Ambiguous Instruments, Words and Figures, and Inchoate Instruments (Sections 17, 18 and 20)

Instruments are often drafted hastily, on printed forms, by people who are not lawyers. The Act therefore contains rules for three recurring problems: an instrument that could be read either as a note or as a bill; an amount written differently in words and in figures; and a signed instrument left wholly or partly blank for someone else to complete. This note explains Sections 17, 18 and 20, and the way courts apply the principle of Section 20 to signed blank cheques.

1. Ambiguous Instruments (Section 17)

Section 17, Negotiable Instruments Act, 1881

Where an instrument may be construed either as a promissory note or bill of exchange, the holder may at his election treat it as either, and the instrument shall be thenceforward treated accordingly.

When it arises: typically where the drawer and drawee are the same person (an order by a firm on itself, or a bank draft drawn by one office on another), or where the drawee is fictitious or lacks capacity, so that the order is in substance the drawer's own promise.
The holder chooses: the election belongs to the holder, who will usually choose whichever form gives the better remedy, for example treating the instrument as a note to avoid the need for acceptance or notice of dishonour.
Election is final: once the holder elects, the instrument is treated "thenceforward" in that character for all purposes; he cannot switch later.

2. Words and Figures (Section 18)

Section 18, Negotiable Instruments Act, 1881

If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.

The rule rests on the assumption that words are written with more care and are harder to alter than figures. It is a rule of construction between the parties: it applies whether the amount in words is larger or smaller than the figure. If the words themselves are ambiguous, the figures may be used to resolve the ambiguity.

⚠ Note

In banking practice, a cheque whose amount in words and figures differs is a recognised ground for returning the cheque unpaid, because the bank is not bound to resolve the discrepancy on its customer's behalf. Section 18 still governs the liability of the parties if the matter reaches court.

3. Inchoate Stamped Instruments (Section 20)

Section 20, Negotiable Instruments Act, 1881

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.

Conditions

Signed: the paper must bear the signature of the person to be made liable.
Stamped: it must be stamped in accordance with the law on negotiable instruments; the stamp sets the ceiling.
Delivered: the signer must deliver it to another, intending it to be used as an instrument. A signed blank stolen from a drawer is not "delivered".
Blank or incomplete: the paper may be wholly blank or contain an incomplete instrument.

Effect

Prima facie authority: the holder may complete the instrument for any amount up to the amount covered by the stamp.
Holder in due course: the signer is liable to a holder in due course for the amount filled in, even if it exceeds what the signer intended, provided it is within the stamp.
Others: anyone who is not a holder in due course, including the person to whom the paper was first delivered, can recover only the amount the signer intended.

The principle reflects estoppel: a person who arms another with a signed blank instrument takes the risk of its misuse as against an innocent purchaser for value. Completion within the authority given is not a material alteration that would discharge the signer under Section 87 (Topic 28).

4. Signed Blank Cheques

Cheques are not stamped, so Section 20 does not apply to them in terms, but courts apply its principle together with the presumptions in Sections 118 and 139.

📖 Bir Singh v. Mukesh Kumar (Supreme Court, 2019)

Held: A person who signs a cheque and makes it over to the payee remains liable unless he proves that it was not issued in discharge of a debt or liability. If a signed blank cheque is voluntarily handed to a payee towards some payment, the payee may fill in the amount and other particulars, and this does not invalidate the cheque. Even if the details were filled in by someone else, the Section 139 presumption applies; the onus is on the accused to rebut it by evidence.

The decision has made the security cheque and the signed blank cheque central to many Section 138 disputes. The drawer's defences lie in proving that no debt was due, or that the cheque was filled in for an amount beyond what was owed (Topics 43 and 45).

⚠ Key point

Where an instrument can be read as a note or a bill, the holder may elect to treat it as either, and is bound by the election (Section 17). Where words and figures differ, the words prevail (Section 18). A person who signs and delivers a stamped paper, blank or incomplete, gives prima facie authority to complete it up to the amount covered by the stamp, and is liable to a holder in due course for the amount filled in; others recover only what he intended (Section 20). For signed blank cheques, the payee may complete the details and the Section 139 presumption still applies (Bir Singh v. Mukesh Kumar, 2019).

5. Related Topics and Provisions

Holder in due course (Topic 13)
Discharge by material alteration (Topic 28)
Security cheques and blank cheques (Topic 43)
Presumptions under Sections 139 and 140 (Topic 45)