THE
NEGOTIABLE INSTRUMENTS ACT, 1881
ACT NO. 26 OF 1881
[9th December, 1881.]
An
Act to define and amend the law relating to Promissory Notes,
Bills of Exchange and Cheques.
Preamble. WHEREAS it
is expedient to define and amend the law relating
to, promissory notes, bills of exchange and cheques ; It
is hereby enacted as follows
Short title
1.Short title. This Act may
be called the Negotiable Instruments Act, 1881.
Local extent. Saving
of usages relating to hundis, etc. It
extends to the whole of India but nothing herein contained
affects the 'Indian Paper Currency Act, 1871, (3 of 1871).
section 21, or .affects any local usage relating to
any instrument in an oriental language :
Provided that such usages may be excluded by any words in
the body of the instrument which indicate an intention
that the legal relations of the parties thereto shall
be governed by this Act and it shall come into
force on the first day of March, 1882.
2.Commencement. [Repeal of enactments.]
Rep. by the Amending Act, 1891 (12 of 1891), s. 2 and Sch.
3.Interpretation-clause.
In this Act-
3* *
* *
* *
4["banker"
includes any person acting as a banker and any post
office savings bank;]
5* *
* *
* *
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1 The words "except the State of Jammu and Kashmir",
which were subs. by Act 3 of 1951 for "
except Part B States ", omitted by Act 62 of
1956, s. 2 and Sch.
2 Rep. by the Indian Paper Currency Act, 1923 (10
of 1923). See now the Reserve Bank of India
Act, 1934 (2 of 1934), s. 31.
3 Definition of the word " India", which
was subs. by Act 3 of 1951 for the definition
of the word " State ", omitted by Act 62 of 1956,
s. 2 and Sch.
4 Subs. by Act 37 of 1955, s. 2, for the
definition of the word "banker".
5 Omitted by Act 53 of 1952, s. 16 (w.e.f. 14-2-1956).
Extended to Laccadive Minicoy and Amindivi Islands (w.e.f.
1-10-1967):
vide Reg. 8 of 1965, s. 3 & Sch.
Extended to Goa, Daman and Diu with modifications, by Reg.
12 of 1962 s. 3 & Sch.
Extended to and brought into force in Dadra and Nagar
Haveli (w.e.f. 1-7-65) by Reg. 6 of 1963, s. 2 and
Such. I.
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4. "Promissory note".
A " promissory note" is an instrument in
writing (not being a bank-note or a
currency-note) containing an unconditional
undertaking, signed by the maker, to pay a certain sum of
money only to, or to the order of, a certain person,
or to the bearer of the instrument.
Illustrations
A signs
instruments in the following terms
(a)
"I promise to pay B or order Rs. 500."
(b)
" I acknowledge myself to be indebted to B in Rs. 1,000 to
be paid on demand, for value received."
(c)
Mr. B, O U Rs. 1,000."
(d)
I promise to pay B Rs. 500 and all other sums
which shall be due to him."
(e)
I promise to pay B Rs. 500, first deducting
thereout any money which he may owe me."
(f)
" I promise to pay B Rs. 500 seven
days after my marriage with C."
(g)
" I promise to pay B Rs. 500 on D's death, provided
D leaves me enough to pay that sum."
(h)
" I promise to pay B Rs. 500 and to deliver to him
my horse on 1st January next."
The instruments respectively
marked (a) and (b) are promissory notes.
The instruments respectively marked (c), (d), (e), (f),
(g) and (h) are not promissory notes.
5."Bill of exchange".
A "bill of exchange" is an instrument in writing,
containing an unconditional order, signed by
the maker, directing a certain person to pay
a certain sum of money only to, or to the order of,
a certain person or to the bearer of the instrument.
A promise or order
to pay is not " conditional ", within
the meaning of this section and section
4, by reason of the time for payment of
the amount or any instalment thereof being expressed to
be on ,the lapse of a certain period after the occurrence
of a specified event which, according to
the ordinary expectation of mankind,
is certain to happen, although the
time of its happening may be uncertain.
The sum payable may
be "certain", within the meaning of
this section and section 4, although it includes future
interest or is pay- able at an indicated rate of exchange,
or is according to the course of exchange, and although
the instrument provides that, on default of payment
of an instalment, the balance unpaid shall become due.
The person to whom
it is clear that the direction is given or that
payment is to be made may be a "certain I person", within
the meaning of this section and section 4, although
he is mis-named or designated by description
only.
6."Cheque". A "cheque"
is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
7.Drawer, Drawee. The
maker of a bill of exchange or cheque is called
the drawer "; the person thereby directed to pay is called
the " drawee" .
Drawee in case of need. When
in the bill or in any endorsement thereon
the name of any person is given in addition to the drawee
to be resorted to in case of need, such person is
called a " drawee in case of need ".
Acceptor. After the drawee
of a bill has signed his assent upon the bill,
or, if there are more parts thereof than one, upon one
of such parts, and delivered the same, or given notice of such
signing to the holder or to some
person on his behalf, he is called the
" acceptor ".
Acceptor for honour.1[When
a bill of exchange has been noted or protested
for nonacceptance or for better security,] and any
person accepts it supra protest for honour of the drawer
or of any one of the endorsers , such person is called an
" acceptor for honour ".
Payee. The person named in
the instrument, to whom or to whose order
the money is by the instrument directed to be paid, is
called the "payee".
8."Holder". The "
holder" of a promissory note, bill of exchange or
cheque means any person entitled in his own name to the
possession thereof and to receive or recover
the amount due thereon from the parties
thereto.
Where the note, bill or cheque
is lost or destroyed, its holder is the person so
entitled at the time of such loss or destruction.
9.Holder in due course. "
Holder in due course " means any person who for consideration
became the possessor of a promissory note, bill of
exchange or cheque if payable to bearer, or the payee or
indorsee thereof, if 2[payable to order,] before
the amount mentioned in it became payable, and
without having sufficient cause to believe that
any defect existed in the title of the person
from whom he derived his title.
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1 Subs. by Act 2 of 1885, s. 2, for " When acceptance
is refused and the bill is protested for non-acceptance".
2 Subs. by Act 8 of 1919, s. 2, for " payable to, or
to the order of,
a payee,".
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10."Payment in due course".
"Payment in due course" means payment in accordance
with the apparent tenor of the instrument in good faith
and without negligence to any person in
possession thereof under circumstances
which do not afford a reasonable ground for believing
that he is not entitled to receive payment
of the amount therein mentioned.
11.Inland instrument.
A promissory note, bill of exchange or cheque
drawn or made in 1 [India], and made payable in, or drawn
upon any person resident in, 1 [India] shall
be deemed to be an inland instrument.
12.Foreign instrument. Any
such instrument not so drawn, made or made payable
shall be deemed to be a foreign instrument.
13.2[(1)Negotiable instrument.
A " negotiable instrument " means
a promissory note, bill of exchange or cheque payable either
to order or to bearer.
Explanation (i).-A promissory note,
bill of exchange or cheque is payable to order
which is expressed to be so payable or which
is expressed to be payable to a particular person,
and does not contain words prohibiting transfer
or indicating an intention that it shall not
be transferable.
Explanation (ii).-A promissory
note, bill of exchange or cheque is payable
to bearer which is expressed to be so payable or on which
the only or last endorsement is an endorsement in blank.
Explanation (iii).-Where
a promissory note, bill of exchange or cheque,
either originally or by endorsement, is expressed to be
pay- able to the order of a specified person, and not to
him or his order, it is nevertheless payable to him
or his order at his option.]
3[(2) A negotiable instrument
may be made payable to two or more payees jointly, or it
may be made payable in the alternative to one of two, or
one or -some of several payees.]
14.Negotiation. When a promissory
note, bill of exchange or cheque is transferred
to any person, so as to constitute that person
the holder thereof, the instrument is said to be negotiated.
