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

CHAP PRELIMINARY

PRELIMINARY 1. Short title.

1.Short title. This Act may be called the Negotiable Act, 1881.

Instruments

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.

2.Commencement. [Repeal of enactments.] Rep. by the Amending Act, 1891 (12 of 1891), s. 2 and Sch. 1.

3. Interpretation-clause.

3.Interpretation-clause. In this Act3* * * * * *

4["banker" includes any person acting as a banker and office savings bank;] 5* * * * * *

any

post

--------------------------------------------------------------------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). the Reserve Bank of India Act, 1934 (2 of 1934), s. 31. See now

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 "banker". Act 37 of 1955, s. 2, for the definition of the word

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 s. 3 & Sch. 1962

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. --------------------------------------------------------------------12

CHAP OF NOTES, BILLS AND CHEQUES

OF NOTES, BILLS AND CHEQUES

4. "Promissory note".

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 black horse on 1st January next." my

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".

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 payable 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 that payment is to be made may be a "certain I person", within the or

13

meaning of this section and section 4, although he is designated by description only.

mis-named

or

6. "Cheque".

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.

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 thereon the be resorted case of need in case of need. When in the bill or in any endorsement name of any person is given in addition to the drawee to to in case of need, such person is called a " drawee in ".

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".

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".

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 having sufficient cause to believe that any defect existed title of the person from whom he derived his title. without in the

--------------------------------------------------------------------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,". --------------------------------------------------------------------14

10. "Payment in due course".

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.

Inland instrument. Explanation (ii). Explanation (iii). Foreign instrument.] 14. is expressed to be payable to the order of a specified person.2[(1)Negotiable instrument. Any such instrument not so drawn. bill of exchange or cheque payable either to order or to bearer. 1 [India] shall be deemed to be an inland instrument. the instrument is said to be negotiated. Negotiation. and not to him or his order.11. bill of exchange or cheque. 14. 12. the . 13. A promissory note.-A promissory note. made made payable shall be deemed to be a foreign instrument.] 3[(2) A negotiable instrument may be made payable to two or more payees jointly. 12. 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.-Where a promissory note. A " negotiable instrument " means a promissory note. Negotiable instrument.Foreign instrument. or drawn upon any person resident in. so as to constitute that person holder thereof. 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. Explanation (i).Negotiation. or one or -some of several payees. and made payable in. bill of exchange or cheque is transferred to any person. or it may be made payable in the alternative to one of two. or 13. and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. When a promissory note. bill of exchange or cheque drawn or made in 1 [India].-A promissory note. it is nevertheless payable to him or his order at his option. either originally or by endorsement.

2 Subs. s.] payee 17. 2. the holder may at his election treat it as either. 3 Ins. on the back or face thereof or on a slip of paper annexed thereto. otherwise than as such maker. for the purpose of negotiation. -and is called the " indorser ". for " a State". he is said to indorse same. and the person so specified is called the " indorsee " of the instrument. and the instrument shall be thenceforward treated accordingly. the 16. 17. Indorsement. 15. 16. by Act 36 of 1957." and if he adds a direction to pay the amount mentioned in the instrument to. II. When the maker or holder of a negotiable instrument signs the same. --------------------------------------------------------------------- 15 to be completed as a negotiable instrument. for the original sub-section. 3 and Sch. The provisions of this Act relating to a shall apply with the necessary modifications to an indorsee. a specified person. If the indorser signs his name only. 1[(2)Indorsee. s. by Act 8 of 1919. or to the order of.Ambiguous instruments. the indorsement is said to be " in full " . the indorsement is said to be " in blank.1[(1)] Indorsement in "blank" and "in full". Where an instrument may be construed either as a promissory note or bill of exchange.15. 3. by Act 5 of 1914. s. or so signs for the same purpose a stamped paper intended --------------------------------------------------------------------1 Subs. .Indorsement. Indorsement in "blank" and "in full". Ambiguous instruments.

s. for any amount specified therein and not exceeding the amount covered by the stamp. --------------------------------------------------------------------- . Where amount is stated differently in figures and words. 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 amount intended by him to be paid thereunder. 20. in the capacity in which he signed the same. Inchoate stamped instruments.18. he thereby gives prima facie authority to the holder thereof to make or complete. "At sight". If the amount undertaken or ordered to be paid is stated differently in figures and in words. 3. "On presentment". The person so signing shall be liable upon such instrument. s. by Act 5 of 1914. 3 and Sch. upon it a negotiable instrument. and either wholly blank or having written thereon an incomplete negotiable instrument.Instruments payable on demand.Where amount is stated differently in figures and words. In a promissory note or bill of exchange the expressions " at sight " and " on presentment " mean on demand. as the case may be. 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]. for "the States". 2 Subs.Inchoate stamped instruments. the amount stated in words shall be the amount undertaken or ordered to be paid. "At sight". and a cheque. 18. 19. 19. A promissory note or bill of exchange. Instruments payable on demand.. "On presentment". The expression --------------------------------------------------------------------1 Ins. 21. 21. in which no time for payment is specified. 20. are payable on demand. by Act 3 of 1951.

after acceptance. In calculating the date at which a promissory note or bill of exchange. the period shall be held to terminate on the last day of such month. The maturity of a promissory note or exchange is the date at which it falls due. after presentment sight. is made payable three months after date. for for 22. maturity of bill or note payable so many months 23. with the day on which it was so accepted. bill of Days of grace. or presented for acceptance or sight. at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable. or protest for non-acceptance. The instrument is at maturity on the 3rd December . Calculating afterdate or sight. Illustrations (a) A negotiable instrument. or. is made payable three months after date. made payable a stated number of months after date or after sight. and. in a promissory note. dated 29th January 1878. or the event happens. The instrument is at maturity on the 3rd December 1878. is made payable at one month after date. or after a certain event. Calculating maturity of bill or note payable so many months after date or sight. 23.1878. where the instrument is a bill of exchange made payable a stated number of months after sight and has been accepted for honour. If the month in which the period would terminate has no corresponding day. or noted for nonacceptance. in a bill of exchange. Every promissory note or bill of exchange which is not expressed to be payable on demand. (c) A promissory note or bill of exchange. "Maturity". The instrument is at maturity on the third day after the 28th February 1878. 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 noting nonacceptance. dated 31st August 1878. "Maturity" 22.16 "after sight " means. is at maturity. (b) A negotiable instrument. dated 30th August 1878. . or protested for nonacceptance.

25. Capacity to make. CHAP PARTIES To NOTES. BILLS AND CHEQUES CHAPTER III PARTIES To NOTES. indorsement.When the day on which a promissory note or bill of exchange is at maturity is a public holiday. promissory notes. 25. or of presentment for acceptance or sight. When day of maturity is a holdiay. the instrument shall be deemed to be due on the next preceding business day. etc. etc. Calculating maturity of bill or note dateor sight.Every person capable of contracting. When day of maturity is a holdiay. bill of . etc. acceptance. etc. payable so many days after 24. according to the law to which he is subject. delivery and negotiation of a promissory note.-The expression " public holiday " includes Sundays: 1** * and any other day declared by the 2[Central Government]. 17 Explanation. or on which the event happens.. 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. by notification in the Official Gazette. the day of the date.. drawing. Capacity to make. BILLS AND CHEQUES 26. promissory notes. shall be excluded.24. Calculating maturity of bill or note payable so many days after date or sight. to be a public holiday. may bind himself and be bound by the making. or of protest for non-acceptance. 26.

