Trannlitation

SCC Online Web Edition, Copyright © 2021
Page 1 Tuesday, September 28, 2021

Printed For: Kamran Ahmad, Jamia Millia Islamia
SCC Online Web Edition: http://www.scconline.com
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The
Negotiable Instruments Act, 1881
(Negotiable Instruments Act, 1881)
[Act 26 of 1881 as amended up to Act 20 of 2018]1
[9th December, 1881]
CONTENTS
CHAPTER I
PRELIMINARY
1. Short title, local extent, saving of usages relating to hundis, etc., commencement
2. Repeal of enactments
3. Interpretation clause
CHAPTER II
OF NOTES, BILLS AND CHEQUES
4. “Promissory note”
5. “Bill of exchange”
6. Cheque
7. “Drawer”, “Drawee”
8. “Holder”
9. “Holder in due course”
10. “Payment in due course”
11. “Inland instrument”
12. “Foreign instrument”
13. “Negotiable instrument”
14. Negotiation
15. Indorsement
16. Indorsement “in blank” and “in full” “Indorsee”
17. Ambiguous instruments
18. Where amount is stated differently in figures and words

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19. Instrument payable on demand
20. Inchoate stamped instruments
21. “At sight”, “On presentment”, “After sight”
22. “Maturity”
23. Calculating maturity of bill or note payable so many months after date or sight
24. Calculating maturity of bill or note payable so many days after date or sight
25. When day of maturity is a holiday
CHAPTER III
PARTIES TO NOTES, BILLS AND CHEQUES
26. Capacity to make, etc., promissory notes etc
27. Agency
28. Liability of agent signing
29. Liability of legal representative signing
30. Liability of drawer
31. Liability of drawee of cheque
32. Liability of maker of note and acceptor of bill
33. Only drawee can be acceptor except in need or for honour
34. Acceptance by several drawees not partners
35. Liability of indorser
36. Liability of prior parties to holder in due course
37. Maker, drawer and acceptor principals
38. Prior party a principal in respect of each subsequent party
39. Suretyship
40. Discharge of indorser's liability
41. Acceptor bound, although indorsement forged
42. Acceptance of bill drawn in fictitious name
43. Negotiable instrument made, etc., without consideration
44. Partial absence or failure of money-consideration
45. Partial failure of consideration not consisting of money

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45-A. Holder's right to duplicate of lost bill
CHAPTER IV
OF NEGOTIATION
46. Delivery
47. Negotiation by delivery
48. Negotiation by indorsement
49. Conversion of indorsement in blank into indorsement in full
50. Effect of indorsement
51. Who may negotiate
52. Indorser who excludes his own liability or makes it conditional
53. Holder deriving title from holder in due course
54. Instrument indorsed in blank
55. Conversion of indorsement in blank into indorsement in full
56. Indorsement for part of sum due
57. Legal representative cannot, by delivery only, negotiate instrument indorsed by

deceased
58. Instrument obtained by unlawful means or for unlawful consideration
59. Instrument acquired after dishonour or when overdue
60. Instrument negotiable till payment or satisfaction
CHAPTER V
OF PRESENTMENT
61. Presentment for acceptance
62. Presentment of promissory note for sight
63. Drawee's time for deliberation
64. Presentment for payment
65. Hours for presentment
66. Presentment for payment of instrument payable after date or sight
67. Presentment for payment of promissory note payable by instalments
68. Presentment for payment of instrument payable at specified place and not
elsewhere
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69. Instrument payable at specified place
70. Presentment where no exclusive place specified
71. Presentment when maker, etc., has no known place of business or residence
72. Presentment of cheque to charge drawer
73. Presentment of cheque to charge any other person
74. Presentment of instrument payable on demand
75. Presentment by or to agent, representative of deceased assignee of insolvent
75-A. Excuse for delay in presentment for acceptance or payment
75-B. Presentment of negotiable instruments in riot areas unnecessary
76. When presentment unnecessary
77. Liability of banker for negligently dealing with bill presented for payment
CHAPTER VI
OF PAYMENT AND INTEREST
78. To whom payment should be made
79. Interest when rate specified
80. Interest when no rate specified
81. Delivery of instrument on payment, or indemnity in case of loss
CHAPTER VII
