What is the meaning of Inchoate cheque?

What is the meaning of Inchoate cheque?


 A cheque signed by a drawer of cheque without completing the material particulars such as date, amount or name of the payee, it is known as an inchoate or incomplete cheque. When the drawer of a cheque hands over an inchoate cheque to a payee, prima facie he has given authority to the payee to complete the instrument. Section 20 of N.I.Act 1881 also applies to inchoate cheque, although this section deals with completing blank instruments which require being stamped.

The section 20 of NI Act 1881 defines the liability of the drawer to the inchoate stamped instrument which reads as under.

Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in 1[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.

A stranger to the negotiation cannot bind the drawer of the cheque by filling in inchoate cheque, but in terms of sec 20, 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. 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.

Related articles:

Definition of a cheque

Rules for cash payment of a cheque

Effects of not negotiable mark on a cheque

General and special crossing of a cheque

Meaning of material alteration in a cheque

Cheque bounce implications

Difference between bill of exchange and cheque

Little more to know about a cheque

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