15.Indorsement. When
the maker or holder of a
negotiable instrument signs the same,
therwise than as such maker, for the purpose
of negotiation, on the back or face thereof or on a slip
of paper annexed thereto, or so signs for the
same purpose a stamped paper intended
to be completed as a negotiable instrument, he is said to
indorse the same, -and is called the " indorser
".
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1 Subs. by Act 36 of 1957, s. 3 and Sch. II, for "
a State".
2 Subs. by Act 8 of 1919, s. 3, for the original sub-section.
3 Ins. by Act 5 of 1914, s. 2.
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16.1[(1)] Indorsement
in "blank" and "in full". If the indorser
signs his name only, the indorsement is said to be "
in blank," and if he adds a direction to pay the amount
mentioned in the instrument to, or to the order of,
a specified person, the indorsement is said to be "
in full " ; and the person so specified is called the "
indorsee " of the instrument.
1[(2)Indorsee. The
provisions of this Act relating to a payee shall
apply with the necessary modifications to an indorsee.]
17.Ambiguous instruments.
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.
18.Where amount is
stated differently in figures and words. 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.
19.Instruments payable
on demand. A promissory note or bill of exchange,
in which no time for payment is specified, and a cheque, are payable
on demand.
20.Inchoate
stamped instruments. Where one person
signs and delivers to another a
paper stamped in accordance with the law
relating to negotiable instruments then in force
in 2[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 any thing in excess of the mount intended
by him to be paid thereunder.
21. "At sight". "On
presentment". In a promissory note or bill of exchange
the expressions " at sight " and " on presentment
" mean on demand. The expression "after
sight " means, in a promissory note, after
presentment for sight, and, in a
bill of exchange, after acceptance, or noting for
nonacceptance, or protest for non-acceptance.
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1 Ins. by Act 5 of 1914, s. 3.
2 Subs. by Act 3 of 1951, s. 3 and Sch., for "the States".
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22. "Maturity".
The maturity of a promissory note or bill of
exchange is the date at which it falls due.
Days of grace. Every promissory
note or bill of exchange which is not expressed to
be payable on demand, at sight or on presentment is at
maturity on the third day after the day on which it is expressed
to be payable.
23. Calculating maturity
of bill or note payable so
many months after date or sight.
In calculating the date at which a promissory
note or bill of exchange, made payable a stated number of
months after date or after sight, or after a
certain event, is at maturity, the
period stated shall be held to terminate on the day of the
month which corresponds with the day on which the instrument
is dated, or presented for acceptance
or sight, or noted for non-
acceptance, or protested for nonacceptance, or the event
happens, or, where the instrument
is a bill of exchange made payable a stated
number of months after sight and has been accepted
for honour, with the day on which it was so
accepted. If the month in which the period would terminate
has no corresponding day, the period shall be held to terminate
on the last day of such month.
Illustrations
(a) A negotiable instrument,
dated 29th January 1878, is made payable at
one month after date. The instrument is at maturity on the
third day after the 28th February 1878.
(b) A negotiable
instrument, dated 30th August 1878, is made payable
three months after date. The instrument is at maturity on
the 3rd December 1878.
(c) A promissory
note or bill of exchange, dated 31st August 1878,
is made payable three months after date. The instrument
is at maturity on the 3rd December ,1878.
24. Calculating maturity
of bill or note payable so many days after
date or sight. In calculating the date at which a
promissory note or bill of exchange made payable a
certain number of days after date or after sight
or after a certain event is at maturity, the day
of the date, or of presentment for acceptance or sight,
or of protest for non-acceptance, or on which the
event happens, shall be excluded.
25. When day
of maturity is a holdiay.When the day on which a promissory
note or bill of exchange is at maturity
is a public holiday, the instrument
shall be deemed to be due on the
next preceding business day.
Explanation.-The expression
" public holiday " includes Sundays: 1**
* and any other day declared by the 2[Central
Government], by notification in the Official Gazette,
to be a public holiday.
26. Capacity to make,
etc., promissory notes, etc.Every person capable
of contracting, according to the law to which he is subject,
may bind himself and be bound by the making,
drawing, acceptance, indorsement, delivery and
negotiation of a promissory note, bill of
exchange or cheque.
Minor. A minor may draw, indorse, deliver
and negotiate such ins trument so as to bind all parties
except himself.
Nothing herein contained shall
be deemed to empower a corporation to make, indorse or accept
such instruments except in cases in which, under the
law for the time being in force, they are so empowered.
27. Agency. Every person
capable of binding himself or of being bound,
as mentioned in section 26, may so bind himself or be bound by
a duly authorized agent acting in his name.
A general authority to transact
business and to receive and dis- charge debts
does not confer upon an agent the power of accepting or
indorsing bills of exchange so as to bind his principal.
An authority to draw bills of exchange
does not of itself import an authority to indorse.
28. Liability of agent signing.
An agent who signs his name to a promissory note, bill of
exchange or cheque without indicating thereon that
he signs as agent, or that he does not intend thereby to
incur personal responsibility, is liable
personally on the instrument,
except to those who induced him to sign
upon the belief that the principal only
would be held liable.
29. Liability
of legal representative
signing.A legal representative of a deceased
person who signs his name to a promissory personally thereon
unless he expressly limits his liability to the extent
of the assets received by him as such. note., bill of exchange
or cheque is liable.
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1 The words "New Year's day, Christmas
day: if either of such days falls on a
Sunday, the next following Monday ; Good-Friday;" omitted
by Act 37 of 1955, s. 3 (w.e.f. 1-4-1956).
2 Subs. by the A.O. 1937, for "L.G.".
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30.Liability of drawer. The drawer of
a bill of exchange or cheque is
bound, in case of dishonour by the drawee
or acceptor thereof, to compensate tile holder,
provided due notice of dishonour has been given to,
or received by, the drawer as hereinafter provided.
31. Liability of drawee of cheque. The drawee
of a cheque having sufficient funds of the drawer in his
hands properly applicable to the payment of such cheque
must pay the cheque when duly required so to do,
and, in. default of such payment, must compensate the drawer
for any loss or damage caused by such default.
32. Liability of
maker of note and acceptor of bill. In the absence
of a contract to the contrary, the maker of a promissory
note and the acceptor before maturity of a bill of
exchange are bound to pay the amount thereof
at maturity according to the apparent tenor of the
note or acceptance respectively, and the acceptor of a
bill of exchange at or after maturity is bound
to pay the amount thereof to the holder on demand.
In default of such payment
as aforesaid, such maker or acceptor is bound
to compensate any party to the note or bill for any loss
or damage sustained by him and caused by such default.
33.Only drawee can be acceptor
except in need or for honour. No person except
the drawee of a bill of exchange, or all or some
of several drawees, or a person named therein
as a drawee in case of need, or an acceptor
for honour, can bind himself by an acceptance.
34. Acceptance by several
drawees not partners. Where there are several
drawees of a bill of exchange who are not partners, each
of them can accept it for himself, but none
of them can accept it for another without his
authority.
35. Liability of indorser.
In the absence of a contract to the contrary, whoever
indorses and delivers a negotiable instrument before maturity
without, in such indorsement, expressly excluding or making
conditional his own liability, is bound thereby to
every subsequent
holder, in case of dishonour by the drawee,
acceptor or maker, to compensate
such holder for any loss or damage caused to him by
such dishonour, provided due notice of dishonour
has been given to, or received by, such
indorser as hereinafter provided.
36. Liability of prior
parties to holder in due course.Every prior
party to a negotiable instrument is liable thereon to a
holder in due course until the instrument is duly satisfied.
37. Maker, drawer and
acceptor principals. The maker of
a promissory note or cheque, the drawer of a
bill of exchange until acceptance, and
the acceptor are, in the absence of a contract to the contrary,
respectively liable thereon as principal debtors, and
the other parties thereto are liable thereon as sureties
for the maker drawer or acceptor, as the case
may be.
38. Prior party
a principal in respect of each subsequent
party.As between the parties so liable as sureties,
each prior party is, in the absence of a contract
to the contrary, also liable thereon as a principal
debtor in respect of each subsequent party.
