Blank cheques to recover loans, not goons
Lenders have found a way to send
policemen for the same, using an Act that was first introduced during the Raj in 1881.

Actually some very bad defaulter has probably influenced this article in the ET. By making that above statement they make it sound as if some incredibly bad thing is being done, ie using a British era instrument to torture current Indian citizens. The fact is that most of our laws like the Indian Contracts Act etc are from the British era, no one objects to that. And further the so called 1881 act [while not mentioned it is the Negotiable Instruments Act] referred above was amended by the Indian Govt. a few years ago such that it became a criminal offence to issue a cheque which would not subsequently be honoured. So the Brits had nothing to do with this.
Further the cops do not come to recover the money from you. They come to serve you with the court summons first, thereafter if you don't bother to make a court appearance they will be sent again to serve a non bailable warrant on which you will be arrested and taken to court. Once taken to court you will be bailed out.
That is so far as as news article is concerned. Next turning to the financial institutions who resort to doing this. While issuing you a loan most banks expect you to sign reams of documents and almost never ask for a blank cheque. So this procedure will most probably be followed by such banks who issue you a lawn at the drop of the proverbial hat. Like say the kind lady over the phone who tells you that ICICI is ready to give you a loan of 3 lakh Rupees. These banks have practically not documents required to be signed by you, and so the blank cheque will be their only recourse.
If you are doing business in India it will serve your purpose to have blank cheques from your customers, it will also serve you purpose if you refuse to issue blank cheques to your vendors.