OF DISCHARGE FROM LIABILITY, ON NOTES, BILLS AND CHEQUES
82. Discharge from liability
83. Discharge by allowing drawee more than forty-eight hours to accept
84. When cheque not duly presented and drawer damaged thereby
85. Cheque payable to order
85-A. Drafts drawn by one branch of a bank on another payable to order
86. Parties not consenting discharged by qualified or limited acceptance
87. Effect of material alteration
88. Acceptor or indorser bound notwithstanding previous alteration
89. Payment of instrument on which alteration is not apparent
90. Extinguishment of rights of action on bill in acceptor's hands

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CHAPTER VIII
OF NOTICE OF DISHONOUR
91. Dishonour by non-acceptance
92. Dishonour by non-payment
93. By and to whom notice should be given
94. Mode in which notice may be given
95. Party receiving must transmit notice of dishonour
96. Agent of presentment
97. When party to whom notice given is dead
98. When notice of dishonour is unnecessary
CHAPTER IX
OF NOTING AND PROTEST
99. Noting
100. Protest
101. Contents of protest
102. Notice of protest
103. Protest for non-payment after dishonour by non-acceptance
104. Protest of foreign bills
104-A. When noting equivalent to protest
CHAPTER X
OF REASONABLE TIME
105. Reasonable time
106. Reasonable time of giving notice of dishonour
107. Reasonable time for transmitting such notice
CHAPTER XI
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED
108. Acceptance for honour
109. How acceptance for honour must be made
110. Acceptance not specifying for whose honour it is made

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111. Liability of acceptor for honour
112. When acceptor for honour may be charged
113. Payment for honour
114. Right of payer for honour
115. Drawee in case of need
116. Acceptance and payment without protest
CHAPTER XII
OF COMPENSATION
117. Rules as to compensation
CHAPTER XIII
SPECIAL RULES OF EVIDENCE
118. Presumptions as to negotiable instruments
119. Presumption on proof of protest
120. Estoppel against denying original validity of instrument
121. Estoppel against denying capacity of payee to indorse
122. Estoppel against denying signature or capacity of prior party
CHAPTER XIV
OF CROSSED CHEQUES
123. Cheque crossed generally
124. Cheque crossed specially
125. Crossing after issue
126. Payment of cheque crossed generally
127. Payment of cheque crossed specially more than once
128. Payment in due course of crossed cheque
129. Payment of crossed cheque out of due course
130. Cheque bearing “not negotiable”
131. Non-liability of banker receiving payment of cheque
131-A. Application of Chapter to drafts
CHAPTER XV
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OF BILLS IN SETS
132. Set of bills
133. Holder of first acquired part entitled to all
CHAPTER XVI
OF INTERNATIONAL LAW
134. Law governing liability of maker, acceptor or indorser of foreign instrument
135. Law of place of payment governs dishonour
136. Instrument made, etc., out of India but in accordance with the law of India
137. Presumption as to foreign law
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
CIRCULAR
139. Presumption in favour of holder
140. Defence which may not be allowed in any prosecution under Section 138
141. Offences by companies
142. Cognizance of offences
142-A. Validation for transfer of pending cases
143. Power of court to try cases summarily
143-A. Power to direct interim compensation
144. Mode of service of summons
145. Evidence on affidavit
146. Bank's slip prima facie evidence of certain facts
147. Offences to be compoundable
148. Power of Appellate Court to order payment pending appeal against conviction
SCHEDULE
———
Negotiable Instruments Act, 1881

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[Act 26 of 1881 as amended up to Act 20 of 2018]1 [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:
Statement of Objects and Reasons of Amendment Act 26 of 2015.—The
Negotiable Instruments Act, 1881 was enacted to define and amend the law relating
to Promissory Notes, Bills of Exchange and Cheques. The Banking, Public Financial
Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 inserted in the
Negotiable Instruments Act, 1881 (herein referred to as the said Act), a new Chapter
XVII, comprising Sections 138 to 142. Section 138 of the said Act provides for
penalties in case of dishonour of cheques due to insufficiency of funds in the account
of the drawer of the cheque.