Illustration
A draws a bill payable
to his own order on B, who accepts. A afterwards
indorses the bill to C, C to D, and D to E. As between
E and B, B is the principal debtor, and A, C and D are his
sureties. As between E and A, A
is the principal debtor, and C and D are
his sureties. As between E and C, C is the principal
debtor and D is his surety.
39. Suretyship.When
the holder of an accepted bill of exchange enters
into any contract with the acceptor which, under section 134 or
135 of the Indian Contract Act, 1872,(9 of 1872) would
discharge the other parties, the holder may
expressly reserve his right to charge
the other parties, and in such case they are not discharged.
40. Discharge of
indorser's liability. Where the holder of a negotiable
instrument, without the consent of the indorser, destroys
or impairs the indorser's remedy against a prior party,
the indorser is discharged from liability to
the holder to the same extent as if the instrument
had been paid at maturity.
Illustration
A is the holder of a bill
of exchange made payable to the order of B, which
contains the following indorsements in blank:-
First
indorsement, " B."
Second
indorsement, " Peter Williams."
Third
indorsement, " Wright & Co."
Fourth
indorsement, " John Rozario."
This bill A puts in suit
against John Rozario and strikes out, without
John Rozario's consent, the indorsements by Peter Williams and
Wright & Co. A is not entitled to recover anything
from John Rozario.
41.Acceptor bound,although, indorsement
forged. An acceptor of a bill of exchange already
indorsed is not relieved from liability by reason
that such indorsement is forged, if lie knew or had reason
to believe the indorsement to be forged when he accepted
the bill.
42.Acceptance of bill drawn in
fictitious name. An acceptor of a bill of
exchange drawn in a fictitious name and
payable to the drawer's order is
not, by reason that such name is
fictitious, relieved from liability to any holder in due
course claiming under an indorsement by the same hand
as the drawer's signature, and purporting to be made by
the drawer.
43.Negotiable instrument
made, etc., without consideration. A negotiable
instrument made, drawn, accepted, indorsed or transferred
without consideration, or for a consideration which fails,
creates no obligation of payment between the parties
to the transaction. But if
any such party has transferred
the instrument with or without indorsement
to a holder for consideration, such holder,
and every subsequent holder deriving title from him,
may recover the amount due on such instrument from
the transferor for consideration or any prior
party thereto.
Exception I.-No party
for whose accommodation a negotiable instrument
has been made, drawn, accepted or indorsed can, if he have
paid the amount thereof, recover thereon such amount
from any person who became a party to such instrument
for his accommodation.
Exception II.-No party
to the instrument who has induced any other
party to make, draw, accept, indorse or transfer the same to him
for a consideration which he has failed to pay
or perform in full shall recover thereon
an amount exceeding the value of the consideration (if any)
which he has actually paid or performed.
44. Partial absence or failure
of moneyconsideration. When the consideration
for which a person signed a promissory note, bill
of exchange or cheque consisted of money, and was
originally absent in part or has
subsequently failed in part, the sum which a
holder
standing in immediate relation with such signer is entitled
to receive from him is proportionally reduced.
Explanation.-The drawer of a bill
of exchange stands in immediate relation with the
acceptor. The maker of a promissory note, bill of
exchange or cheque stands in immediate relation with
the payee, and the indorser with his indorsee.
Other signers may by agreement stand in immediate
relation with a holder.
Illustration
A draws a bill on B
for Rs. 500 payable to the order of A. B accepts
the bill, but subsequently dishonours it by non-payment.
A sues B on the bill, B proves that it was accepted for
value as to Rs. 400, and as an accommodation
to the plaintiff as to the residue. A can
only recover Rs. 400.
45.Partial failure
of consideration not consisting of money. Where
a part of the consideration for which
a person signed a promissory note, bill
of exchange or cheque, though not consisting of money,
is ascertainable in money without collateral enquiry, and there
has been a failure of that part, the sum which a holder
standing in immediate relation with such signer is
entitled to receive from him is proportionally reduced.
1[45A.Holder's right to duplicate
of lost bill. Where a bill of exchange has been
lost before it is over-due, the person who was the holder
of it may apply to the drawer to give him another bill of
the same tenor, giving security to the drawer, if
required, to indemnify him against all persons whatever
in case the bill alleged to have been lost shall be found
again.
If the drawer
on request as aforesaid refuses to give
such duplicate bill, he may be compelled to do so.]
46.Delivery. The
making, acceptance or indorsement
of a promissory note, bill of exchange or cheque
is completed by delivery, actual or constructive.
As between parties standing in
immediate relation, delivery to be effectual must be made
by the party making, accepting or indorsing the instrument,
or by a person authorized by him in that behalf.
As between such parties and
any holder of the instrument other than
a holder in due course, it may be shown that the instrument
was delivered conditionally or for a special purpose only,
and not for the purpose of transferring absolutely the property
therein.
A promissory note, bill of
exchange or cheque payable to bearer is negotiable
by the delivery thereof.
A promissory note, bill of exchange
or cheque payable to order is negotiable by the holder by
indorsement and delivery thereof.
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1 Ins. by Act 2 of 1885, s. 3.
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47. Negotiations by delivery. Subject to the
provisions of section 58, a promissory note, bill
of exchange or cheque payable to bearer is negotiable
by delivery thereof.
Exception.-A promissory note, bill
of exchange or cheque delivered on condition
that it is not to take effect except
in a certain event is not negotiable (except
in the hands of a holder for value without notice
of the condition) unless such event happens.
Illustrations
(a) A, the holder of a negotiable
instrument payable to bearer, delivers it to
B's agent to keep for B. The instrument
has been negotiated.
(b) A, the holder of a negotiable
instrument payable to bearer, which is in the hands
of A's banker, who is at the time the banker
of B, directs the banker to transfer the
instrument to B's credit in the banker's
account with B. The banker does so, and
accordingly now possesses the instrument as B's agent.
The instrument has been negotiated, and B has become the
holder of it.
48. Negotiation by indorsement. Subject to
the provisions of section 58, a promissory note, bill of
exchange or cheque 1[payable to order,] is negotiable
by the holder by indorsement and delivery
thereof.
49.Conversion of indorsement
in blank into indorsement in full. The holder of a
negotiable instrument indorsed in blank may, without signing
his own name, by writing above the indorser's
signature a direction to pay to
any other person as indorsee, convert
the
indorsement in blank into an indorsement in full; and the
holder does not thereby incur the responsibility of an indorser.
50. Effect of indorsement. The indorsement
of a negotiable instrument followed by delivery
transfers to the indorsee the property therein with the
right of further negotiation;but the indorsement may, by
express words, restrict or exclude
such right, or may merely
constitute the indorsee an agent
to indorse the instrument, or to reeive its
contents for the indorser, or for some other
specified person.
Illustrations
B signs the following indorsements on
different negotiable instruments payable to bearer:-
(a) "Pay the contents to C only".
(b) "Pay C for my use."
(c) "Pay C or order for the account of B".
(d) "The within must be credited to C".
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1 Subs. by Act 8 of 1919, s. 4, for "payable to the
order of a specified person, or to a specified person or
order,".
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These indorsements exclude the
right of further negotiation by C.
(e) "Pay C."
(f) "Pay C value in account
with the Oriental Bank."
(g)Pay the contents to C, being
part of the consideration in a certain deed of assignment
executed by C to the indorser and others."
These indorsements do not exclude the right of further negotiation
by C.
51.Who may negotiate.
Every sole maker, drawer, payees
or indorsee, or all of several
joint makers, drawers, payees or
indorsees, of a negotiable instrument may, if
the negotiability of such instrument has
not been restricted or excluded as mentioned in
section 50, indorse and negotiate the same.
Explanation.-Nothing in this section
enables a maker or drawer to indorse or negotiate an instrument,
unless he is in lawful possession or is holder
thereof ; or enables a payee or indorsee to indorse
or negotiate an instrument, unless he is holder thereof.
Illustration
A bill is drawn payable to A or
order. A indorses it to B, the indoresement
not containing the words " or order " or any equivalent
words. B may negotiate the instrument.
