp paper. The Supreme Court in Basalingappa v. Mudibassapa,
(2019) 5 SCC 418 held that a blank cheque given as a security or for any other purpose does not attract the
presumption under Section 139 of the NI Act that it was given for discharging a debt or liability. The burden is on the
accused to rebut this presumption by showing that there was no legally enforceable debt or liability at the time of
issuing the cheque.

In M/s. Kalamani Tex & Anr. vs. P. Balasubramanian, the Supreme Court held that even a blank cheque leaf, voluntarily
signed and handed over by the accused, which is towards some payment, would attract presumption under Section
139 of the NI Act, in the absence of any cogent evidence to show that the cheque was not issued for discharging any
debt or liability.

Jain P. Jose vs. Santosh & Anr., where the Supreme Court observed that Sections 118 and 139 of the NI Act mandate
that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse
onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the
presumption imposed upon him.

Rangappa vs Sri Mohan, where the Supreme Court held that even a blank cheque leaf, voluntarily signed and handed
over by the accused, which is towards some payment, would attract presumption under Section 139 of the
Negotiable Instruments Act, 1881 (NI Act), in the absence of any cogent evidence to show that the cheque was not
issued for discharging any debt or liability5. The Court also observed that Sections 118 and 139 of the NI Act mandate
that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse
onus’ clauses become operative. In such a situation, the obligation shifts upon the accused to discharge the
presumption imposed upon him.

Pradeep Kumar and Another vs Post Master General and Others6, where the Supreme Court upheld the judgment of
High Court of Judicature at Madras, whereby the order of acquittal of the Judicial Magistrate was reversed and the
appellants had been convicted under Section 138 of the NI Act. The appellants had given blank Kisan Vikas Patras
(KVPs) to an agent who had fraudulently filled them up and encashed them. The Supreme Court held that Section 139
of NI Act would apply to KVPs as well as they are negotiable instruments within Section 13(1) of NI Act. The Court
also held that there was no evidence to show that there was no legally enforceable debt or liability at the time of
issuing KVPs by appellants.

To be considered legally valid, a promissory note must include these essential elements. However, in some cases, a
blank promissory note may also be valid and enforceable if it is voluntarily signed and handed over by the issuer to
the payee as a security or for some other purpose. In such cases, the payee may fill up the blank promissory note
with the agreed terms and conditions of the loan and present it for payment when due3.

However, this does not mean that the payee can fill up the blank promissory note with any arbitrary or unreasonable
terms and conditions that were not agreed upon by the parties. The payee has to act in good faith and in accordance
with the original intention of the parties when filling up the blank promissory note. Otherwise, the issuer may
challenge the validity and enforceability of the promissory note on the grounds of fraud, misrepresentation, duress,
undue influence, mistake, or lack of consideration.