2. As Sections 138 to 142 of the said Act were found deficient in dealing with
dishonour of cheques, the Negotiable Instruments (Amendment and Miscellaneous
Provisions) Act, 2002, inter alia, amended Sections 138, 141 and 142 and inserted
new Section 143 to 147 in the said Act aimed at speedy disposal of cases relating to
the offence of dishonour of cheques through their summary trial as well as making
them compoundable. Punishment provided under Section 138 too was enhanced from
one year to two years. These legislative reforms are aimed at encouraging the usage of
cheque and enhancing the credibility of the instrument so that the normal business
transactions and settlement of liabilities could be ensured.
3. The Supreme Court, in its judgment dated 1st August, 2014, in the case of
Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 held that the
territorial jurisdiction for cases relating to offence of dishonour of cheques is restricted
to the court within whose local jurisdiction such offence was committed, which in the
present context is where the cheque is dishonoured by the bank on which it is drawn.
The Supreme Court has directed that only in those cases where post the summoning
and appearance of the alleged accused and the recording of evidence has commenced
as envisaged in Section 145(2) of the said Act, proceeding will continue at that place.
All other complaints (including those where the accused/respondent has not been
properly served) shall be returned to the complainant for filing in the proper court, in
consonance with exposition of the law, as determined by the Supreme Court.
4. Pursuant to the judgment of the Supreme Court, representations have been
made to the Central Government by various stakeholders, including industry
associations and financial institutions, expressing concerns about the wide impact this
judgment would have on the business interests as it will offer undue protection to
defaulters at the expense of the aggrieved complainant; will give a complete go-by to
the practice/concept of ‘Payable at Par cheques’ and would ignore the current realities
of cheque clearing with the introduction of CTS (Cheque Truncation System) where
cheque clearnace happens only through scanned image in electronic form and cheques
are not physically required to be presented to the issuing branch (drawee bank
branch) but are settled between the service branches of the drawee and payee banks;
will give rise to multiplicity of cases covering several cheques drawn on bank(s) at
different places and adhering to it is impracticable for a single window agency with
customers spread all over India.
5. In view of above, the Negotiable Instruments (Amendment) Bill, 2015 proposing
a principle for determination of the place of jurisdiction for cases relating to dishonour
of cheque under Section 138 of the Negotiable Instruments Act, 1881 was introduced
in Lok Sabha on 6th May, 2015 and considered and passed by it on 13th May, 2015.
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However, the said Bill could not be taken-up for consideration in Rajya Sabha, since
the House was adjourned sine die on 13th May, 2015. As Parliament was not in
session and immediate action was required to be taken by the Central Government, an
Ordinance, namely, the Negotiable Instruments (Amendment) Ordinance, 2015 was
promulgated by the President on 15th June, 2015.
6. Now, it is proposed to introduce the Negotiable Instruments (Amendment) Bill,
2015, to replace the Negotiable Instruments (Amendment) Ordinance, 2015 (Ord. 6 of
2015). The Negotiable Instruments (Amendment) Bill, 2015, inter alia, provides for
the following namely:—
(i) cases relating to dishonor of cheques under Section 138 of the said Act to be
inquired and tried only by a court within whose local jurisdiction the branch of
the bank, where the payee or the holder in due course maintains the account, is
situated;
(ii) cases under Section 138 pending in any court before the commencement of the
proposed legislation to be transferred to the court in accordance with the new
scheme of jurisdiction for such cases as proposed under sub-section (2) of
Section 142;
(iii) where a complaint has been filed against the drawer of a cheuqe in the court
having jurisdiction under the new scheme of jurisdiction, all subsequent
complaints arising out of Section 138 of the said Act against the same drawer
shall be filed before the same court, irrespective of whether those cheques were
presented for payment within the territorial jurisdiction of that court;
(iv) where, if more than one prosecution filed by the same payee or holder in due
course against the same drawer of cheques is pending before different courts,
upon the said fact having been brought to the notice of the court, the court shall
transfer the case of the court having jurisdiction as per the new scheme of
jurisdiction proposed under sub-section (2) of Section 142; and
(v) amending Explanation I under Section 6 of the said Act which relates to the
meaning of expression “a cheque in the electronic form”, as the said meaning is
found to be deficient because it presumes drawing of a physical cheque, which is
not the objective in preparing “a cheque in the electronic form” and therefore,
inserting a new Explanation III in the said section giving reference of the
expressions contained in the Information Technology Act, 2000.