52.Indorser who
excluds his own liability or
makes it conditional. The indorser of
a negotiable instrument may, by express words
in the indorsement, exclude his own liability thereon, or
make such liability or the right of the indorsee to receive
the amount due thereon depend upon the happening of
a specified event, although such event may never happen.
Where an indorser
so excludes his liability and afterwards
becomes the holder of the instrument, all intermediate
indorsers are liable to him.
Illustrations
(a) The indorser of a negotiable instrument
signs his name, adding the words-" Without
recourse."
Upon this indorsement he incurs no liability.
(b) A is the
payee and holder of a negotiable instrument.
Excluding personal liability by an indorsement " without
recourse," he transfers the instrument to B, and B
indorses it to C, who indorses it to A. A
is not only reinstated in his former rights, but has
the rights of an indorsee against B and C.
53.Holder deriving title from holder
in due course. A holder of a negotiable instrument
who derives title from a holder in due course has
the rights thereon of that holder in due course.
54.Instrument indorsed
in blank. Subject to the provisions
hereinafter contained as to crossed cheques, a negotiable
instrument indorsed in blank is payable
to the bearer thereof even although originally
payable to order.
55.Conversion of indorsement
in blank into indorsement in full. If a negotiable
instrument, after having been indorsed in blank, is
indorsed in full, the amount of it cannot be claimed from
the indorser in full, except by the person to whom it has
been indorsed in full, or by one who derives title through
such person.
56.Indorsement for part of
sum due. No writing on a negotiable instrument
is valid for the purpose of negotiation if such
writing purports to transfer only a part of the amount appearing
to be due on the instrument; but where such amount
has been partly paid, a note to that effect
may be indorsed on the instrument, which may
then be negotiated for the balance.
57.Legal re-presentative
cannot by delivery only negotiate
instrument indorsed by deceased.
The legal representative of a deceased
person cannot negotiate by delivery only a promissory note,
bill of exchange or cheque payable to
order and indorsed by the deceased
but not delivered,
58.Instrument obtained
by unlawful means or for unlawful
consideration. When a negotiable instrument has been lost,
or has been obtained from any maker, acceptor
or holder thereof by means of an offence
or fraud, or for an unlawful consideration, no possessor
or indorsee who claims through the person who found
or so obtained the instrument is
entitled to receive the amount due thereon from such
maker, acceptor or holder, or from any party
prior to such holder, unless such possessor
or indorsee is, or some person through whom he claims
was, a holder thereof in due course.
59.Instrument acquired
after dishonour or when overdue. The holder
of a negotiable instrument, who
has acquired it after dishonour,
whether by non-acceptance or non-payment,
with notice thereof, or after maturity, has
only, as against the other parties, the rights
thereon of his transferor:
Accommodation note or bill. Provided that any person who, in good
faith and for consideration, becomes the holder, after maturity,
of a promissory note or bill of exchange made,
drawn or accepted without consideration, for
the purpose of enabling some party thereto to raise money
thereon, may recover the amount of the note or bill
from any prior party.
Illustration
The acceptor
of a bill of exchange, when he
accepted it, deposited with the drawer certain
goods as a collateral security for the payment
of the bill, with power to the drawer to sell the
goods and apply the proceeds in discharge of the bill if
it were not paid at
maturity. The bill not having been paid at maturity,
the drawer sold the _goods and retained the proceeds,
but indorsed the bill to A. A's title is subject to
the same objection as the drawer's title.
60.Instrument negotiable
till payment or satisfaction.
A negotiable instrument may be negotiated (except
by the maker, drawee or acceptor after maturity)
until payment or satisfaction thereof by the maker,
drawee or acceptor at or after maturity, but not after such payment
or satisfaction.
61.Presentment for acceptance.
A bill of exchange payable after sight must, if no
time or place is specified therein for presentment, be
presented to the drawee thereof for acceptance, if he can,
after reasonable search, be found,
by a person entitled to demand
acceptance, within a reasonable
time after it is drawn, and in business
hours on a business day. In default of such presentment,
no party thereto is liable thereon to the person making
such default. If the drawee
cannot, after reasonable search, be found, the bill is dishonoured.
If the bill is directed
to the drawee at a particular place, it must
be presented at that place; and
if at the due date for presentment
he cannot, after reasonable search, be found there,
the bill is dishonoured.
1[Where authorized by agreement or usage, a presentment
through the post office by means of a registered letter
is sufficient.]
62.Presentment of promissory note
for sight. A promissory note, payable at
a certain period after sight, must be presented to
the maker thereof for sight (if he can after reasonable
search be found) by a person entitled to demand payment,
within a reasonable time after it is made and
in business hours on a business day. In default
of such presentment, no party thereto is liable
thereon to the person making such default.
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1 Ins. by Act 2 of 1885, s. 4.
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63.Drawee's time for deliberation
. The holder must, if so required
by the drawee of a bill of exchange presented to
him for acceptance, allow the drawee 1[forty-eight]
hours (exclusive of public holidays) to consider whether
he will accept it.
64.Presentment for payment. Promissory
notes,-bills of exchange and cheques must be
presented for payment to the maker, acceptor or drawee
thereof respectively, by or on behalf
of the holder as hereinafter provided.
In default of such presentment, the other
parties thereto are not liable thereon to such holder.
2[Where authorized by agreement
or usage, a presentment through the post office by
means of a registered letter is sufficient.]
Exception.-Where a promissory note is payable on demand
and is not payable at a specified place, no presentment
is necessary in order to charge the maker thereof.
65.Hours for presentment.
Presentment for payment must be made during
the usual hours of business, and, if at a banker's,
within banking hours.
66.Presentment for payment
of instrument payable after date or sight.
A promissory. note or bill of exchange, made
payable at a specified period after date
or sight thereof, must be presented for payment
at maturity.
67.Presentment for
payment of promissory note payable
by instalments. A promissory note
payable by instalments must be presented
for payment on the third day after the
date fixed for payment of each instalment;
and non-payment on such presentment has the
same effect as non-payment of a note at maturity.
68.Presentment for
payment of instrument payable at specified place
and not else where. A promissory note, bill
of exchange or cheque made, drawn or accepted
payable at a specified place and not elsewhere
must, in order to charge any party thereto, be presented for payment
at that place.
69.Instrument payable
at specified place.A promissory note or bill
of exchange made, drawn or accepted payable at a specified
place must, in order to charge the maker or drawer thereof,
be presented for payment at that place.
---------------------------------------------------------------------
1 Subs. by Act 12 of 1921, s. 2, for " twenty-four".
2 Ins. by Act 2 of 1885, s. 4.
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70.Presentment
where no exclusive place specified. A promissory note
or bill of exchange, not made payable as mentioned in sections
68 and 69, must be presented for payment at
the place of business (if any), or. at
the usual residence, of the maker, drawee or
acceptor thereof, as the case may be.
71.Presentment when maker, etc.,has
no known place of business or residence. If the maker, drawee
or acceptor of a negotiable instrument has no
known place of business or fixed residence, and no place
is specified in the instrument for presentment for acceptance
or payment. such presentment may be made to
him' in person wherever be can be found.
72.Presentment of cheque
to charge drawer. 1[Subject to the provisions
of section 84,] a cheque must, in order to
charge the drawer, be presented at the
bank upon which it is drawn before the relation
between the drawer and his banker has been altered
to the prejudice of the drawer.
73.Presentment of cheque
to charge any other person. A cheque must,
in order to charge any person except the drawer, be
presented within a reasonable time after delivery thereof
by such person.
74.Presentment of instrument
payable on demand. Subject to the provisions
of section 31, a negotiable instrument payable on
demand must be presented for payment within
a reasonable time after it is received by the
holder.
75.Presentment by or to agent, re-presentative
of deceased, or assignee of insolvent.
Presentment for acceptance or payment may be made
to the duly authorized agent of the drawee, maker or acceptor,
as the case may be, or, where the drawee, maker or acceptor
has died, to his legal representative, or, where he
has been declared an insolvent, to his assignee.
