S.138, NI Act, 1881 and Signing a Blank Cheque : The Legal Aspects

S.138, NI Act, 1881 and Signing a Blank Cheque : The Legal Aspects

In an issue arising out of Section 138 of Negotiable Instruments Act, 1881, it has been commented at Mojj Engineering Systems Ltd v A.B. Sugars Ltd [2008] GCtR 2935 (Delhi) thus: - 

 

"Since an undated cheque cannot be encashed, it can only mean that the petitioners had authorized the complainant to enter an appropriate date on it. In Young Vs. Grote (1827) 4 Bing. 253 it was held that when a blank cheque is signed and handed over, it means the person signing it has given an implied authority to any subsequent holder to fill it up. Similarly, in Scholfield Vs. Lord Londesborough (1895-1899) All ER Rep 282 it was held that whoever signs a cheque or accepts a bill in blank, and then puts it into circulation, must necessarily intend that either the person to whom he gives it, or some future holder, shall fill up the blank which he has left. This common law doctrine was also affirmed by Justice Macnaghten in Griffiths Vs. Dalton [1940] 2 KB 264 where it was held that the drawer of an undated cheque gives a prima facie authority to fill in the date. This aspect has also been incorporated in Section 20 of the Negotiable Instruments Act, which deals with Inchoate Stamped Instruments."

"The question whether the consideration for which the cheque was issued was ultimately satisfied or whether the cheque was wrongly sought to be encashed, are all issues that must also be decided at the trial."

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Written by 

Vishal

Delhi

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