7. It is, therefore, proposed to provide for a place of jurisdiction, which is fair to
both the parties (the complainant and the accused), so that a fair trial is ensured in
cases filed for dishonor of cheques under Section 138 of said Act, keeping in view the
observations of the Supreme Court in the case of Dashrath Rupsingh Rathod. Further,
the clarity on jurisdictional issue for trying the cases of dishonor of cheques would
increase the credibility of the cheque as a financial instrument. This would help the
trade and commerce in general and allow the lending institutions including banks to
continue to extend financing without the apprehension of the loan default on account
of dishonor of cheques.
8. The Bill seeks to achieve the above objects.
Statement of Objects and Reasons of Amendment Act 20 of 2018.—The
Negotiable Instruments Act, 1881 (the Act) was enacted to define and amend the law
relating to Promissory Notes, Bills of Exchange and Cheques. The said Act has been
amended from time to time so as to provide, inter alia, speedy disposal of cases
relating to the offence of dishonour of cheques. However, the Central Government has
been receiving several representations from the public including trading community
relating to pendency of cheque dishonour cases. This is because of delay tactics of
unscrupulous drawers of dishonoured cheques due to easy filing of appeals and
obtaining stay on proceedings. As a result of this, injustice is caused to the payee of a
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dishonoured cheque who has to spend considerable time and resources in court
proceedings to realise the value of the cheque. Such delays compromise the sanctity
of cheque transactions.
2. It is proposed to amend the said Act with a view to address the issue of undue
delay in final resolution of cheque dishonour cases so as to provide relief to payees of
dishonoured cheques and to discourage frivolous and unnecessary litigation which
would save time and money. The proposed amendments will strengthen the credibility
of cheques and help trade and commerce in general by allowing lending institutions,
including banks, to continue to extend financing to the productive sectors of the
economy.
3. It is, therefore, proposed to introduce the Negotiable Instruments (Amendment)
Bill, 2017 to provide, inter alia, for the following, namely—
(i) to insert a new Section 143-A in the said Act to provide that the Court trying an
offence under Section 138 may order the drawer of the cheque to pay interim
compensation to the complainant, in a summary trial or a summons case, where
he pleads not guilty to the accusation made in the complaint; and in any other
case, upon framing of charge. The interim compensation so payable shall be such
sum not exceeding twenty per cent of the amount of the cheque; and
(ii) to insert a new Section 148 in the said Act so as to provide that in an appeal by
the drawer against conviction under Section 138, the Appellate Court may order
the appellant to deposit such sum which shall be a minimum of twenty per cent
of the fine or compensation awarded by the trial court.
4. The Bill seeks to achieve the above objectives.
►Object.—The main object of the Negotiable Instruments Act, 1881 is to legalise the system by
which instruments contemplated by it could pass from hand to hand by negotiation like any other
goods. The purpose of the Act was to present an orderly and authoritative statement of the leading
rules of law relating to the negotiable instruments. To achieve the objective of the Act, the legislature
thought it proper to make provision in the Act for conferring certain privileges to the mercantile
instruments contemplated under it and provide special procedure in case the obligation under the
instrument was not discharged. Section 138 of the Act creates an offence, Shri Ishar Alloy Steels
Ltd. v. Jayaswals Neco Ltd., (2001) 3 SCC 609.
►Applicability of English Law.—The Negotiable Instruments Act is based on the principles of
English Law and where no special considerations arise with reference to Indian circumstances the
courts are justified in construing the statute conformably to the provisions of English Law,
K.T.V.R.T. Veerappa Chetty v. Vellayan Ambalam, 1918 SCC OnLine Mad 182 : AIR 1919 Mad
179.
Chapter I
PRELIMINARY
1. Short title, local extent, saving of usages relating to hundis, etc.,
commencement.—This Act may be called the Negotiable Instruments Act, 1881. It
extends to 2 [the whole of India] 3 [* * *] but nothing herein contained affects the 4
[Indian Paper Currency Act, 1871 (II of 1871)], Section 21, or affects any local usages
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.