2[75A.Excuse for delay in presentment
for acceptance or payment. Delay in presentment
2[for acceptance or payment] is excused if the delay
is caused by circumstances beyond the control of the holder, and
not imputable to his default, misconduct or
negligence. When the cause of delay
ceases to operate, presentment must be made within
a reasonable time.]
---------------------------------------------------------------------
1 Ins. by Act 6 of 1897, s. 2.
2 Ins. by Act 25 of 1920, s. 2.
3 Subs. by Act 12 of 1921, s. 3, for "for payment".
---------------------------------------------------------------------
76.When presentment
unnecessary. No presentment for payment is necessary,
and the instrument is dishonoured at the due
date for presentment, in any of the following cases:
-
(a)
if the maker, drawee or acceptor intentionally prevents the presentment
of the instrument, or, if the instrument being payable at
his place of business, he closes such
place on a business day during the usual business hours,
or,
if
the instrument being payable at some other
specified place, neither he nor any person authorized to
pay it attends at such place during the usual business hours,
or,
if
the instrument not being payable at any specified place,
he cannot after due search be found ;
(b) as against any party sought to be charged therewith,
if he has engaged to pay notwithstanding non-presentment;
(c)
as against any party if, after maturity, with knowledge that
the instrument has not been presented-
he
makes a part payment on account of the amount due on the
instrument, or promises
to pay the amount due thereon in whole or in
part,
or otherwise waives his right to take
advantage of any default in presentment for
payment;
(d)
as against the drawer, if the drawer could not suffer
damage from the want of such presentment.
77 .Liability of
banker for negligently dealing with
bill presented for payment. When a bill of exchange,
accepted payable at a specified bank,
has been duly presented there for payment
and dishonoured, if the banker so negligently or improperly
keeps, deals with or delivers back such
bill as to cause loss to the holder, he must
compensate the holder for such loss.
78. To
whom payment should be made. Subject to the provisions of
section 82, clause (c), payment of the amount
due on a promissory note, bill of exchange
or cheque must, in order to discharge the maker or acceptor,
be made to the holder of the instrument.
79.Interest when rate specified.
When interest at a specified rate is
expressly made payable on a promissory note
or bill of exchange, interest shall be
calculated at the rate specified, on the amount
of the principal money due thereon, from the
date of the instrument, until tender or realization
of such amount, or until such date after
the institution of a suit to recover such amount as
the Court directs.
80.Interest when no rate
specified. When no rate of interest is specified in
the instrument, interest on the amount due thereon shall, 1[notwithstanding
any agreement relating to interest between
any parties to the instrument], be calculated at the rate
of 2[eighteen per annum,] from the date at which the same
ought to have been paid by the party Charge, until
tender or realization of the amount due thereon, or
until such date after the institution of a suit to
recover such amount as the Court directs.
Explanation.-When the party charged
is the indorser of an instru- ment dishonoured
by non-payment, he is liable to pay interest only
from the time that he receives notice of the dishonour.
81.Delivery of instrument
on payment, or indemnity in case of loss.
Any person liable to pay, and called upon by the holder thereof
to pay, the amount due on a promissory
note, bill of exchange or cheque is before
payment entitled to have it shown, and is on payment entitled
to have it delivered up, to him, or, if the instrument
is lost or cannot be produced, to be indemnified
against any further claim thereon against him.
82.Discharge from liability--
The maker, acceptor or indorser respectively
of a negotiable instrument is discharged from liability
thereon-
(a) by cancellation; to a holder thereof who
cancels such
acceptor's or indorser's name with intent to discharge
him, and
to all parties claiming under such holder;
(b) by
release ; to a holder thereof who otherwise discharges
such maker, acceptor or indorser, and to all parties deriving
title under
such holder after notice of such discharge;
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1 Subs. by Act 30 of 1926, s. 2, for " except in cases
provided for by the Code of Civil Procedure, section 532".
2 Subs. by Act 66 of 1988, s. 2 (w.e.f. 30-12-1988).
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(c)by
payment ,to all parties thereto, if the instrument is
payable to bearer, or has been indorsed in blank,
and such
maker, acceptor or indorser makes payment in due course
of
83.Discharge by allowing
drawee more than forty-eight hours to accept.
If the holder of a bill of exchange allows the drawee
more than 1[forty-eight] hours, exclusive of public
holidays, to consider whether he will accept
the same, all previous parties not consenting to
such allowance are thereby discharged from
liability to such holder.
When cheque not duly presented and drawer damaged thereby.
2[84. (1) When
cheque not duly presented and drawer damaged
thereby. Where a cheque is
not presented for payment within a reasonable
time of its issue, and the drawer or person
on whose account it is drawn had the right, at the
time when presentment ought to have been
made, as between himself and the banker, to have
the cheque paid and suffers actual
damage through the delay, he is discharged
to the extent of such damage, that is to say, to the extent to
which such drawer or person is a creditor of the banker to a larger
amount than he would have been if such cheque had been paid.
(2) In determining
what is a reasonable time, regard shall be had
to the nature of the instrument, the usage
of trade and of bankers, and the facts
of the particular case.
(3) The holder of the cheque
as to which such drawer or- person is so
discharged shall be a creditor, in lieu of such
drawer or person, of such banker to the extent of
such discharge and entitled to recover the amount from him.
Illustrations
(a) A draws a cheque
for Rs. 1,000, and, when the cheque ought to
be presented, has funds at the bank to meet it. The
bank fails before the cheque is presented.
The drawer is discharged, but the holder can
prove against the bank for the amount. of the cheque.
(b) A draws a cheque at Umballa
on a bank in Calcutta. The bank fails before
the cheque could be presented in ordinary course. A
is not discharged, for he has not suffered actual
damage through any delay. in presenting the
cheque.]
85. 3[(1)] Cheque payable
to order. Where a cheque payable to order purports
to be endorsed by or on behalf of the payee, the drawee is
discharged by payment in due course.
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1 Subs. by Act 12 of 1921, s. 2, for " twenty-four".
2 Subs. by Act 6 of 1897, s. 3, for the original section.
3 Renumbered as sub-section (1) of s. 85 by Act 17 of 1934,
s. 2.
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1[(2) Where a cheque is originally expressed to be payable
to bearer, the -drawee is discharged
by payment in due course to the bearer thereof,
notwithstanding any endorsement whether in full or in blank
appearing thereon, and notwithstanding
that any such endorsement purports to
restrict or exclude further negotiation.]
2[85A.Drafts drawn by one branch
of a bank on another payable to order. Where
any draft, that is, an order to pay money, drawn by one
office of a bank upon another office of the
same bank for a sum of money payable
to order on demand, purports to be endorsed by or
on behalf of the payee, the bank is discharged by payment
in due course.]
86. Parties not consenting
discharged by qualified or limited acceptance.If
the holder of a bill of exchange
acquiesces in a qualified acceptance,
or one limited to part of the sum mentioned in the
bill, or which substitutes a different place or time for
payment, or which, where the drawees are not partners, is
not signed by all the drawees, all previous parties
whose consent is not obtained to such acceptance
are discharged as against the holder and those
claiming under him, unless on notice given by the
holder they assent to such acceptance.
Explanation.-An
acceptance is qualified-
(a)
where it is conditional, declaring the payment to be dependent
on the happening, of an event therein stated ;
(b)
where it undertakes the payment of part only of the sum
ordered to be paid ;
(c) where, no place of payment being
specified on the order, it undertakes the payment
at a specified place, and not otherwise
or elsewhere ; or where, a place of payment
being specified in the order, it undertakes the payment
at some
other place and not otherwise or elsewhere
(d) where it undertakes the payment at a time
other than that at which under the order it would be legally
due.
87.Effect of material
alteration. Alteration by indorsee.Any material
alteration of a negotiable instrument renders the same void
as against any one who is a party thereto at the time
of making such alteration and does not consent
thereto, unless it was made in order to carry out
the common intention of the original parties:
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1 Ins. by Act 17 of 1934, s. 2.