Liability of legal representative signing. 27. indorse. An agent who signs his name to a promissory note. Liability of legal representative signing. except to those who induced him to sign upon the belief that the principal only would be held liable. Liability of agent signing. they are so empowered. Liability of agent signing. bill of exchange or cheque is liable ---------------------------------------------------------------------1 The words "New Year's day. indorse or accept such instruments except in cases in which. A minor may draw. or that he does not intend thereby to incur personal responsibility. 28. ins- Nothing herein contained shall be deemed to empower a corporation to make.O.". Agency. A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal. Good-Friday. import 28. 1-4-1956). An authority to draw bills of exchange does not of itself an authority to indorse. Every person capable of binding himself or of being bound. bill of exchange or cheque without indicating thereon that he signs as agent. for "L. 29. --------------------------------------------------------------------- . 27. under the law for the time being in force. deliver and negotiate such trument so as to bind all parties except himself. s.e. 1937.. Christmas day: if either of such days falls on a Sunday. is liable personally on the instrument. by the A. Minor. as mentioned in section 26.f. 29. may so bind himself or be bound by a duly authorized agent acting in his name.G. 2 Subs. 3 (w." omitted by Act 37 of 1955.exchange or cheque.A legal representative of a deceased person who signs his name to a promissory note. the next following Monday . Agency.

provided due notice of dishonour has been given to. Liability of maker of note and acceptor of bill.Liability of drawer. and. In default of such payment as aforesaid. 31. Liability of drawer. and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. 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. to compensate tile holder. default of such payment. Only drawee can be acceptor except in need or for honour. 32. 30.18 personally thereon unless he expressly limits his liability extent of the assets received by him as such. In the absence of a contract to the contrary. 31. The drawer of a bill of exchange or cheque is bound. Liability of maker of note and acceptor of bill. in case of dishonour by the drawee or acceptor thereof. to the 30. or received by. Liability of drawee of cheque. 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. must compensate the drawer for any loss or damage caused by such default. the drawer as hereinafter provided. Liability of drawee of cheque. . 32. 33. in. 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.

Maker. can except in need or for honour. Maker. and the acceptor are. The maker of a promissory note or cheque.33. the drawer of a bill of exchange until acceptance.Only drawee can be acceptor person except the drawee of a bill several drawees. drawer and acceptor principals. or an acceptor for honour. expressly excluding or making conditional his own liability. drawer and acceptor principals. or all or some of therein as a drawee in case of bind himself by an acceptance.Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied. in the absence of a contract to the contrary. 34. No of exchange. 19 Every indorser after dishonour is liable as upon payable on demand. or a person named need. or received by. 35. to compensate such holder for any loss or damage caused to him by such dishonour. Liability of indorser. 37. 34. provided due notice of dishonour has been given to. 35. such indorser as hereinafter provided. is bound thereby to every subsequent holder. whoever indorses and delivers a negotiable instrument before maturity without. respectively liable thereon as principal debtors. acceptor or maker. Liability of prior parties to holder in due course. an instrument 36. Liability of indorser. each of them can accept it for himself. 36. Where there are several drawees of a bill of exchange who are not partners. and the . Acceptance by several drawees not partners. in such indorsement. In the absence of a contract to the contrary. 37. Acceptance by several drawees not partners. in case of dishonour by the drawee. but none of them can accept it for another without his authority. Liability of prior parties to holder in due course.

38. " B. in the absence of a contract to the contrary. the holder may expressly reserve his right to charge the other parties. and D to E. As between E and C. B is the principal debtor. Discharge of indorser's liability. who accepts. also liable thereon as a principal debtor in respect of each subsequent party. and C and D are his sureties.As between the parties so liable as sureties. which contains the following indorsements in blank:First indorsement. 39. Suretyship. each prior party is. " Peter Williams. 38. and A.other parties thereto are liable thereon as sureties for drawer or acceptor. 40 Discharge of indorser's liability.When the holder of an accepted bill of exchange enters into any contract with the acceptor which. As between E and B. C is the principal debtor and D is his surety. Illustration A draws a bill payable to his own order on B. As between E and A. Illustration A is the holder of a bill of exchange made payable to the of B. and in such case they are not discharged." order . Prior party a principal in respect of each subsequent party. 39. Prior party a principal in respect of each subsequent party. C to D. under section 134 or 135 of the Indian Contract Act. the maker. as the case may be. destroys or impairs the indorser's remedy against a prior party.(9 of 1872) would discharge the other parties. A is the principal debtor." Second indorsement. C and D are his sureties. the indorser is discharged from liability to the holder to the same extent as if the instrument had been paid at maturity. 40. 1872. Suretyship. Where the holder of a negotiable instrument. without the consent of the indorser. A afterwards indorses the bill to C.

. 43. " John Rozario. But if any such party has transferred the instrument with or without indorsement to a holder for consideration. and every subsequent holder deriving title from him.Acceptor bound. Acceptor bound.although. A negotiable instrument made. " Wright & Co.Third indorsement. may recover the amount due on such instrument from the transferor for consideration or any prior party thereto..Negotiable instrument made. creates no obligation of payment between the parties to the transaction. indorsement forged. if lie knew or had reason to believe the indorsement to be forged when he accepted the bill.although. by reason that such name is fictitious. indorsement forged. An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer's order is not. such holder. without John Rozario's consent. the indorsements by Peter Williams and Wright & Co. Acceptance of bill drawn in fictitious name. or for a consideration which fails. . drawn. etc. 20 41." Fourth indorsement. 42. relieved from liability to any holder in due course claiming under an indorsement by the same hand as the drawer's signature. 43. and purporting to be made by the drawer. An acceptor of a bill of exchange already indorsed is not relieved from liability by reason that such indorsement is forged. etc. 41. accepted." This bill A puts in suit against John Rozario and strikes out. without consideration. Negotiable instrument made. indorsed or transferred without consideration. A is not entitled to recover anything from John Rozario.Acceptance of bill drawn in fictitious name. 42. without consideration.

bill of exchange or cheque stands in immediate relation with the payee. A for value as to Rs. Partial absence or failure of moneyconsideration. 44. When the consideration for which a person signed a promissory note. 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. Partial failure of consideration not consisting of money. to the residue. The maker of a promissory note. Other signers may by agreement stand in immediate relation with a holder. 45.Exception I. 400. bill of exchange or cheque. accept.-No party to the instrument who has induced any other party to make. B by non-payment. the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced. 44. Exception II. draw. is ascertainable in money without collateral enquiry. and as an accommodation to the plaintiff as can only recover Rs. and there .-No party for whose instrument has been made. but subsequently dishonours it sues B on the bill. drawn. Explanation. B proves that it was accepted 400. Where a part of the consideration for which a person signed a promissory note.Partial failure of consideration not consisting of money. bill of exchange or cheque consisted of money. 21 Illustration A draws a bill on B for Rs. the order of A. recover thereon who became a party to such instrument for accommodation a negotiable or indorsed can. A 45. and the indorser with his indorsee.-The drawer of a bill of exchange stands in immediate relation with the acceptor. Partial absence or failure of moneyconsideration. if he have such amount from any person his accommodation. 500 payable to accepts the bill. accepted paid the amount thereof. and was originally absent in part or has subsequently failed in part. though not consisting of money.