►Usages.—Relying on Goodwin v. Roberts, [1875] 10 Ex. 337, it was observed that mercantile
usage, however extensive, should not be allowed to prevail if contrary to positive law. The saving
clause in Section 1 saved only local usage relating to instruments in oriental languages such as
Hundis, and did not save general usage like Section 1 of the Indian Contract Act, 1872, Dossabhai
Hirchand v. Virchand Dalchharam, 1918 SCC OnLine Bom 115 : AIR 1919 Bom 73.
If any local usage relating to bills and notes in an oriental language- the operation of which usage
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is saved by Section 1, though such usage may be at variance with the Act- be relied upon, such
usage should be alleged and established by the party relying upon it, Jambu Chetty v. Palaniappa
Chettiar, ILR (1903) 26 Mad 526.
NOTES ►The section clearly indicates that an instrument, even if it be within the
definition of a promissory note, bill of exchange or cheque will, if written in an oriental
language, be governed by usage, if any, applicable to it and not by the provisions of
the Act; but in the absence of any such usage, such instrument (though in an oriental
language) would be governed by the provisions of the Act [11th Law Commission
Report, 1958].
2. Repeal of enactments.—5 [* * *]
3. Interpretation clause.—In this Act—
6
[* * *]
7 [Banker.—“Banker” includes any person acting as a banker and any post office
savings bank.]
8 [* * *]
Chapter II
OF NOTES, BILLS AND CHEQUES
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, I.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 black 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 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
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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, be a “certain person”, within the meaning of this section and Section 4,
although he is mis-named or designated by description only.
9 [6. Cheque.—A “cheque” is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand and it includes the electronic

image of a truncated cheque and a cheque in the electronic form.
Explanation I.—For the purposes of this section, the expressions—
10 [(a) “a cheque in the electronic form” means a cheque drawn in electronic form
by using any computer resource and signed in a secure system with digital
signature (with or without biometrics signature) and asymmetric crypto
system or with electronic signature, as the case may be;]
(b) “a truncated cheque” means a cheque which is truncated during the course
of a clearing cycle, either by the clearing house or by the bank whether paying
or receiving payment, immediately on generation of an electronic image for
transmission, substituting the further physical movement of the cheque in
writing.
Explanation II.—For the purposes of this section, the expression “clearing house”
means the clearing house managed by the Reserve Bank of India or a clearing house
recognised as such by the Reserve Bank of India.]
11 [Explanation III.—For the purposes of this section, the expressions “asymmetric
crypto system”, “computer resource”, “digital signature”, “electronic form” and

“electronic signature” shall have the same meanings respectively assigned to them in
the Information Technology Act, 2000 (21 of 2000).]
►Post-dated cheque.—Post-dated cheque, held, amounts to promise to pay and that promise
would be fulfilled on the date mentioned on the cheque, A.R. Dahiya v. SEBI, (2016) 14 SCC 370 :
(2017) 3 SCC (Civ) 312.
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”.—12 [When a bill of exchange has been noted or protested
for non-acceptance or for better security], and any person accepts it supra protest for
honour of the drawee or 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 13 [payable to order], before the
amount mentioned in it became payable and without having sufficient cause to believe
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that any defect existed in the title of the person from whom he derived his title.
►Holder in due course—Conditions for—The definition makes it clear that to be a ‘holder in
due course’ a person must be a holder for consideration and the instrument must have been
transferred to him before it becomes overdue and he must be a transferee in good faith and another
important condition is that the transferee namely the person who for consideration became the
possessor of the cheque should not have any reason to believe that there was any defect in the title
of the transferor, U. Ponnappa Moothan Sons v. Catholic Syrian Bank Ltd., (1991) 1 SCC 113.
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 14 [India] and made payable in, or drawn upon any person resident in 15 [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. “Negotiable instrument”.—16 [(1) 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 the
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 payable 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.
17
[(2) A negotiable instrument may be 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, otherwise 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”.
16. Indorsement “in blank” and “in full” “Indorsee”.—18 [(1)] 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 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.
19
[(2) 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.
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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. Instrument 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 20 [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 anything in excess of the amount intended by him to
be paid thereunder.
21. “At sight”, “On presentment”, “After sight”.—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 non-acceptance, or protest for non
-acceptance.
