Cheque given as security, amount and date filled in by payee

[Anonymous]

I want some information from you that i have take one freelance for
developmental but he ask security cheque i have mention only party
name and signature but he put the amt and date with out my knowledge
and cheque bounce & he put the case on me for recovery of amount so
what i need to do now please help me on this

[Pulkit Srivastava]

Although, in order to answer your query, detailed facts and circumstances pertaining to the manner and mode of issuance of cheque by you to the other party would be required, however, based on the facts as narrated by you, it would be important to first analyse Section 87 of the Negotiable Instruments Act, 1881 which states as follows:

“Section 87 – Effect of material alteration.
Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;
Alteration by indorsee.- And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.
The provisions of this section are subject to those of Sections 20, 49, 86 and 125.”
Accordingly, any material alteration to a cheque without the consent of the drawer unless it is made to carry out the common intention of the original parties thereto renders the cheque void.

However, Section 87 has been made subject to Sections 20, 49, 86 and 125 of the Negotiable Instruments Act, 1881. Section 20 of the Negotiable Instruments Act, 1881 is reproduced here-in-below:

“20. Inchoate stamped instruments-
Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in [India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount: provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.”

By reason of the aforementioned provision, only a right has been created in the holder of the cheque subject to the conditions mentioned therein. Thereby, only a prima facie authority is granted, inter alia, to complete an incomplete negotiable instrument. The provision has a rider, namely, no person other than a holder in due course shall recover the amount from the person delivering the instrument anything in excess of the amount intended by him to paid therein.

Since, as per your factual background, you admit that the signature on the cheque is yours, therefore, it would be difficult for you to dispute the contents of the cheque in view of the provision of Section 20 of the Act.

You have mentioned in your question that a case has already been filed. However, it is not fully clear whether this case is a civil suit for recovery of the amount or a case under Section 138 of the Negotiable Instruments Act.

If the case already filed is a civil suit and Section 138 case is yet to be filed, in that case if the Legal Notice under Section 138 of Negotiable Instruments Act, 1881 is still not served upon you, then, once the Legal Notice is served, you can give a detailed reply to the same denying your liability and narrating the entire factual gamut. This will form a basis for your defence, in case, the other party initiates a complaint under Section 138 of Negotiable Instruments Act, 1881 before the Court of law.

As regards the fact relating to the said cheque being a security cheque, if you can prove that at relevant time (i.e. date mentioned in the cheque), you owed no legal liability to the other party, or any documents suggesting that the cheques were given towards security of a particular transaction, the same shall strengthen your case.

For more details on the legal position on the issue of a cheque which was given as a security, please read the following article: Dishonour of cheque given as security – whether offence under Section 138 N.I. Act made out?

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