bearer A promissory note. A promissory note. 1[45 Holder's right to duplicate of lost bill. acceptance or indorsement of a promissory note. delivery to be effectual must be made by the party making. 3.] to give such CHAP OF NEGOTIATION CHAPTER IV OF NEGOTIATION 46. bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof.Holder's right to duplicate of lost bill.has been a failure of that part. 46. by Act 2 of 1885. the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced. bill of exchange or cheque is completed by delivery. bill of exchange or cheque payable to is negotiable by the delivery thereof. As between parties standing in immediate relation. . The making. s. if required. If the drawer on request as aforesaid refuses duplicate bill. or by a person authorized by him in that behalf. the person who was the holder of it may apply to the drawer to give him another bill of the same tenor. As between such parties and any holder of the instrument other than a holder in due course.Delivery. to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. he may be compelled to do so. actual or constructive. accepting or indorsing the instrument. it may be shown that the instrument was delivered conditionally or for a special purpose only. --------------------------------------------------------------------1 Ins. 1[45A. Where a bill of exchange has been lost before it is over-due. and not for the purpose of transferring absolutely the property therein. giving security to the drawer.

The instrument has been negotiated. Negotiation by indorsement.--------------------------------------------------------------------- 22 47. The banker does so. Negotiations by delivery. Conversion of indorsement in blank into indorsement in full. Illustrations (a) A. 48. delivers it to B's agent to keep for B. and B has become the holder of it. 49. to Exception. 47. the holder of a negotiable instrument payable to bearer. bill of exchange or cheque 1[payable to order. 48. 49.Conversion of indorsement in blank into indorsement in full. Subject to the provisions of section 58. who is at the time the banker of B.] is negotiable by the holder by indorsement and delivery thereof. directs the banker to transfer the instrument to B's credit in the banker's account with B. Negotiations by delivery. and accordingly now possesses the instrument as B's agent. 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.-A promissory note. convert the indorsement in blank into an indorsement in full. by writing above the indorser's signature a direction to pay to any other person as indorsee. which is in the hands of A's banker. Negotiation by indorsement. The instrument been negotiated. has (b) A. Subject to the provisions of section 58. The holder of a negotiable instrument indorsed in blank may. bill of exchange or cheque payable bearer is negotiable by delivery thereof. and the holder does . the holder of a negotiable instrument payable to bearer. a promissory note. without signing his own name.

by Act 8 of 1919. or may merely constitute the indorsee an agent to indorse the instrument. 50. by express words. 4.not thereby incur the responsibility of an indorser." (g)Pay the contents to C. or to reeive its contents for the indorser." These indorsements do not exclude the right of further negotiation C. . 50. or to a specified person or order. Effect of indorsement. Effect of indorsement. or for some other specified person. being part of the consideration in a certain deed of assignment executed by C to the indorser and others. by 51. --------------------------------------------------------------------1 Subs. restrict or exclude such right. (d) "The within must be credited to C". for "payable to the order of a specified person. (e) "Pay C. s." (f) "Pay C value in account with the Oriental Bank.lm10 These indorsements exclude the right of further negotiation by C.". The indorsement of a negotiable instrument followed by delivery transfers to the indorsee the property therein with the right of further negotiation. ---------------------------------------------------------------------negotiable 23 ." (c) "Pay C or order for the account of B".but the indorsement may. Illustrations B signs the following indorsements on different instruments payable to bearer:(a) "Pay the contents to C only". (b) "Pay C for my use.

by express words in the indorsement. Illustration A bill is drawn payable to A or order. although such event may never happen. A rights of name. A indorses it to B. Holder deriving title from holder in due course. drawer. 52. but has the an indorsee against B and C. or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event. The indorser of a negotiable instrument may. B may negotiate the instrument. unless he is holder thereof. 52. (b) Excluding transfers to A. Where an indorser so excludes his liability and afterwards becomes the holder of the instrument. unless he is in lawful possession or is holder thereof . if the negotiability such instrument has not been restricted or excluded as mentioned section 50. drawers." Upon this indorsement he incurs no liability. or enables a payee or indorsee to indorse or negotiate an instrument. personal liability by an indorsement " without recourse. and B indorses it to C.Who may negotiate. exclude his own liability thereon. the indoresement not containing the words " or order " or any equivalent words. 51. payees indorsees. Every sole maker.Who may negotiate.Indorser who excluds his own liability or makes it conditional. adding A is the payee and holder of a negotiable instrument. or all of several joint makers. Indorser who excluds his own liability or makes it conditional. all intermediate indorsers are liable to him. payees indorsee. indorse and negotiate the same. Illustrations (a) The indorser of a negotiable instrument signs his the words-" Without recourse." he the instrument to B. . who indorses it is not only reinstated in his former rights. of a negotiable instrument may. or or of in Explanation. 53.-Nothing in this section enables a maker or drawer to indorse or negotiate an instrument.

or by one who derives title through such person. a note to that effect may be indorsed on the instrument.Legal re-presentative cannot by delivery only negotiate .Instrument indorsed in blank.53.Indorsement for part of sum due. 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. If a negotiable instrument. cannot by delivery only negotiate 57. 56. 57. the amount of it cannot be claimed from the indorser in full. after having been indorsed in blank. except by the person to whom it has been indorsed in full.Conversion of indorsement in blank into indorsement in full. is indorsed in full. a negotiable instrument indorsed in blank is payable to the bearer thereof even although originally payable to order. Conversion of indorsement in blank into indorsement in full. 24 54. 54.Holder deriving title from holder in due course. Subject to the provisions hereinafter contained as to crossed cheques. 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. 56. 55. but where such amount has been partly paid. Legal re-presentative instrumentindorsed by deceased. Instrument indorsed in blank. which may then be negotiated for the balance. 55.

a holder thereof in due course. The legal representative of a deceased person cannot negotiate by delivery only a promissory note. of a promissory note or bill of exchange made. unless such possessor or indorsee is. or some person through whom he claims was. when he accepted it. acceptor or holder thereof by means of an offence or fraud. drawn or accepted without consideration. with notice thereof. 59. as against the other parties. or after maturity. bill of exchange or cheque payable to order and indorsed by the deceased but not delivered. or has been obtained from any maker. Instrument acquired after dishonour or when overdue. A's . Instrument obtained by unlawful means or for unlawful consideration. acceptor or holder. 58. after maturity. 58. the drawer sold the _goods and retained the proceeds. or from any party prior to such holder. has only. whether by non-acceptance or non-payment. 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.instrument indorsed by deceased. but indorsed the bill to A. who has acquired it after dishonour. The holder of a negotiable instrument. 59. becomes the holder. the rights thereon of his transferor: Accommodation note or bill. 25 Illustration The acceptor of a bill of exchange. in good faith and for consideration. When a negotiable instrument has been lost. The bill not having been paid at maturity.Instrument acquired after dishonour or when overdue. or for an unlawful consideration. deposited with the drawer certain goods as a collateral security for the payment of the bill. for the purpose of enabling some party thereto to raise money thereon. Provided that any person who.Instrument obtained by unlawful means or for unlawful consideration. may recover the amount of the note or bill from any prior party. 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.