2 Ins. by Act 25 of 1930, s. 2.
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88.Acceptor or
indorser bound notwithstanding
previous alteration. An acceptor or indorser
of a negotiable instrument is bound
by his acceptance or indorsement notwithstanding any
previous alteration of the instrument.
89.Payment of instrument
on which alteration is not apparent. Where
a promissory note, bill of exchange
or cheque has been materially altered
but does not appear to have been so altered, or where
a cheque is presented for payment which does not at the time
of presentation appear to be crossed or to have had a crossing
which has been obliterated, payment thereof by a person
or banker liable to pay, and paying the same
according to the apparent tenor thereof at the time
of payment and otherwise in due course, shall
discharge such person or banker from all liability
thereon ; and such payment shall not be questioned
by reason of the instrument having been altered or the
cheque crossed.
90.Extinguishment of
rights of action on bill in acceptor's
hands. If a bill of exchange which
has been negotiated is, at or after maturity,
held by the acceptor in his own right, all rights of action
thereon are extinguished.
91.Dishonour by non-acceptance.
A bill of exchange is said to be dishonoured
by non-acceptance when the drawee, or one
of several drawees not being partners,
makes default in acceptance upon being duly
required to accept the bill, or where presentment is excused
and the bill is not accepted.
Where the drawee is incompetent
to contract, or the acceptance is' qualified,
the bill may be treated -as dishnoured.
92.Dishonour by non-payment.
A promissory note, bill of exchange or cheque
is said to be dishonoured by non-payment when the maker
of the note, acceptor of the bill
or drawee of the cheque makes default in payment
upon being duly required to pay the same.
93.By and to whom notice should
be given. When a promissory note, bill of exchange or
cheque is dishonoured by non-acceptance or non- payment,
the holder thereof, or some party thereto who remains liable
thereon, must give notice that the instrument has been so
dishonoured to all other parties whom the holder seeks
to make severally liable thereon, and
to some one of several parties whom he seeks to
make jointly liable thereon.
Nothing in this section renders
it necessary to give notice to the maker of
the dishonoured promissory note or the drawee or acceptor of
the dishonoured bill of exchange or cheque.
94.Mode in which notice may be
given. Notice of dishonour may be given to a duly
authorized agent of the person to whom it is required to
be given, or, where he has died, to his legal representative,
or, where he has been declared an insolvent, to his assignee
; may be oral or written; may, if written, be sent by post;
and may be in any form ; but it must inform the party
to whom it is given, either in express terms
or by reasonable intendment, that the
instrument has been dishonoured, and in what
way, and that he Will be held liable thereon ;
and it must be given within a reasonable time after dishonour,
at the place of business or (in case such party has no place
of business) at the residence of the party for whom it is
intended.
If the notice is duly directed
and sent by post and miscarries, such miscarriage
does not render the notice invalid.
95.Party receiving must transmit
notice of dishonour. Any party receiving notice of
dishonour must, in order to render any prior party liable
to himself, give notice of dishonour to such party
within a reasonable time, unless such party
otherwise receives due notice as provided by
section 93.
96.Agent for presentment.
When the instrument is deposited with an agent
for presentment, the agent is entitled to the same time
to give notice to his principal as if he were the holder
giving notice of dishonour, and the principal is entitled
to a further like period to give notice of dishonour.
97.When party to whom
notice given is dead. When the party to whom
notice of dishonour is despatched is
dead, but the party despatching
the notice is ignorant of his death
the notice is sufficient,
98.When notice of dishnour is unnecessary.
No notice of dishonour is necessary
(a) when it is dispensed with
by the party entitled thereto;
(b)
in order to charge the drawer when he has countermanded payment;-
(c)
when the party charged could not suffer damage for want
of notice;
(d)
when the party entitled to notice cannot
after due search be found ; or the party
bound to give notice is, for any other
reason, unable without any fault of his own to give it;
(e)
to charge the drawers, when the acceptor is
also a drawer;
(f) in
the case of a promissory note which is not negotiable;
(g)
when the party entitled to notice, knowing the facts, promises
unconditionally to pay the amount
due on the instrument.
99. Noting. When a promissory
note or bill of exchange has been dishonoured
by non-acceptance or non-payment, the holder may
cause such dishonour to be noted by a notary public upon
the instrument, or upon a paper attached thereto,
or partly upon each. Such
note must be made within a reasonable time after dishonour,
and must specify the date of dishonour, the reason,
if any, assigned for such dishonour,
or, if the instrument has not been expressly
dishonoured, the reason why the holder treats it as
dishonoured, and the notary's charges.
100.Protest. When
a promissory note or bill of exchange has been
dishonoured by non-acceptance or non-payment, the
holder may, within a reasonable
time, cause such dishonour to be noted
and certified by a notary public. Such certificate
is called a protest.
Protest for better
security. When the acceptor of a bill of exchange
has become insolvent, or his credit
has been publicly impeached, before the
maturity of the bill, the holder may, within a reasonable
time, cause a notary public to demand better security
of the acceptor, and on its being refused may, within a
reasonable time, cause such facts
to be noted and certified as aforesaid.
Such certificate is called a protest for better security.
101.Contents of protest.A
protest under section 100 must contain-
(a)
either the instrument itself, or a literal transcript
of the instrument and of everything written or printed thereupon;
(b)
the name of the person for whom and against whom the instrument
has been protested ;
(c) astatement
that payment or acceptance, or
better security, as the case may be, has
been demanded of such person by
the notary public ; the terms of his answer, if
any, or a statement that he gave no answer or that he
could not be found ;
(d) when the note or bill has been dishonoured,
the place and time of dishonour, and,
when better security has been refused,
the place and time of refusal ;
(e)
the subscription of the notary public
making the protest;
(f)
in the event of an acceptance for honour
or of a payment for honour, the name of the
person by whom, of the person for whom, and the manner
in which, such acceptance or payment
was offered and effected.
1[A notary public may make
the demand mentioned in clause (c) of this section
either in person or by his clerk or, where authorized by
agreement or usage, by registered letter.]
102.Protest for non-payement
after dishonour by non-acceptance.
When a promissory note or bill of exchange is required
by law to be protested, notice of such
protest must be given instead of notice of dishonour,
in the same manner and subject to the same conditions ; but the
notice may be given by the notary public who makes the protest.
103.Protest for non-payement
after dishonour by non-acceptance.
All bills of exchange drawn payable at some other place
than the place mentioned as the residence of the drawee,
and which are dishonoured by non-acceptance, may,
without further presentment to the drawee, be protested
for non-payment in the place specified for payment, unless
paid before or at maturity.
104.Protest of foreign bills. Foreign
bills of exchange must be protested for dishonour
when such protest is required by the law of the
place where they are drawn.
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1 Ins. by Act 2 of 1885, s. 5.
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1[104A.When noting
equivalent to protest. For the purposes of this
Act, where a bill or note is required to be protested within
a specified time or before some further proceeding
is taken, it is. sufficient that
the bill has been noted for protest
before the expiration of the specified time or the
taking of the proceeding ; and the formal protest
may be extended at any time thereafter as of the date
of the noting.]
105.Reasonable time. In determining
what is a reasonable time for presentment for acceptance
or payment, for giving notice of dishonour and
for noting, regard shall be had to the nature of the
instrument and the usual course of dealing with respect
to similar instruments ; and, in calculating such
time, public holidays shall be excluded.
106.Reasonable time of giving notice
of dishonour. If the holder and -the party to whom
notice of dishonour is given carry on business or
live (as the case may be) in different places, such notice is
given within a reasonable time if it is despatched
by the next post or on the day next after the
day of dishonour.
If the said parties carry on business
or live in the same place, such notice is given
within a reasonable time if it is despatched in time
to reach its destination on the day next
after the day of dishonour.
107.Reasonable time
for transmitting such notice. A
party receiving notice of dishonour, who seeks to enforce
his right against a prior party, transmits the
notice within a reasonable time -if he transmits
it within the same time after its receipt as he would have
had to give notice if he had been the holder.
