The Karnataka High Court held that when the drawer issues a signed blank cheque, alterations on the cheque's body do not necessitate the drawer's consent.

The Court allowed an Appeal challenging the acquittal order for an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

The Court noted that when someone signs and delivers a stamped paper—blank or incomplete—for a negotiable instrument, they provide prima facie authority for the holder to complete it, within the stamped amount, preventing it from being deemed a material alteration.

The Bench of Justice S Rachaiah observed, “when the accused / drawer of the cheque signed the cheque and issued blank cheque to the complainant, if any alteration appears on the body of the cheque, such alterations need not require the consent of the accused / drawer of the cheque”.

Advocate H B. Rudresh appeared for the Appellant and Advocate Amruthesh C appeared as Amicus Curiae.

An Appeal was filed before the High Court by the Complainant against the judgment and order of acquittal in a case involving an offence under Section 138 of the NI Act. The Complainant, a teacher, lent Rs.2,50,000 to the Accused for her granddaughter's education and family needs. Payments were made through cheques and cash. Despite promises, the Accused failed to repay, leading to the dishonour of a cheque. The Trial Court acquitted the accused, finding issues with the altered cheque and not considering crucial evidence.

The Court framed the following issues: “i. Whether the finding of the Trial Court in recording the acquittal of the accused for the offence punishable under Section 138 of N.I Act is justified?

ii. Whether the appellant has made out grounds to interfere with the said findings?

The Court highlighted that the Appellate Court should only intervene in an appeal against acquittal if it identifies a clear error or perversity in the Trial Court's decision. “The Appellate Court has to interfere only where it is noticed the perversity or error committed by the Trial Court in recording the acquittal in a case of appeal against acquittal”, the Court noted.

The Court emphasized that Section 139 of the NI Act establishes a presumption that a cheque, once its execution is admitted, was issued to discharge a debt or liability. “To rebut the presumption it is for the accused to rely on the evidence led by the complainant or the accused can also rely on the material submitted by the complainant in order to raise the probable defence. It is not necessary for the accused to enter into the witness box in support of his defence”, the Bench noted.

Furthermore, the Court observed the complainant's claim of paying Rs.2,50,000 to the accused, who allegedly agreed to repay shortly. When the complainant sought repayment, the accused issued a cheque for the same amount, which bounced due to alteration. The accused asserted borrowing only Rs.1,50,000 and accused the complainant of altering the cheque. The Trial Court acquitted the accused, citing the complainant's failure to prove the accused's consent to alteration.

Moreover, the Court noted that signing and delivering a paper stamped as per the NI Act gives prima facie authority to complete a negotiable instrument within the stamp limit. The bank's endorsement on this matter was considered erroneous. The Court reiterated that endorsing a blank negotiable instrument authorizes the holder to fill it, provided the amount doesn't exceed the stamp limit.

The Court, in this context, noted “where one person signs and delivers to another a paper stamped in accordance with law relating to negotiable instruments 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. Once the authority is given to the complainant, it cannot be said that it is materially altered. The endorsement issued by the bank in this regard appears to be erroneous and not acceptable”.

In the case, the Court acknowledged the complainant's payment claim and the accused's admission to issuing a blank cheque. The Court noted that alterations on the body of a cheque, issued blank by the accused, don't require the accused's consent. The Trial Court's error in basing the acquittal on the premise of material alteration prompted the Court to deem the acquittal incorrect.

Accordingly, the Court allowed the Appeal and set aside the impugned judgment and order.

Cause Title: H B Bhagyalakshmi v Cheluvamma

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