60. within a reasonable time after it is drawn. CHAP OF PRESENTMENT CHAPTER V OF PRESENTMENT 61.Instrument negotiable till payment or satisfaction. a presentment through the post office by means of a registered letter is sufficient. be found. if no time or place is specified therein for presentment. by a person entitled to demand acceptance. but not after such payment or satisfaction. after reasonable search. be presented to the drawee thereof for acceptance. drawee or acceptor at or after maturity. after reasonable search. A negotiable instrument may be negotiated (except by the maker. Instrument negotiable till payment or satisfaction. if he can. it must be presented at that place. If the bill is directed to the drawee at a particular place. and if at the due date for presentment he cannot. If the drawee cannot. 60. A bill of exchange payable after sight must. be found there. . be found. In default of such presentment. 61. drawee or acceptor after maturity) until payment or satisfaction thereof by the maker. after reasonable search. and in business hours on a business day. 1[Where authorized by agreement or usage.] 62. no party thereto is liable thereon to the person making such default. Presentment for acceptance. the bill is dishonoured.title is subject to the same objection as the drawer's title.Presentment for acceptance. the bill is dishonoured.

no presentment is necessary in order to charge the maker thereof. the other parties thereto are not liable thereon to such holder. by or on behalf of the holder as hereinafter provided. In default of such presentment. if so required by the drawee of a bill of exchange presented to him for acceptance. 62.Presentment for payment.Presentment of promissory note for sight. In default of such presentment.Hours for presentment. by Act 2 of 1885. a presentment through the post office by means of a registered letter is sufficient. 4. 65.] Exception. --------------------------------------------------------------------- 26 63. Promissory notes. 63. 64.Drawee's time for deliberation .-bills of exchange and cheques must be presented for payment to the maker. 2[Where authorized by agreement or usage. A promissory note. no party thereto is liable thereon to the person making such default. within a reasonable time after it is made and in business hours on a business day. Presentment for payment. acceptor or drawee thereof respectively. payable at a certain period after sight. Hours for presentment. 65. s. allow the drawee 1[forty-eight] hours (exclusive of public holidays) to consider whether he will accept it. --------------------------------------------------------------------1 Ins. Presentment for payment must be made . must be presented to the maker thereof for sight (if he can after reasonable search be found) by a person entitled to demand payment. The holder must. Drawee's time for deliberation . 64.-Where a promissory note is payable on demand and is not payable at a specified place.Presentment of promissory note for sight.

Presentment for payment of promissory note payable by instalments. Presentment for payment of instrument payable after date or sight. for payment of instrument payable at specified place 68. in order to charge the maker or drawer thereof.A promissory note or bill of exchange made.Presentment for payment of instrument payable after date or sight. in order to charge any party thereto. and non-payment on such presentment has the same effect as non-payment of a note at maturity. 69. 68.Presentment for payment of instrument payable at specified place and not else where. drawn or accepted payable at a specified place and not elsewhere must. A promissory. and. Presentment for payment of promissory note payable by instalments. by Act 12 of 1921. 69. note or bill of exchange. s. 67. .during the usual hours of business.Instrument payable at specified place. Instrument payable at specified place. 67. a banker's. 2. made payable at a specified period after date or sight thereof. A promissory note. bill of exchange or cheque made. drawn or accepted payable at a specified place must. 66. be presented for payment at that place. Presentment andnot else where. must be presented for payment at maturity. for " twenty-four". if at banking hours. --------------------------------------------------------------------1 Subs. within 66. be presented for payment at that place. A promissory note payable by instalments must be presented for payment on the third day after the date fixed for payment of each instalment.

A promissory note or bill of exchange. of the maker. 1[Subject to provisions of section 84. not made payable as mentioned in sections 68 and 69.has no known place of business 71. must be presented for payment at the place of business (if any). Presentment where no exclusive place specified. by Act 2 of 1885.Presentment of cheque to charge drawer. be presented at the bank upon which it is drawn before relation between the drawer and his banker has been altered to prejudice of the drawer. Presentment of cheque to charge any other person. when maker. If the maker.Presentment where no exclusive place specified. --------------------------------------------------------------------- 27 70. Presentment orresidence. s. A cheque . or. such presentment may be made to him' in person wherever be can be found.Presentment of cheque to charge any other person. Presentment of cheque to charge drawer. etc.] a cheque must. 72.Presentment when maker. the the the the 73.has no known place of business or residence. drawee or acceptor thereof. at the usual residence. and no place is specified in the instrument for presentment for acceptance or payment.. etc. 72. 70. 71.2 Ins. 4. as the case may be.. in order to charge drawer. drawee or acceptor of a negotiable instrument has no known place of business or fixed residence. 73.

3. re-presentative of deceased. Delay in presentment 2[for acceptance or payment] is excused if the delay is caused by circumstances beyond the control of the holder. or.must. maker or acceptor has died. 2[75A. in order to charge any person except the drawer. 2. or assignee of insolvent. be presented within a reasonable time after delivery thereof by such person. 2. 74. by or to agent. s.] --------------------------------------------------------------------1 Ins. s. 74. to his legal representative. Presentment for acceptance or payment may be made to the duly authorized agent of the drawee. 2 Ins. by Act 25 of 1920.Presentment of instrument payable on demand. or 75. re-presentative of deceased. Presentment of instrument payable on demand. to his assignee. When the cause of delay ceases to operate. and not imputable to his default. a negotiable instrument payable on demand must be presented for payment within a reasonable time after it is received by the holder. or. for "for payment". misconduct or negligence. where the drawee.Presentment by or to agent. where he has been declared an insolvent. by Act 12 of 1921. 3 Subs. presentment must be made within a reasonable time. Presentment assigneeof insolvent. by Act 6 of 1897. s. maker or acceptor.Excuse for delay in presentment for acceptance or payment. as the case may be. 75. --------------------------------------------------------------------- 28 . Subject to the provisions of section 31. 2[75 Excuse for delay in presentment for acceptance or payment.

take advantage of any (d) as against the drawer. drawee or acceptor intentionally prevents the presentment of the instrument. if he has engaged to pay notwithstanding non-presentment. if the instrument being payable at some other specified place. suffer 77. if the instrument not being payable at any specified he cannot after due search be found . When a bill of exchange. if the drawer could not damage from the want of such presentment. in any of the following cases: - (a) if the maker. or. and the instrument is dishonoured at the due date for presentment. has been duly presented there for payment and dishonoured. (b) as against any party sought to be charged therewith. place. presented 77. or. neither he nor any person authorized to pay it attends at such place during the usual business hours. (c) that as against any party if. 76. if the instrument being payable at his place of business. or. Liability of banker for negligently dealing with bill forpayment. with knowledge the instrument has not been presentedthe he makes a part payment on account of the amount due on instrument. to pay the amount due thereon in whole or in or otherwise waives his right to default in presentment for payment.76. No presentment for payment is necessary. if the banker so negligently or improperly keeps. he closes such place on a business day during the usual business hours. deals . When presentment unnecessary. after maturity. accepted payable at a specified bank.When presentment unnecessary. or promises part.Liability of banker for negligently dealing with bill presented for payment.