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 non-acceptance, 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.
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25. When day of maturity is a holiday.—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 Sunday 21 [* * *] and any
other day declared by the 22 [Central Government], by notification23 in the Official
Gazette, to be a public holiday.
Chapter III
PARTIES TO NOTES, BILLS AND CHEQUES
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 instruments 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 authorised agent
acting in his name.
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.
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 note, bill of exchange or cheque is liable
personally thereon unless he expressly limits his liability to the extent of the assets
received by him as such.
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 the 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.
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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.
Every indorser after dishonour is liable as upon an instrument payable on demand.
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, C 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 (IX 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 indorsement in blank.
First indorsement, “B.”
Second indorsement, “Peter Williams.”
Third indorsement, “Wright and 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 and 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
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indorsement is forged, if he 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, create no obligation of payment between the parties to
the transaction. But if any such party has transferred the instrument with or without
endorsement 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 has 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 money-consideration.—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-payments. 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.
24
[45-A. 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.]
Chapter IV
OF NEGOTIATION
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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
authorised 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
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.
►Escrow.—Under the English law a deed may be delivered conditionally to a person other than
the obligee but not to the obligee himself. A deed thus delivered is called an escrow. But the ‘term’
escrow is also applied loosely to denote a bill delivered conditionally.
Whether the instrument was taken as an absolute or a conditional payment is a question of fact
which would depend upon intention of the parties. When creditor takes the instrument as an
absolute payment of debt, he would be restricted to the terms of the instrument only and cannot fall
back on the original transaction, CITI Bank N.A. v. Standard Chartered Bank, (2004) 1 SCC 12.
47. Negotiation 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 25 [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
negotiable instrument indorsed in blank may without signing his own name, by writing
above the indorser's signature a direction to pay 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 right of further negotiation;
but the indorsement may, by express words, restrict or include such right, or may
merely constitute the indorsee an agent to indorse the instrument or to receive its
contents for the indorser, or for some other specified person.
Illustration
B signs the following indorsements on different negotiable instrument payable to
bearer:
(a) “Pay the contents to C only.”
(b) “Pay C for my use.”
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(c) “Pay C or order for the account of B.”
(d) “The within must be credited to C.”
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, payee 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 indorsement not
containing the words “or order” or any equivalent words. B may negotiate the
instrument.
52. Indorser who excludes 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.
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57. Legal representative 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 of 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 right 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.
Chapter V
OF PRESENTMENT
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.
26
[Where authorised 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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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 27 [forty-eight]
hours (exclusive of public holidays) to consider whether he will accept it.
64. Presentment for payment.—28 [(1)] 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.
29 [Where authorised 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.
30 [(2) Notwithstanding anything contained in Section 6, where an electronic image
of a truncated cheque is presented for payment, the drawee bank is entitled to

demand any further information regarding the truncated cheque from the bank holding
the truncated cheque in case of any reasonable suspicion about the genuineness of the
apparent tenor of instrument, and if the suspicion is that of any fraud, forgery,
tampering or destruction of the instrument, it is entitled to further demand the
presentment of the truncated cheque itself for verification:
Provided that the truncated cheque so demanded by the drawee bank shall be
retained by it, if the payment is made accordingly.]
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
elsewhere.—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.
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 he can be found.
72. Presentment of cheque to charge drawer.—31 [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
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delivery 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, representative of deceased assignee of insolvent.—
Presentment for acceptance or payment may be made to the duly authorised 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.
32 [75-A. Excuse for delay in presentment for acceptance or payment.—Delay in
presentment 33 [for acceptance or payment] is excused if the delay is caused by

circumstances beyond the control of 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.]
75-B. Presentment of negotiable instruments in riot areas unnecessary.—34 [* * *]
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 presents 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 authorised 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.
Chapter VI
OF PAYMENT AND INTEREST
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
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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, 35 [notwithstanding any
agreement relating to interest between any parties to the instruments], be calculated
at the rate of 36 [eighteen per centum] per annum, from the date at which the same
ought to have been paid by the party charged, until tender or realisation 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 instrument 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.—37 [(1)] 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.
38
[(2) Where the cheque is an electronic image of a truncated cheque, even after
the payment the banker who received the payment shall be entitled to retain the
truncated cheque.
