Unsigned Cheques
In Pakistan, the legal framework surrounding cheques, particularly in relation to whether an unsigned cheque can be considered a “valuable security,” is rooted in the Pakistan Penal Code (PPC), Negotiable Instruments Act, 1881, and judicial interpretations.
Valuable Security: Definition and Analysis
According to Section 30 of the Pakistan Penal Code, a “valuable security” includes any document that creates, extends, transfers, extinguishes, or releases a legal right or liability. This can include cheques, promissory notes, and other negotiable instruments, provided they are legally enforceable and have the capacity to affect legal rights.
However, for a cheque to qualify as a “valuable security,” it must meet certain legal requirements:
- It must be signed by the drawer.
- It must represent an intent to pay a specific sum of money.
- It must be capable of creating a legal obligation or extinguishing a debt when presented.
Unsigned Cheque and Legal Enforceability
An unsigned cheque, however, does not fulfil the requisite conditions of being a “valuable security” because it lacks one of the fundamental elements—the signature of the drawer, which is necessary to authorise the cheque. Without the drawer’s signature, the cheque is legally incomplete and cannot be enforced. Under Section 6 of the Negotiable Instruments Act, 1881, a cheque is defined as a bill of exchange drawn on a specified banker, signed by the drawer, which demands payment on demand. In this light, an unsigned cheque falls short of this definition.
Thus, an unsigned cheque cannot be considered a valuable security, as it does not, in its present form, create or extinguish any legal right or obligation. It holds no legal value and cannot be enforced for payment.
Potential Problems Arising from Unsigned Cheques
Several issues can arise in the context of unsigned cheques:
- Inability to Present for Payment: Banks are required to process cheques that comply with legal formalities. An unsigned cheque is incomplete, and banks will refuse to honour or process it. The payee cannot present the cheque for payment or enforce any claim based on it.
- Fraudulent Alterations and Litigation: There is a potential for disputes or fraud if the cheque falls into the wrong hands and is altered to include a signature or other details. While such a fraud would render the cheque void under Section 87 of the Negotiable Instruments Act, the drawee could face legal challenges in proving the original state of the cheque.
- Loss of Trust in Commercial Transactions: An unsigned cheque could damage trust between parties involved in commercial transactions, especially in cases where one party believes that the cheque would be honoured. This could lead to civil litigation for breach of contract or non-performance.
- Criminal Implications: Though an unsigned cheque is not a valuable security, its wrongful or deceptive use could attract criminal liability under Section 420 of the PPC (cheating) if there is an element of fraud, deceit, or inducement with the intention of causing wrongful loss or gain. However, Section 489-F PPC, which criminalises the dishonouring of cheques for repayment of loans or fulfilment of obligations, would not apply in the case of an unsigned cheque, as the cheque would not be deemed to have been “drawn.”
The following observations can be garnered on Cheques and Signatures from recent case law.
1. Importance of Signature for Enforceability of a Cheque
In the cases of 2024 CLD 30 and 2024 PCrLJ 165, the courts emphasised that for a cheque to be enforceable, certain elements must be present, including the drawer’s signature. In both cases, the petitioner had not denied the existence of their signature on the cheque, which placed a burden on them to rebut any presumption of liability. These cases reaffirm that an unsigned cheque does not meet the legal standards of a valid cheque under the Negotiable Instruments Act, 1881 and cannot serve as valuable security, as discussed in prior interpretations.
Furthermore, the 2021 SCMR 1227 case highlights that even if the cheque is dishonoured, the validity and enforceability of a cheque hinge upon the presence of the drawer’s signature. The mismatch of signatures, as noted in this case, can lead to exoneration, especially in cases where the signature does not match the specimen available in bank records.
2. Judicial Presumption under Section 118 of the Negotiable Instruments Act, 1881
Several cases, including 2022 MLD 1955 and 2022 CLD 779, emphasised the presumptive nature of signatures on negotiable instruments under Section 118 of the Negotiable Instruments Act, 1881. The courts held that once a cheque is signed and presented, it is presumed to have been made for consideration unless proven otherwise. In these cases, the burden shifts to the defendant to disprove this presumption, either by challenging the authenticity of the signatures or providing evidence that the cheque was not issued for payment.