payment of the amount due on a promissory note.with or delivers back such bill as to cause loss to the must compensate the holder for such loss. Interest when no rate specified. on the amount of the principal money due thereon.] from the date at which the same ought to have been paid by the . When interest at a specified rate is expressly made payable on a promissory note or bill of exchange. clause (c). Interest when rate specified. in order to discharge the maker or acceptor. When no rate of interest is specified in the instrument. holder.To whom payment should be made.Interest when rate specified. 80. 79. or until such date after the institution of a suit to recover such amount as the Court directs. be calculated at the rate of 2[eighteen per annum.Interest when no rate specified. until tender or realization of such amount. be made to the holder of the instrument. 29 79. from the date of the instrument. Subject to the provisions of section 82. 1[notwithstanding any agreement relating to interest between any parties to the instrument]. bill of exchange or cheque must. interest shall be calculated at the rate specified. 78. 80. interest on the amount due thereon shall. To whom payment should be made. he CHAP OF PAYMENT AND INTEREST CHAPTER VI OF PAYMENT AND INTEREST 78.

-When the party charged is the indorser of an instrument dishonoured by non-payment.The maker. acceptor or indorser. or. (b) by release . --------------------------------------------------------------------- . the amount due on a promissory note. to him. acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon- (a) by cancellation. Discharge from liability-- 82. BILLS AND CHEQUES CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES. Delivery of instrument on payment.party Charge. to a holder thereof who cancels acceptor's or indorser's name with intent to discharge and to all parties claiming under such holder. he is liable to pay interest only from the time that he receives notice of the dishonour.Delivery of instrument on payment.Discharge from liability-. and to all parties deriving title under such holder after notice of such discharge. such him. bill of exchange or cheque is before payment entitled to have it shown. 81. and is on payment entitled to have it delivered up. and called upon by the holder thereof to pay. or indemnity in case of loss. Any person liable to pay. BILLS AND CHEQUES 82. or indemnity in case of loss. or until such date after the institution of a suit to recover such amount as the Court directs. to be indemnified against any further claim thereon against him. 81. CHAP OF DISCHARGE FROM LIABILITY ON NOTES. to a holder thereof who otherwise discharges such maker. until tender or realization of the amount due thereon. if the instrument is lost or cannot be produced. Explanation.

f. to have the cheque paid and suffers actual damage through the delay. 2 (w. be of (3) The holder of the cheque as to which such drawer or. to consider whether he will accept the same. by Act 30 of 1926. and such maker. and the drawer or person on whose account it is drawn had the right.1 Subs. --------------------------------------------------------------------- 30 (c)by payment .person is so discharged shall be a creditor. by Act 66 of 1988. . If the holder of a bill of exchange allows the drawee more than 1[forty-eight] hours. he is discharged to the extent of such damage. 83. at the time when presentment ought to have been made. that is to say. the usage of trade and bankers. section 532".e. 83. 30-12-1988). Where a cheque is not presented for payment within a reasonable time of its issue.to all parties thereto. 2[84.Discharge by allowing drawee more than forty-eight hours to accept. if the instrument is payable to bearer. as between himself and the banker. 2[84 When cheque not duly presented and drawer damaged thereby. s. s. 2. Discharge by allowing drawee more than forty-eight hours to accept. and the facts of the particular case. acceptor or indorser makes payment in due course of the amount due thereon. 2 Subs. exclusive of public holidays. or has been indorsed in blank. (2) In determining what is a reasonable time. all previous parties not consenting to such allowance are thereby discharged from liability to such holder. of such banker to the extent of such discharge and entitled to recover the amount from him. 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. for " except in cases provided for by the Code of Civil Procedure. regard shall had to the nature of the instrument. in lieu of such drawer or person. (1) When cheque not duly presented and drawer damaged thereby.

The drawer is discharged. notwithstanding any endorsement whether in full or in blank appearing thereon. s. of the cheque. The bank fails before the cheque could be presented in ordinary course. --------------------------------------------------------------------- 31 1[(2) Where a cheque is originally expressed to be payable to bearer. s. 1. the -drawee is discharged by payment in due course to the bearer thereof. 2 Subs. for he has not suffered actual damage through any delay. for " twenty-four". 2. but the holder can prove against the bank for the amount. for the original section. 2. (b) A draws a cheque at Umballa on a bank in Calcutta.] 2[85A. The bank fails before the cheque is presented. the drawee is discharged by payment in due course. the bank is discharged by payment in due course.000. 3. and notwithstanding that any such endorsement purports to restrict or exclude further negotiation.] 86. that is. an order to pay money. 85 by Act 17 of 1934. 3[(1)] Cheque payable to order. purports to be endorsed by or on behalf of the payee. has funds at the bank to meet it.Drafts drawn by one branch of a bank on another payable to order.Illustrations (a) A draws a cheque for Rs. in presenting the cheque. by Act 6 of 1897. 85. and. by Act 12 of 1921. s. drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand. 3 Renumbered as sub-section (1) of s. Where a cheque payable to order purports to be endorsed by or on behalf of the payee. --------------------------------------------------------------------1 Subs.] 85. Cheque payable to order. Where any draft. when the cheque ought to be presented. A is not discharged. .

If the holder of a bill of exchange acquiesces in a qualified acceptance. 86. or where. declaring the payment to be dependent on the happening. of an event therein stated . by Act 25 of 1930. s. by Act 17 of 1934. or which substitutes a different place or time for payment.Parties not consenting discharged by qualified or limited acceptance. a place of payment being specified in the order. (c) where. (b) where it undertakes the payment of part only of the sum ordered to be paid . or which. (d) where it undertakes the payment at a time other that at which under the order it would be legally due. Explanation. and not otherwise or elsewhere . is not signed by all the drawees. unless on notice given by the holder they assent to such acceptance. unless it was made in order to carry out the common intention of the original parties: --------------------------------------------------------------------1 Ins. no place of payment being specified on the order. where the drawees are not partners.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. 2. or one limited to part of the sum mentioned in the bill. it undertakes the payment at some other place and not otherwise or elsewhere.-An acceptance is qualified(a) where it is conditional. Parties not consenting discharged by qualified or limited acceptance. Effect of material alteration. 2 Ins. it undertakes the payment at a specified place. than 87.Effect of material alteration. 2. Alteration by indorsee. all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him. 87. --------------------------------------------------------------------- 32 . s.