108.Acceptancc for honour.
When a bill of exchange has been noted or protested for
nonacceptance or for better security, any person not being
a party already liable thereon may, with the consent
of the holder, by writing on the bill, accept the
same for the honour of any party thereto.2*
* *
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1 Ins. by Act 2 of 1885, s. 6.
2 The second sentence rep. by s. 7, ibid.
---------------------------------------------------------------------
109.How acceptance for honour must
be made. A person desiring to accept for
honour must, 1[by writing on the bill under his
hand,] declare that he accepts under protest
the protested bill for the honour
of the drawer or of a particular indorser whom he
names, or generally for honour 2* * *.
110. Acceptance not specifying
for whose honour it is made. Where the acceptance does not
express for whose honour it is made, it shall be deemed
to be made for the honour of the drawer.
111.Liability of
acceptor for honour. An acceptor for honour
binds himself to all parties subsequent to the party for
whose honour he accepts to pay the amount of
the bill if the drawee do not ; and such
party and all prior parties are liable
in their respective capacities to
compensate the acceptor for honour for all loss
or damage sustained by him in consequence of such acceptance.
But an acceptor
for honour is not liable to the holder of the bill
unless it is presented, or (in case the address given
by such acceptor on the bill is a place other than
the place where the bill is made payable) forwarded
for presentment, not later than the day next after
the day of its maturity.
112.When acceptor for honour may be
charged. An acceptor for honour
cannot be charged unless the bill has at its
maturity been presented to the drawee for payment,
and has been dishonoured by him, and noted or protested
for such dishonour.
113.Payment for honour. When a bill of exchange
has been noted or protested for nonpayment, any person
may pay the same for the honour of any
party liable to pay the same, provided that the
person so paying 1[or his agent in that behalf] has
previously declared before a notary public the
party for whose honour he pays, and that
such declaration has been recorded by such notary public.
114.Right of payer for honour. Any person so paying
is entitled to all the rights, in respect of
the bill, of the holder at the time of such
payment, and may recover from the party for whose honour
he pays all sums so paid, with interest thereon
and with all expenses properly incurred in making
0such payment
0 --------------------------0-------------------------------------------
1 Subs. by Act 2 of 1885, s. 8, for "in
the presence of a notary public, subscribe
the bill with his own hand, and". 2The words
"and such declaration must be recorded by the notary in his
register " rep. by s. 8, ibid. 3 Ins.
by s. 9, ibid. ---------------------------------------------------------------------
115.Drawee in case
of need. Where a drawee in case of need is named
in a bill of exchange, or in any indorsement thereon, the
bill is not dishonoured until it has been dishonoured by
such drawee.
116.Acceptance and payment
without protest. A drawee in case of need may accept
and pay the bill of exchange without previous protest.
117.Rules as to compensation. The
compensation payable in case of dishonour of
a promissory note, bill of exchange or cheque, by
any party liable to the holder or any indorsee, shall 1*
* * be determined by the following rules:-
(a) the holder is entitled to the
amount due upon the
instrument, together with the expenses properly incurred
in presenting,
noting and protesting it ;
(b) when the person charged
resides at a place different
from that at which the instrument was payable, the holder
is entitled to receive such sum at the current rate of
exchange between the two places;
(c) an indorser who, being liable,
has paid the amount due on
the same is entitled to the amount so paid with interest
at 2[eighteen
per centum] per annum from the date of payment
until tender or realization thereof, together
with all ex- penses coused by the dishonour
and payment;
(d) when the person charged and such indorser
reside at different places, the indorser
is entitled to receive such
sum at the current rate of exchange between the two places;
(e) the party entitled to compensation may draw
a bill upon
the party liable to compensate him, payable at sight
or on
demand, for the amount due to him, together with all expenses
properly incurred by him. Such bill must be
accompanied by
the instrument dishonoured and the protest thereof (if any).
If such bill is dishonoured, the party dishonouring
the same is liable to make compensation
thereof in the same manner as in the case of
the original
bill. ---------------------------------------------------------------------
1 The words, figures and brackets "(except in
cases provided for by the Code of
Civil Procedure, section 532)" omitted by
Act 30 of 1926,s. 3.
2 Subs. by Act 66 of 1988, s. 3, for "Six per centum
"(w.e.f. 30-12-
1988)
---------------------------------------------------------------------
118.Presumptions as to negotiable
instruments- Until the contrary is proved, the following
presumptions shall be made: -
(a) of consideragion; that every negotiable instrument
was made or drawn for consideration, and that every
such instru- ment, when it has been accepted,
indorsed, negotiated or
transferred, was accepted, indorsed, negotiated
or trans- ferred
for consideration ;
(b) as to date; that every negotiable instrument
bearing a date was made or drawn on such date ;
(c)as to time of acceptance; that every
accepted bill of exchange was accepted within
a reasonable time after its date and before its maturity
;
(d)as to time of transfer; that
every transfer of a negotiable instrument was
made before its maturity;
(e)as to order of indorsements;
that the indorsements
appearing upon a negotiable instrument were made in the order
in which they appear thereon;
(f)as to stamp; that a
lost promissory note, bill of
exchange or cheque was duly stamped ;
(g)that holder is a holder in due course; that the holder of
a negotiable instrument is a holder in due course:provided
that, where
the instrument has been obtained from its lawful
owner, or from any person in lawful custody thereof, by means
of
an SP offence or fraud. or has been obtained
from the
maker or acceptor thereof by means of an offence or fraud, or
for
unlawful consideration, the burthen of proving that the
holder
is a holder in due course lies upon him.
119.Presumption on proof of protest.
In a suit upon an instrument which has been dishonoured,
the Court shall, on proof of the protest, presume
the fact of is dishonour, unless and until
such fact is disproved.
120.Estoppel against denying original
validity of instrument. No maker of a
promissory note, and no drawer of a bill of exchange
or cheque, and no acceptor of a bill of exchange for
the honour of the drawer shall,
in a suit thereon by a holder in
due course, be permitted to deny the validity
of the instrument as originally made or drawn.
121.Estoppel
against denying capacity of payee to indorse.
No maker of a promissory note and no acceptor
of a bill of exchange 1[payable
to order] shall, in a suit thereon by a
holder in due course, be permitted to deny the
payee's capacity, at the date of the note or bill,
to indorse the same.
122.Estoppel against
denying signature or capacity of prior
party. No indorser of a negotiable instrument shall, in
a suit thereon by a subsequent holder, be permitted to deny
the signature or capacity to contract of any prior party
to the instrument.
123.Cheque crossed
generally. Where a cheque bears across its face
an addition of the words "and company "
or any abbreviation thereof, between
two parallel transverse lines, or of two parallel
transverse lines simply, either with or
without the words " not negotiable,"
that addition shall be deemed a crossing, and the cheque
shall be deemed to be crossed generally.
124. Cheque crossed specially.
124.Cheque crossed
specially. Where a cheque bears across its face
an addition of the name of a banker, either with or without
the words " not negotiable," that addition shall
be deemed a crossing, and the cheque shall be deemed to
be crossed specially, and to be crossed to that banker.
125.Crossing after issue. Where
a cheque is uncrossed, the holder may cross it generally
or specially.
Where a
cheque is crossed generally, the holder may cross it specially.
Where a cheque is crossed generally or specially, the holder
may add the words"' not negotiable".
---------------------------------------------------------------------
1 Subs. by Act 8 of 1919, s. 5, for " payable to, or
to the order of, a specified person ". ---------------------------------------------------------------------
Where
a cheque is crossed specially, the banker to whom it is crossed
may again cross it specially to another banker. his agent,
for collection.
126.Payment of cheque
crossed generally. Where a cheque is crossed
generally, the banker on whom it is drawn shall not
pay it otherwise than to a banker.
Payment of cheque crossed
specially. Where a cheque is crossed specially,
the banker on whom it is drawn shall not pay it otherwise
than to the banker to whom it is crossed, or his agent for
collection.