In 2022 YLRN 151, the presumption under Section 118 was applied, and the court ruled that the accused could not rebut the presumption that the cheque was issued for payment. This demonstrates how critical the signature is in establishing the prima facie validity of the instrument.
3. Forensic and Expert Analysis of Signatures
The importance of forensic examination of signatures, particularly under Article 84 of the Qanun-e-Shahadat, 1984, is highlighted in 2024 MLD 689 and 2023 PLD 528. In these cases, the courts empowered themselves to examine and compare signatures to determine the validity of cheques and agreements. The courts noted that forensic expert opinions, while not determinative, provide essential insights, and failure to request such an examination could weaken a party’s case.
In 2022 MLD 1555, the failure to request a comparison of signatures weakened the defendant’s case, reinforcing the procedural importance of requesting expert examination where signature authenticity is disputed.
4. Misuse and Fraud Related to Signatures on Cheques
The issue of fraudulent signatures was explored in cases like 2022 SCMR 821 and 2022 YLRN 15, where the courts dealt with instances of forged signatures leading to criminal liabilities. In these cases, the courts underscored that merely being the beneficiary of a fraudulent cheque does not automatically confer liability unless there is proof of active connivance or intent. The importance of proving that the signature was forged or fraudulently obtained is essential in both civil and criminal contexts, and the lack of forensic verification in these instances can result in acquittals.
5. Procedural Rights in Challenging Signature Validity
In 2022 CLD 900, the Lahore High Court reiterated that signatures are essential for liability under negotiable instruments. The case emphasised that even legal representatives are not liable for cheques that they did not sign or draw. This reflects the procedural necessity of establishing clear signatures to enforce cheques in summary suits under Order XXXVII, Rule 2 of the Civil Procedure Code.
6. The Role of Presumptions Under Section 118 of the Negotiable Instruments Act, 1881
In 2021 CLC 569 and 2020 SCMR 1621, the courts reaffirmed the presumption under Section 118 of the Negotiable Instruments Act, 1881, that a cheque is presumed to have been drawn for consideration unless proven otherwise. This presumption is a key feature in cheque-related disputes. The burden to rebut this presumption falls on the defendant, who must provide sufficient evidence, such as expert testimony, to challenge the authenticity of the cheque or its underlying consideration.
For instance, in 2020 SCMR 1621, the defendant claimed that the cheque in question was lost and reported to the police. However, since the bank memorandum indicated the dishonour of the cheque due to “insufficient funds” and not because of a missing signature, the court applied the presumption under Section 118. The defendant had the opportunity to seek a handwriting expert’s verification but did not do so, leading to the suit being decided in the plaintiff’s favour. This case highlights how failure to challenge the signature properly can be detrimental to the defence.
7. Delayed FIRs and Presumptions in Criminal Cases
In 2021 YLR 324, the court examined a case where a cheque was dishonoured, but the FIR was lodged after a significant delay of four years. The absence of timely action, combined with the failure to produce evidence linking the accused to the bank account from which the cheque was drawn, resulted in the dismissal of the prosecution’s case. This emphasises that while the presumption under Section 118 may favour the plaintiff or complainant, procedural delays and lack of evidence can weaken the presumption, especially in criminal matters under Section 489-F of the Pakistan Penal Code (PPC).
8. Importance of Handwriting Expert Testimony
The court’s discretion to compare signatures or rely on expert testimony is a recurring theme in cases like 2021 CLC 569 and 2020 CLD 1427. Under Article 84 of the Qanun-e-Shahadat Order, 1984, courts are empowered to compare signatures. In 2021 CLC 569, the defendant denied his signature on a cheque but did not file an application to compare the handwriting. This omission weakened his defence, and the court upheld the presumption of authenticity under Section 118 of the Negotiable Instruments Act.