Extinguishment of rights of action on bill in acceptor's hands. The provisions of this section are sections 20. discharges his indorser from all liability to him in respect of the consideration thereof. if made by an indorsee.Acceptor or indorser bound notwithstanding previous alteration. at or after maturity. 86 and 125.Alteration by indorsee. shall discharge such person or banker from all liability thereon . 89.Extinguishment of rights of action on bill in acceptor's hands. subject to those of 88. and any such alteration. 89. payment thereof by a person or banker liable to pay. If a bill of exchange which has been negotiated is. 90. 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. 90. CHAP OF NOTICE OF DISHONOUR . 49. all rights of action thereon are extinguished. 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. and such payment shall not be questioned by reason of the instrument having been altered or the cheque crossed.Payment of instrument on which alteration is not apparent. Payment of instrument on which alteration is not apparent. 88. Where a promissory note. bill of exchange or cheque has been materially altered but does not appear to have been so altered. held by the acceptor in his own right. and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due course.

makes default in acceptance upon being duly required to accept the bill. or where presentment is excused and the bill is not accepted. Dishonour by non-payment. . must give notice that the instrument has been so dishonoured to all other parties whom the holder seeks to make severally liable thereon. or the is' qualified. 93. or some party thereto who remains liable thereon.Dishonour by non-payment. or one of several drawees not being partners. and to some one of several parties whom he seeks to make jointly liable thereon. A promissory note. acceptor 33 of the bill or drawee of the cheque makes default being duly required to pay the same. in payment upon 93. A bill of exchange is said to be dishonoured by non-acceptance when the drawee. When a promissory note. 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.CHAPTER VIII OF NOTICE OF DISHONOUR 91.Dishonour by non-acceptance.By and to whom notice should be given. 92. Where the drawee is incompetent to contract. By and to whom notice should be given. the bill may be treated -as dishnoured. bill of exchange or cheque is dishonoured by non-acceptance or nonpayment. 91. bill of exchange or cheque is said to be dishonoured by non-payment when the maker of the note. the holder thereof. Dishonour by non-acceptance. acceptance 92.

Notice of dishonour may be given to a duly authorized agent of the person to whom it is required to be given. 97. where he has died. the agent is entitled to the same time to give notice to his principal as if he were the holder giving notice of dishonour.Agent for presentment. When party to whom notice given is dead. to his assignee . unless such party otherwise receives due notice as provided by section 93. 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. When the instrument is deposited with an agent for presentment. 95. but it must inform the party to whom it is given. may be oral or written. and that he Will be held liable thereon .Party receiving must transmit notice of dishonour. give notice of dishonour to such party within a reasonable time. to his legal representative. 96. and it must be given within a reasonable time after dishonour. . if written. either in express terms or by reasonable intendment. and may be in any form . 95. 97. Mode in which notice may be given. miscarries. may. If the notice is duly directed and sent by post and such miscarriage does not render the notice invalid. or. When the party to whom notice of dishonour is despatched is dead. and the principal is entitled to a further like period to give notice of dishonour. where he has been declared an insolvent. but the party despatching the notice is ignorant of his death the notice is sufficient. in order to render any prior party liable to himself. and in what way.94. 94. Party receiving must transmit notice of dishonour. Any party receiving notice of dishonour must. Agent for presentment. that the instrument has been dishonoured. or.When party to whom notice given is dead. 96. be sent by post.Mode in which notice may be given.

charge the drawers. (g) when the party entitled to notice. . No notice of dishonour is necessary- (a) when thereto. or the party bound to give notice is.When notice of dishnour is unnecessary. CHAP OF NOTING AND PROTEST CHAPTER IX OF NOTING AND PROTEST 99. 98.34 98. it is dispensed with by the party entitled (b) in order to charge the drawer when he has countermanded payment. when the acceptor is also a (f)in the case of a promissory note which is not negotiable. unable without any fault of his own to give it. Noting. for any other reason. (d) when the party entitled to notice cannot after due search be found . (e) to drawer. promises unconditionally to pay the amount due on the instrument. knowing the facts.(c) when the party charged could not suffer damage for want of notice. When notice of dishnour is unnecessary.

before the maturity of the bill. (c) astatement that payment or acceptance. the reason. Such certificate is called a protest for better security. the reason why the holder treats it as dishonoured. the terms of his answer. or upon a paper attached thereto. When the acceptor of a bill of exchange has become insolvent. Contents of protest. cause such facts to be noted and certified as aforesaid. 35 101. within a reasonable time. 101. 100. Protest for better security.A protest under section 100 must contain- (a) either the instrument itself. Protest. assigned for such dishonour.99. When a promissory note or bill of exchange ha s been dishonoured by non-acceptance or non-payment. and the notary's charges. the holder may cause such dishonour to be noted by a notary public upon the instrument. or a literal transcript of the instrument and of everything written or printed thereupon. or partly upon each. the holder may. within a reasonable time. or better security.Contents of protest. if the instrument has not been expressly dishonoured. and on its being refused may. When a promissory note or bill of exchange has been dishonoured by non-acceptance or non-payment. cause a notary public to demand better security of the acceptor. if any. within a reasonable time. Such certificate is called a protest. cause such dishonour to be noted and certified by a notary public. as the case may be. the holder may. Such note must be made within a reasonable time after dishonour.Protest. (b) the name of the person for whom and against whom the instrument has been protested . or. has been demanded of such person by the notary public . or a statement that he gave no answer or that he could . if any. or his credit has been publicly impeached.Noting. and must specify the date of dishonour. 100.

of the person for whom. 103.Protest of foreign bills. but the notice may be given by the notary public who makes the protest. (e) the protest. when better security has been refused. be of . 102. Protest for non-payement after dishonour by non-acceptacne. the name of the person by whom.not be found . notice of such protest must be given instead of notice of dishonour. subscription of the notary public making the (f) in the event of an acceptance for honour or of a payment for honour. (d) when the note or bill has been dishonoured. 1[A notary public may make the demand mentioned in clause (c) this section either in person or by his clerk or. unless paid before or at maturity. by registered letter.Protest for non-payement after dishonour by non-acceptacne. Notice ofprotest. the place and time of refusal . 104. and. and which are dishonoured by non-acceptance. and the manner in which. Protest of foreign bills. When a promissory note or bill of exchange is required by law to be protested. All bills of exchange drawn payable at some other place than the place mentioned as the residence of the drawee. where authorized agreement or usage. such acceptance or payment was offered and effected. 104. in the same manner and subject to the same conditions . the place and time of dishonour. be protested for non-payment in the place specified for payment.Protest for non-payement after dishonour by non-acceptacne. Foreign bills of exchange must protested for dishonour when such protest is required by the law the place where they are drawn. 103. may. without further presentment to the drawee.] of by 102.

If the said parties carry on business or live in the same place. --------------------------------------------------------------------- 36 1[104A. notice is given within a reasonable time if it is despatched in such .Reasonable time.When noting equivalent to protest. public holidays shall be excluded. Reasonable time of giving notice of dishonour. 105. For the purposes of this Act.] CHAP OF REASONABLE TIME CHAPTER X OF REASONABLE TIME 105. where a bill or note is required to be protested within a specified time or before some further proceeding is taken. sufficient that the bill has been noted for protest before the expiration of the specified time or the taking of the proceeding . 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.Reasonable time of giving notice of dishonour. 5. s.--------------------------------------------------------------------1 Ins. regard shall be had to the nature of the instrument and the usual course of dealing with respect to similar instruments . In determining what is a reasonable time for presentment for acceptance or payment. and the formal protest may be extended at any time thereafter as of the date of the noting. Reasonable time. 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. 106. and. it is. in calculating such time. 106. for giving notice of dishonour and for noting. by Act 2 of 1885.

who seeks to enforce his right against a prior party. How acceptance for honour must be made.time to reach dishonour. A party receiving notice of dishonour. 107. Reasonable time for transmitting such notice. 6. . with the consent of the holder.Acceptancc for honour. by writing on the bill. 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. 2 The second sentence rep. by Act 2 of 1885. CHAP OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED CHAPTER XI OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED 108. any person not being a party already liable thereon may. s. accept the same for the honour of any party thereto. ibid.Reasonable time for transmitting such notice. Acceptancc for honour. When a bill of exchange has been noted or protested for nonacceptance or for better security.-of case of need. its destination on the day next after the day of 107. by s.2* * * --------------------------------------------------------------------1 Ins. 7.) acceptance and payment for honour and reference in 109. --------------------------------------------------------------------- 37 (Chapter XI.

