MODULE 3[C]: SECTION 7-

DRAWER, DRAWEE & PAYEE

1. INTRODUCTION
The title “Negotiable Instruments Act, 1881” (hereinafter referred to as NI Act, 1881)
consists of two important words to be described: Negotiable and Instruments. Here, the word
“negotiable” means transferrable and the word “instrument” refer to a written document
which serves as a security for the payment of money.

The NI Act, 1881 describes three types of negotiable instruments

PROMISSORY BILL OF CHEQUE

NOTE EXCHANGE
Section 6 of the NI
Section 4 of the NI Section 5 of the NI Act, 1881
Act, 1881 Act, 1881
PARTIES:
PARTIES: PARTIES:
 DRAWER
 MAKER  DRAWER  DRAWEE
 PAYEE  DRAWEE  PAYEE
 PAYEE

Section 7 of the NI Act, 1881 defines among other things DRAWER, DRAWEE and
PAYEE.

2. DRAWER
 The maker of a bill of exchange or a cheque is called a Drawer.

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 As said in the case SHIV KUMAR VERMA v MANOJ PANDEY 1, a drawer can be a
person or a company or a firm or an association of individuals.
 Generally, it is the drawer of a cheque who is held to be liable in case of dishonor of
cheque under section 138 of the NI Act, 1881. Even if the cheque was issued to discharge
someone else’s liability, the drawer will be held responsible.
 There are certain exceptions to this rule as given in section 141, which says that if a
cheque is issued by a company, then the people who are in charge and are responsible for
the conduct of the business of the company will be held guilty for the dishonor of cheque.
 The accused can be held guilty u/s 138 only if it is proved that he has “drawn” the
cheque. The term “drawn” is nowhere defined in the NI Act, 1881. The judge in the case
Santhi C. Santhi Bhavan v Mary Sherly2 held that there are certain essentials to be proved
to ascertain the fact that the cheque was drawn.
a. The drawer made the cheque under his signature.
b. The cheque contains an order in writing.
c. The cheque has a limited amount written.
d. The sum has to be given to the bearer or payee or to the order of the person.

3. DRAWEE
 According to section 7 of the NI Act, 1881, the person directed to pay the money is called
as the drawee.
 In case of a BILL OF EXCHANGE, the drawee is a debtor who is directed to pay the
requirede amount.
 In case of a CHEQUE, which is also a kind of Bill of exchange, the bank (where the
drawer has the account) is called the DRAWEE.
 ACCEPTANCE OF THE INSTRUMENT:
Bill of exchange: A bill of exchange has to be accepted by the drawee. It has to be
accepted in written form with the signature of the drawee. The acceptance can be either
on the face of the bill or on the bank of the bill. The liability of the drawee will arise only

1
Cr LJ 191 (Del.)
2
AIR 2011 [NOC] 425 (Ker.)
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 when he has accepted the bill and not otherwise. The acceptance can be conditional or
qualified.
Cheque: From the practical point of view, as the cheque book is issued by the drawee
bank, there is no further requirement of acceptacne by the concerned bank.

4. PAYEE
 According to section 7,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.
 As the definition mentions the word “person”, this implies that two persons cannot be
joint payees.
 The term “payee” does not include the term endorser or endorsee. If the payee by his
signature endorses the cheque (except an Account Payee cheque) or a bill of exchange in
favour of third person, then the payee becomes an endorser and the third person becomes
the endorsee.
 In the case of a BEARER CHEQUE, there is no need of endorsement and the person who
bears the cheque, becomes the payee.

KNOWLWDGE NUGGET!!

 In the case of a Cheque, the drawer can also be called a payee, when the drawer issues a
SELF CHEQUE.
 In case of a Bill of Exchange, the drawer can be a payee, if the creditor has retained the
bill with him and has not endorsed it to any other person.

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