(3) A certificate issued on the foot of the printout of the electronic image of a
truncated cheque by the banker who paid the instrument, shall be prima facie proof of
such payment.]
Chapter VII
OF DISCHARGE FROM LIABILITY, ON NOTES, BILLS AND CHEQUES
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;
(c) by payment, to all parties thereto, if the instrument is payable to bearers, or
has been indorsed in blank, and such maker, acceptor or indorser makes
payment in due course of the amount due thereon.
►Promissory notes—Whether effects absolute discharge of debt.—Depends upon
intention of the parties to the contract.—It is always a question of intention of the parties whether a
negotiable instrument taken on account of a debt operates as an absolute discharge of the debt or
not. A bill or a promissory note can never go in the discharge of a debt unless it is a part of a
contract that it shall be so. In the present case the execution of the promissory notes also cannot be
said to be in complete discharge of obligation to pay price and interest thereon under the contract.
The execution of those notes clearly intended to operate as conditional payments. The various
factors and circumstances and particularly, the fact that these notes were as between the seller and
the purchaser subject to several conditions leading to variation and adjustment and replacement and
the default clause contained in each, clearly indicate that these were not intended to constitute
independent or separate contracts by themselves but that they were a part and parcel of one
integrated transaction embodied in the contract, Renusagar Power Co. Ltd. v. General Electric Co.,
(1984) 4 SCC 679.
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 39 [forty-eight] hours,
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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.
40
[84. When cheque not duly presented and drawer damaged thereby.—(1) Where a
cheque is not presented for payment within a reasonable time of its issue, and 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 Ambala 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. Cheque payable to order.—41 [(1)] When a cheque payable to order purports to
be indorsed by or on behalf of the payee, the drawee is discharged by payment in due
course.
42 [(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.]
43 [85-A. 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 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;
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(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.—Any material alteration of 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;
Alteration by indorsee, And any such alteration, if made by an indorsee,
discharges his indorser from all liability to him in respect of the consideration thereof.
The provisions of this section are subject to those of Sections 20, 49, 86 and 125.
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.—44 [(1)] 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 sum 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.
45
[(2) Where the cheque is an electronic image of a truncated cheque, any
difference in apparent tenor of such electronic image and the truncated cheque shall
be a material alteration and it shall be the duty of the bank or the clearing house, as
the case may be, to ensure the exactness of the apparent tenor of electronic image of
the truncated cheque while truncating and transmitting the same.
(3) Any bank or a clearing house which receives a transmitted electronic image of a
truncated cheque, shall verify from the party who transmitted the image to it, that the
image so transmitted to it and received by it, is exactly the same.]
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.
Chapter VIII
OF NOTICE OF DISHONOUR
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 dishonoured.
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.
►Applicability.—The provisions of Section 91 and 92 of the Negotiable Instruments Act are
intended to be applicable to bills of exchange payable at sight or on demand. There may be
acceptance and dishonour by non-acceptance of a bill payable on demand though presentment
acceptance is not required by law in such a case, K.T.V.R.T. Veerappa Chetty v. Vellayan
Ambalam, 1918 SCC OnLine Bom 115 : AIR 1919 Bom 73.
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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 notes 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 authorised 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, 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.
►Requirement of Notice.—The provisions of the Negotiable Instruments Act are really based
on the principles of English Common Law relating to mercantile instruments. The law has always
been, both in England and in India, that there must be dishonour and notice of dishonour to be given
within reasonable time, in order to sustain an action against the drawee or any other holder of the
bill, K.T.V.R.T. Veerappa Chetty v. Vellayan Ambalam, 1918 SCC OnLine Bom 115 : AIR 1919
Bom 73.
►Validity of Notice of Demand.—Contended that under Section 138 of the Negotiable
Instruments Act, the holder of the cheque can issue notice and under Section 93 of the Act, the
notice cannot be issued by more than one person; that the holder of the cheque as mentioned in
Section 138 of the Act cannot be more than one person and the notice issued on behalf of two
distinct legal persons is bad in law. It was held by the Calcutta High Court that this fact is to be
considered at the stage of trial and cannot constitute a ground for quashing of proceedings under
Section 482 of the Code of Criminal Procedure, 1973, Pradeep Kumar Malhotra v. State of West
Bengal, 2011 SCC OnLine Cal 1700.