113. 113.When acceptor for honour may be charged.Liability of acceptor for honour. Acceptance not specifying for whose honour it is made. 111.Payment for honour. 112. An acceptor for honour cannot be charged unless the bill has at its maturity been presented to the drawee for payment. 1[by writing on the bill under his hand. When a bill of exchange has been noted or protested for nonpayment. it shall be deemed to be made for the honour of the drawer. 111. 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. 110. 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 . provided that the person so paying 1[or his agent in that behalf] has previously declared before a . A person desiring to accept for honour must. 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. Where the acceptance does not express for whose honour it is made. 110. or generally for honour 2* * *. and noted or protested for such dishonour. Acceptance not specifying for whose honour it is made. But an acceptor for honour is not liable to the holder of the bill unless it is presented. 112. not later than the day next after the day of its maturity. Payment for honour.How acceptance for honour must be made. and has been dishonoured by him.] declare that he accepts under protest the protested bill for the honour of the drawer or of a particular indorser whom he names. any person may pay the same for the honour of any party liable to pay the same.109. Liability of acceptor for honour. When acceptor for honour may be charged.

2The words "and such declaration must be recorded by the notary in his register " rep. or in any indorsement thereon. by s. and may recover from the party for whose honour he pays all sums so paid. and that such 114. Right of payer for honour. s. by s.Right of payer for honour. 3 Ins. CHAP OF COMPENSATION . for "in the presence of a notary public. Drawee in case of need. and".notary public the party for whose honour he pays. Acceptance and payment without protest. declaration has been recorded by such notary public. ibid. in respect of the bill. Where a drawee in case of need is named in a bill of exchange. --------------------------------------------------------------------- 38 interest thereon such payment.Acceptance and payment without protest. and with all expenses properly incurred in making 115.Drawee in case of need. 9. of the holder at the time of such payment. with --------------------------------------------------------------------1 Subs. 116. subscribe the bill with his own hand. A drawee in case of need may accept and pay the bill of exchange without previous protest. 116. the bill is not dishonoured until it has been dishonoured by such drawee. 114. ibid. Any person so paying is entitled to all the rights. 115. 8. 8. by Act 2 of 1885.

the holder is entitled to receive such sum at the current rate of exchange between the two places. Rules as to compensation. the indorser is entitled to receive such sum at the current rate of exchange between the two places. payable at sight or on demand.f. (b) when the person charged resides at a place different from that at which the instrument was payable. 3. s.Rules as to compensation. section 532)" omitted by Act 30 of 1926. for the amount due to him. 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. 3. noting and protesting it . together with all expenses properly incurred by him. together with the expenses properly incurred in presenting. by Act 66 of 1988.CHAPTER XII OF COMPENSATION 117. by any party liable to the holder or any indorsee. bill of exchange or cheque. 2 Subs. together with all expennses coused by the dishonour and payment. (e) the party entitled to compensation may draw a bill upon the party liable to compensate him. (c) an indorser who. being liable. (d) when the person charged and such indorser reside at different places. for "Six per centum "(w. shall 1* * * be determined by the following rules:- (a) the holder is entitled to the amount due upon the instrument. 117. The compensation payable in case of dishonour of a promissory note. figures and brackets "(except in cases provided for by the Code of Civil Procedure. 30-121988) --------------------------------------------------------------------- 39 . Such bill must be accompanied by the instrument dishonoured and the --------------------------------------------------------------------1 The words.s.e.

indorsed. (d)as to time of transfer. that a lost promissory exchange or cheque was duly stamped . negotiated transferred. (f)as to stamp. when it has been accepted. negotiated or transferred for consideration . that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon. the following presumptions shall be made: - (a) of consideragion. bearing was or (b)as to date. that every negotiable instrument made or drawn for consideration. Presumptions as to negotiable instruments- 118.Presumptions as to negotiable instruments. If such bill is dishonoured. of a (e)as to order of indorsements. the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill. that the holder of a negotiable instrument is a holder in due course:provided that. was accepted. a (c)as to time of acceptance. that every negotiable instrument date was made or drawn on such date . note.Until the contrary is proved. that every transfer negotiable instrument was made before its maturity. and that every such instrument. bill of (g)that holder is a holder in due course. indorsed. that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity .protest thereof (if any). CHAP SPECIAL RULES OF EVIDENCE CHAPTER XIII SPECIAL RULES OF EVIDENCE 118. where the instrument has been obtained from its lawful .

Estoppel against denying original validity of instrument. 40 120. Estoppel against denying capacity of payee to indorse. No indorser of a negotiable instrument shall. . unless and until such fact is disproved. and no acceptor of a bill of exchange for the honour of the drawer shall. Presumption on proof of protest.Estoppel against denying signature or capacity of prior party. the Court shall. on proof of the protest. 122. or for unlawful consideration. or from any person in lawful custody thereof.Estoppel against denying capacity of payee to indorse. 121.Presumption on proof of protest. in a suit thereon by a holder in due course. to indorse the same. 120. be permitted to deny the validity of the instrument as originally made or drawn. the burthen of proving that the holder is a holder in due course lies upon him. Estoppel against denying original validity of instrument.owner. No maker of a promissory note and no acceptor of a bill of exchange 1[payable to order] shall. at the date of the note or bill. be permitted to deny the signature or capacity to contract of any prior party to the instrument. Estoppel against denying signature or capacity of prior party. in a suit thereon by a holder in due course. In a suit upon an instrument which has been dishonoured. by means of an SP offence or fraud. presume the fact of is dishonour. No maker of a promissory note. and no drawer of a bill of exchange or cheque. be permitted to deny the payee's capacity. 119. or has been obtained from the maker or acceptor thereof by means of an offence or fraud. 122. 119. in a suit thereon by a subsequent holder. 121.

the holder may cross it generally or specially. or of two parallel transverse lines simply. 5. by Act 8 of 1919. Where a cheque bears across its face an addition of the name of a banker. a specified person ". or to the order of. and the cheque shall be deemed to be crossed generally. 125. either with or without the words " not negotiable.Crossing after issue. 124. 125. Where a cheque is crossed generally. 123. Where a cheque is uncrossed." that addition shall be deemed a crossing. Where a cheque bears across its face an addition of the words "and company " or any abbreviation thereof. and to be crossed to that banker. Cheque crossed specially.Cheque crossed generally. either with or without the words " not negotiable. 124. Where a cheque is crossed generally or specially." that addition shall be deemed a crossing. it holder --------------------------------------------------------------------1 Subs.CHAP OF CROSSED CHEQUES CHAPTER XIV OF CROSSED CHEQUES 123. for " payable to.Cheque crossed specially. Crossing after issue. between two parallel transverse lines. the may add the words"' not negotiable". s. and the cheque shall be deemed to be crossed specially. Cheque crossed generally. --------------------------------------------------------------------- . the holder may cross specially.

