The words “valuable security” denote a document, which is, or purports to be, a document whereby any legal right is created, extended, transferred, restricted, extinguished or released, or whereby any person acknowledges that he lies under legal liability, or has not certain legal right.
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A writes his name on the back of a bill-of-exchange. As the effect of this endorsement is to transfer of the right to the bill to any person who may become the lawful holder of it, the endorsement is a ‘valuable security’ (Section 30).
Elements of valuable security:
Valuable security requires certain things which are as follows:
(i) Valuable security is a document.
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(ii) It is such a document whereby any legal right is created, extended, transferred, restricted or extinguished.
(iii) It is a document whereby any person acknowledges the legal liability or legal right of another person.
If a document is executed by a minor or is unstamped, or contains blank, or does not specify the name of the executor or the date or place of execution, or is infected with any other form of invalidity it is, nevertheless, a valuable security because it purports to be one.
The use of the words ‘which is or purports to be’ indicates that a document which upon certain evidence being given, may be held to be invalid, but on the face of it creates or purports to create, right in immovable property, although a decree could not be passed upon the document, comes within the purview of this section.
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Legal right is a difficult concept. It is not defined and is the subject of lively debate. In its strict sense, it is an ascertainable claim, enforceable before courts and administrative agencies. In its wider sense, it is an advantage or benefit conferred upon a person by a rule of law.
There are rights granted by International law and recognised by the International Court but not enforceable. A legal right involves freedom from penalty. In short, a legal right is one which is either enforceable or recognised.
The Indian Passport Act recognises the right of a foreigner holding a valid passport to enter into this country; such a passport is a document creating a legal right and is as such a valuable security. A document suspending a person from exercising powers exercisable by him by virtue of his office is a restriction of a legal right. A document withdrawing the suspension is a valuable security.
A proposal for insurance stipulating that in the event of its acceptance by the company and the proposer failing to take up the policy, the proposer shall pay to the company initial expenses incurred by it in connection with the proposal is a valuable security. A lottery ticket is a valuable security.
An account-book, generally speaking, may be valuable evidence but it is not valuable security within the definition but it may become such security under certain circumstances, e.g., if the books contained entries showing that certain amounts have been received from customers as sales tax which would be an acknowledgment by the dealer of his liability to pay over those amounts to the Sales Tax Department, the account-books themselves are valuable security.
‘ A ticket for admission to an entertainment is a valuable security as it gives right to the purchaser of the ticket to enter the theatre and witness the performance and to its seller the right to collect a price for it inclusive of entertainment tax. But a certificate used for admission in a college cannot be treated as valuable security. A copy of a valuable security is not a valuable security.
A deed of divorce is a valuable security because it extinguishes a legal right of the parties. A kabuliat is for the same reason a valuable security. An assessment order is a valuable security under Section 420, Indian Penal Code. Therefore, if the cheating, employed by the accused, resulted in inducing the Income-tax Officer, it would amount to inducing the Income-tax Officer to make a valuable security.