127.Payment of cheque crossed specially
more than once.Where a cheque is
crossed specially to more than one banker, except
when crossed to an agent for the purpose of collection,
the banker on whom it is drawn shall refuse payment
thereof.
128.Payment in due
course of corssed cheque.Where the banker on whom
a crossed cheque is drawn- has paid the same in due course,
the banker paying the cheque, and in case such
cheque has come to the hands of the payee) the
drawer thereof, shall respectively be entitled to
the same rights, and be placed in the
same position in all respects, as
they would respectively be entitled to and placed in if
the amount of the cheque bad been paid to and
received by the true owner thereof.
129.Payment of crossed cheque
out of due course.Any banker paying
a cheque crossed generally otherwise than to a banker,
or a cheque crossed specially otherwise than to the
banker to whom the same is crossed, or his agent
for collection, being a banker, shall be liable
to the true owner of the cheque for any loss he may
sustain owing to the cheque having been so paid.
130.Cheque bearing
"not negotiable". A person taking a cheque
crossed generally or specially, bearing in either case the
words " not negotiable," shall not
have, and shall not be capable of giving, a better
title to the cheque than that which the person from
whom he took it had.
131.Non-liability of banker receiving
payment of cheque. A banker who has in good faith
and without negligence received payment for a customer
of a cheque crossed generally or specially to himself
shall not, in case the title to the cheque
proves defective, incur any liability
to, the true owner of the cheque by reason only of having
received such payment.
1[Explanation.-A banker receives
payment of a crossed cheque for a customer within
the meaning of this section notwithstanding -that he credits
his customer's account with the amount of the cheque
before receiving payment thereof.]
2[131A.Application of Chapter
to drafts. The provisions of this Chapter shall apply
to any draft, as defined in section 85A, as if the draft
were a cheque.]
132.Set of bills. Bills of
exchange may be drawn in parts, each part being
numbered and containing a provision that it shall continue payable
only so long as the others remain unpaid.
All the parts together make a set ; but the
whole set constitutes only one bill, and is extinguished
when one of the parts, if a separate bill, would be
extinguished.
Exception.-When a person
accepts or indorses different parts of the bill
in favour of different persons, he and
the subsequent indorsers of each
part are liable on such part as if it
were a separate bill.
133.Holder of first
acquired part entitled to all. As between holders
in due course of different parts of the same set, he who first
acquired title to his part is entitled to the
other parts and the money represented
by the bill.
134 Law governing liability of maker,
acceptor or indorser of foreigninstrument.
134.Law governing liability
of maker, acceptor or indorser of foreign instrument.
In the absence of a contract to the contrary, the liability
of the maker or drawer of a foreign promissory note, bill of exchange
or cheque is regulated in all essential matters by the law of
the place where he made the instrument, and the respective
liabilities of the acceptor and
indorser by the law of the place where
the instrument is made payable.
A bill of exchange was drawn by A in California, where the
rate of interest is 25 per cent., and accepted by B, payable
in Washington, where the rate of interest is
6 per cent. The bill is endorsed in 3[India],
and is dishonoured. An action on the
bill is brought against B in 3[India].
He is liable to pay interest at the rate of 6 per
cent. only ; but if A is charged as drawer, A is liable
to pay interest at the rate of 25 per cent.
---------------------------------------------------------------------
1 Ins. by Act 18 of 1922, s. 2.
2 Ins. by Act 33 of 1947, s. 2.
3 Subs. by Act 3 of 1951, s. 3 and Sch., for "the States".
---------------------------------------------------------------------
135.Law of place of payment governs dishonour.
Where a promissory note, bill of exchange or cheque is made
payable in a different place from that in which it
is made or indorsed, the law of the place where it
is made payable determines what constitutes dishonour
and what notice of dishonour is sufficient.
Illustration
A bill of exchange drawn and indorsed
in 1[India], but accepted payable in France,
is dishonoured. The indorsee causes it to
be protested for such dishonour, and gives notice
thereof in accordance with the law of France, though
not in accordance with the rules herein contained
in respect of bills which are not foreign. The notice
is sufficient.
136.Instrument
made, etc., out of India, but in accordance with the
law of India. If a negotiable
instrument is made, drawn, accepted
or indorsed 2[outside India], but in accordance
with the 3[law of India], the circumstance that any
agreement evidenced by such instrument is invalid
according to the law of the country wherein it was
entered into does not invalidate any subsequent
acceptance or indorsement made thereon 4[within India].
137.Presumption as
to foreign law. The law of any foreign country 5* * * regarding
promissory notes, bills of exchange and cheques shall be
presumed to be the same as that of 6[India], unless and until
the contrary is proved.
NOTARIES PUBLICOF PENALTIES IN CASE OF DISHONOUR OF
CERTAIN CHEQUES FOR INSUFFICIENCYOF FUNDS IN THE ACCOUNTS
CHAPTER XVII
OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR
INSUFFICIENCY OF FUNDS IN THE ACCOUNTS
138.Dishonour
of cheque for insufficiency, etc., of funds in the account.
Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount
of money to another person from
out of that account for the discharge, in whole or
in part, of any debt or other liability, is returned by
the bank unpaid. either because of the amount
of money standing to the credit of that account
is insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that account
by an agreement made with that
bank, such person shall be deemed to have committed
an offence and shall, without prejudice. to any other
provision of this Act, be punished with imprisonment
for a term which may extend to one year, or with fine
which may extend to twice the amount of the cheque, or with
both: Provided that
nothing contained in this section shall
apply unless-
(a)the
cheque has been, presented to the bank within
a period of six months from the date on which it
is drawn or
within the period of its validity, whichever is earlier;
(b)the payee or the holder in due course. of the cheque as
the case may be, makes a demand for the
payment of the
said amount of money by giving a notice, in writing, to
the drawer
of the cheque, within fifteen days of the receipt of
information by him from the bank regarding the return of
the cheque
as unpaid; and
(c)the drawer of such cheque fails to make the payment of
the said amount of money to the payee or, as the case may be,
to
the holder in due course of the cheque, within
fifteen days of the receipt of the said notice.
Explanation.-For the
purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability.
139.Presumption in favour of holder.
It shall be presumed, unless the contrary is
proved, that the holder of a cheque received
the cheque of the nature referred to in section 138 for
the discharge, in whole or in part, of any debt or
other liability.
140.Defence which
may not be allowed in any prosecution under section
138. It shall not be a defence in a prosecution for an offence
under section 138 that the drawer had no reason
to believe when he issued the cheque that
the cheque may be dishonoured on presentment for
the reasons stated in that section.
141.(1)Offences by companies. If
the person committing an offence under section
138 is a company, every person who, at the time
the offence was committed, was in charge of, and was
responsible to, the company for the conduct of the
business of the company, as well as the company, shall
be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly:
Provided that nothing contained
in this sub-section shall render any person
liable to punishment if he proves that the offence
Was committed without his knowledge, or that
he had exercised all due diligence to
prevent the commission of such offence.
(2)Notwithstanding anything contained
in sub-section (1), where any offence under this Act
has been committed by a company and it is proved
that the offence has been committed with
the consent or connivance of, or is attributable
to, any neglect on the part of, any director,
manager, secretary or other officer of the company,
such director, manager, secretary or other officer shall
also be deemed to be guilty of that offence and shall
be liable to be proceeded against and punished accordingly,
Explanation.-For
the purposes of this section,-
(a)"company"
means any body corporate and includes a firm or other association
of individuals; and
(b) "director",
in relation to a firm, means a partner in the firm.
142.Cognizance of offences. Notwithstanding anything contained
in the Code of Criminal Procedure, 1973 (2 of 1974),-
(a) no court shall take cognizance
of any offence punishable
under section 138 except upon a complaint,
in writing, made by the payee or, as the case may be, the holder
in due course of the cheque;
(b) such complaint is made within one month of the date
on which
the cause of action arises under clause (c)
of the provison to section 138;
(c) no
court inferior to that of a Metropolitan Magistrate or
a Judicial Magistrate of the first class shall try
any offence punishable under section 138.]