Where a cheque is crossed specially to more than one banker.Where the banker on whom a crossed cheque is drawn. except when crossed to an agent for the purpose of collection.Payment of cheque crossed specially more than once. or his agent for collection. 127. Payment of crossed cheque out of due course. Where a cheque crossed generally. is it Payment of cheque crossed specially. Where a cheque is crossed specially. Payment of cheque crossed specially more than once. and be placed in the same position in all respects. the banker paying the cheque. his agent.Payment in due course of corssed cheque.has paid the same in due course. the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed. 129. for collection. shall respectively be entitled to the same rights. Payment in due course of corssed cheque. the banker on whom it is drawn shall refuse payment thereof. and in case such cheque has come to the hands of the payee) the drawer thereof. the banker on whom it is drawn shall not pay otherwise than to a banker. . 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. 128. the banker to whom it is crossed may again cross it specially to another banker. Payment of cheque crossed generally.Payment of cheque crossed generally. 128. 126.41 Where a cheque is crossed specially. 126. 127.

as if the draft were a cheque. Cheque bearing "not negotiable".Any banker paying a cheque crossed generally otherwise than to a banker.129. 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. 131. a better title to the cheque than that which the person from whom he took it had. The provisions of this Chapter shall apply to any draft.] 2[131A. A person taking a cheque crossed generally or specially.Payment of crossed cheque out of due course. 130. and shall not be capable of giving.Application of Chapter to drafts. bearing in either case the words " not negotiable. 42 1[Explanation. 130. as defined in section 85A. the true owner of the cheque by reason only of having received such payment. in case the title to the cheque proves defective. shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. incur any liability to. being a banker.Cheque bearing "not negotiable". or a cheque crossed specially otherwise than to the banker to whom the same is crossed.] CHAP OF BILLS IN SETS CHAPTER XV OF BILLS IN SETS ." shall not have.-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. or his agent for collection.Non-liability of banker receiving payment of cheque. Non-liability of banker receiving payment of cheque. 131.

-When a person accepts or indorses different parts of the bill in favour of different persons. Holder of first acquired part entitled to all. but the whole set constitutes only one bill.132.Set of bills. 133. Bills of exchange may be drawn in parts. . acceptor or indorser of foreign instrument. the liability of the maker or drawer of a foreign promissory note.Holder of first acquired part entitled to all. Law governing liability of maker. Set of bills. and the respective liabilities of the acceptor and indorser by the law of the place where the instrument is made payable. each part being numbered and containing a provision that it shall continue payable only so long as the others remain unpaid. Exception. bill of exchange or cheque is regulated in all essential matters by the law of the place where he made the instrument. he and the subsequent indorsers of each part are liable on such part as if it were a separate bill. he who first acquired title to his part is entitled to the other parts and the money represented by the bill. CHAP OF INTERNATIONAL LAW CHAPTER XVI OF INTERNATIONAL LAW 134. and is extinguished when one of the parts. acceptor or foreigninstrument. As between holders in due course of different parts of the same set. would be extinguished. 133. indorser of 134. if a separate bill. All the parts together make a set . In the absence of a contract to the contrary. 132.Law governing liability of maker.

where the rate of interest is 6 per cent. but in accordance with the law ofIndia. 135.. 136. 3 Subs. and gives notice thereof in accordance with the law of France. and accepted by B. is dishonoured. but if A is charged as drawer. --------------------------------------------------------------------- 43 135. 2.. by Act 18 of 1922.. A is liable to pay interest at the rate of 25 per cent. and is dishonoured. s. out of India. . 2 Ins. --------------------------------------------------------------------1 Ins. by Act 33 of 1947. for "the States". 2. 3 and Sch. 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. An action on the bill is brought against B in 3[India]. The notice is sufficient. payable in Washington. by Act 3 of 1951. He is liable to pay interest at the rate of 6 per cent. but accepted payable in France. though not in accordance with the rules herein contained in respect of bills which are not foreign.Illustration A bill of exchange was drawn by A in California. s. Instrument made.Law of place of payment governs dishonour. Illustration A bill of exchange drawn and indorsed in 1[India]. etc. the law of the place where it is made payable determines what constitutes dishonour and what notice of dishonour is sufficient. s. Law of place of payment governs dishonour. only . where the rate of interest is 25 per cent. The bill is endorsed in 3[India]. The indorsee causes it to be protested for such dishonour.

137. 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.136. bills of exchange and cheques shall be presumed to be the same as that of 6[India]. The law of any foreign country 5* * * regarding promissory notes. but in accordance with the 3[law of India]. in whole or in part.Dishonour of cheque for insufficiency. of any debt or other liability. 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]. etc. Presumption as to foreign law. 138. If a negotiable instrument is made. CHAP NOTARIES PUBLICOF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCYOF FUNDS IN THE ACCOUNTS 7[CHAPTER XVII NOTARIES PUBLIC OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS 138. 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. out of India. is returned by the bank unpaid. 137. of funds in the account. but in accordance with the law of India. etc. or with fine which may extend to twice the amount of the cheque.Instrument made. drawn.Presumption as to foreign law. unless and until the contrary is proved.. of funds in the account. such person shall be deemed to have committed an offence and shall.. to any other provision of this Act. be punished with imprisonment for a term which may extend to one year. . without prejudice.. accepted or indorsed 2[outside India]. Dishonour of cheque for insufficiency. etc.

as the case may be. in writing. whichever is earlier. Explanation.or with both: Provided unlessthat nothing contained in this section shall apply (a)the cheque has been. 139. of any debt or other liability. 140. at the time the . 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. Offences by companies. unless the contrary is proved. within fifteen days of the receipt of the said notice. other 139. makes a demand for the payment of the said amount of money by giving a notice. of the cheque as the case may be. It shall be presumed. If the person committing an offence section 138 is a company. that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge.-For the purposes of this section. Presumption in favour of holder. to the drawer of the cheque.(1)Offences by companies. to the holder in due course of the cheque. in whole or in part. (b)the payee or the holder in due course. every person who.Defence which may not be allowed in any prosecution under section 138. under 141. 141. "debt or liability" means a legally enforceable debt or other liability. 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.Presumption in favour of holder. 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.

Explanation. 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.] .] SCHE [Enactments repealed. 142. as the case may be. in writing. made by the payee or. Notwithstanding anything contained in the Code of Criminal Procedure. (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. or is attributable to. as well as the company.-For the purposes of this section.(a)"company" means any body corporate and includes a or other association of individuals. 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. in relation to a firm. (2)Notwithstanding anything contained in sub-section (1). the company for the conduct of the business of the company.- (a)no court shall take cognizance of any offence punishable under section 138 except upon a complaint. means a partner in the firm. (b)such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138.offence was committed. manager. 142. such director. 1973 (2 of 1974). secretary or other officer of the company. manager. and was responsible to. was in charge of. and firm (b) "director". the holder in due course of the cheque. any neglect on the part of. any director. Cognizance of offences. or that he had exercised all due diligence to prevent the commission of such offence.Cognizance of offences. 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.

Sign up to vote on this title
UsefulNot useful