Similarly, in 2020 CLD 1427, the defendant argued that the cheque was lost, but did not challenge the signatures through a handwriting expert. The court emphasised that once a cheque is presented and dishonoured due to insufficient funds, the presumption under Section 118 stands unless the defendant takes steps to disprove it. The failure to present expert evidence leaves the presumption intact, leading to a decision against the defendant.
9. Procedural Inadequacies and the Rebuttal of Presumptions
In cases such as 2021 CLC 2051, the failure to produce corroborative witnesses or documentary proof significantly weakens the case. The plaintiff in this instance failed to provide any evidence that could substantiate the payment of consideration for a property sale through cheques. The court noted that none of the witnesses of the sale agreement were produced, and the cheque was undated and unconnected to any defendant. These procedural inadequacies allowed the court to reject the plaintiff’s claim for specific performance of the sale agreement.
Similarly, 2020 PCrLJ 1678 highlights the importance of linking the accused to the fraudulent use of cheques through proper evidentiary support. In that case, the prosecution failed to establish a connection between the accused and the forgery of cheques. No conspiracy or pre-arranged plan was proven, and the court found that the case against the accused was unsubstantiated, resulting in acquittal.
10. Benefit of the Doubt in Criminal Cases
In criminal cases involving cheque fraud, such as 2021 PCrLJ 308 and 2020 YLR 2388, the courts emphasised the principle of “benefit of the doubt.” Where the prosecution fails to produce solid evidence, such as the original cheques or bank records proving embezzlement or forgery, the accused may be acquitted. In 2021 PCrLJ 308, the prosecution did not provide the necessary original vouchers or expert testimony to prove the allegations of tampering with cheques, leading to the acquittal of the accused.
Key takeaways
The series of judicial precedents discussed above offer significant insights into the legal complexities surrounding the treatment of cheques and signatures in Pakistan. The courts consistently apply fundamental principles derived from the Negotiable Instruments Act, 1881, particularly Section 118, which establishes presumptions regarding the validity and enforceability of cheques. This legal framework, combined with the Qanun-e-Shahadat Order, 1984, shapes the court’s approach in both civil and criminal cases involving dishonoured or disputed cheques.
Several key takeaways emerge from these cases:
- Presumption of Validity: Under Section 118 of the Negotiable Instruments Act, 1881, there is a strong presumption that a cheque is drawn for consideration unless proven otherwise. The burden falls on the defendant to rebut this presumption by producing evidence, such as handwriting expert testimony or proof of forgery.
- Role of Handwriting Experts: The court’s discretion under Article 84 of the Qanun-e-Shahadat Order, 1984, to compare signatures is crucial in determining the validity of a cheque. Failure to request a handwriting expert can significantly weaken a party’s defence, as seen in several cases where defendants failed to challenge the authenticity of signatures.
- Delayed FIRs and Impact on Criminal Cases: In criminal cases, such as those involving Section 489-F of the Pakistan Penal Code, delays in filing First Information Reports (FIRs) or lack of concrete evidence linking the accused to the cheque can result in the case being dismissed or the accused receiving the benefit of the doubt.
- Procedural Requirements and Evidence: The lack of procedural adherence—such as failure to produce key witnesses, original documents, or bank records—can result in claims being dismissed. In cases where plaintiffs or prosecution fail to meet these evidentiary requirements, courts have been inclined to dismiss suits or grant acquittals.
- Rebutting Fraud and Forgery Allegations: Allegations of forgery or fraudulent signatures require substantial evidence, such as forensic examination of signatures and proof of intent. Where such evidence is lacking, courts have acquitted the accused, as seen in cases where the prosecution failed to establish a clear connection between the accused and the fraud.
In conclusion, the jurisprudence surrounding cheques and signatures in Pakistan reflects a balance between presumptions in favour of the cheque holder and the defendant’s right to challenge authenticity through proper evidentiary means. Courts demand strict adherence to procedural and evidentiary standards to establish or rebut claims in both civil and criminal contexts.
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