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 of 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 dishonour 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
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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, promise unconditionally
to pay the amount due on the instrument.
Chapter IX
OF NOTING AND PROTEST
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) a statement 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.
46 [A notary public may make the demand mentioned in clause (c) of this section
either in person or by his clerk, or, where authorised by agreement or usage, by

registered letter.]
102. Notice of protest.—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-payment 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
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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.
47
[104-A. 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.]
Chapter X
OF REASONABLE TIME
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.
Chapter XI
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED
108. Acceptance for honour.—When a bill of exchange has been noted or protested
for non-acceptance 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 honour of any party thereto.
48
[* * *]
109. How acceptance for honour must be made.—A person desiring to accept for
honour must, 49 [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, generally for honour 50 [* * *].
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 damages
sustained by him in consequence for 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.—Any 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 dishonour.
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113. Payment for honour.—When a bill of exchange has been noted or protested for
non-payment, any person may pay the same for the honour of any party liable to pay
the same, provided that the person so paying 51 [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 such payment.
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.
Chapter XII
OF COMPENSATION
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 52 [* * *] 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 53 [eighteen per centum] per
annum from the date of payment until tender or realisation thereof, together
with all expenses caused by the dishonour and payment;
(d) when the person charged and such indorser resides 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.
Chapter XIII
SPECIAL RULES OF EVIDENCE
118. Presumptions as to negotiable instruments.—Until the contrary is proved, the
following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for
consideration, and that every such instrument when it has been accepted,
indorsed, negotiated or transferred, was accepted, indorsed, negotiated or
transferred 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 negotiable instrument was
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made before its maturity;
(e) as to order of indorsement: 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 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 burden of proving that the holder is a holder in due
course lies upon him.
►Purpose of Presumptions.—In a suit to enforce a simple contract, the plaintiff has to aver in
his pleadings that it was made for good consideration and must substantiate it by evidence. But to
this rule, the negotiable instruments are an exception. In a significant departure from the general
rule applicable to contracts, Section 118 of the Act provides certain presumptions to be raised. This
section also lays down some special rules of evidence relating to presumptions. The reason for
these presumptions is that a negotiable instrument passes from hand to hand on endorsement and it
would make trading very difficult and negotiability of the instrument impossible, unless certain
presumptions are made. The presumption, therefore, is a matter of principle to facilitate negotiability
as well as trade, Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513.
►Conflict with Section 114 of the Evidence Act, 1872.—Section 114 of the Evidence Act is a
general provision which enables the court to presume, though not obliged to do so, that a bill of
exchange or a promissory note was founded on a good consideration. Section 118 of the Negotiable
Instruments Act, however, enacts a special rule of evidence which operates between parties to the
instrument or persons claiming under them in a suit or proceeding relating to the bill of exchange
and does not affect the rule contained in Section 114 of the Evidence Act, in cases not falling within
Section 118 of the Negotiable Instruments Act, Official Receiver v. Abdul Shakoor, (1965) 1 SCR
254 : AIR 1965 SC 920.
►Value of Statutory Presumptions.—A statutory presumption has an evidentiary value. The
question as to whether the presumption stood rebutted or not must, therefore, be determined
keeping in view the other evidence on record. In a case where chances of false implication cannot
be ruled out, the background fact and the conduct of parties together with their legal requirements
are required to be taken into consideration, Krishna Janardhan Bhat v. Dattatraya G. Hegde,
(2008) 4 SCC 54.
►Rebuttability of Presumptions.—The use of the phrase “until the contrary is proved” in
Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the
Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the
Evidence Act, makes it clear that presumptions to be raised under both the provisions are
rebuttable, Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513.
Once execution of the promissory note is admitted, the presumption under Section 118(a) would
arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can
prove the non-existence of a consideration by raising a probable defence. If the defendant is proved
to have discharged the initial onus of proof showing that the existence of consideration was
improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged
to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief
on the basis of the negotiable instrument, Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal,
(1999) 3 SCC 35.
In terms of Section 4 of the Evidence Act, whenever it is provided by the Act that the court shall
presume a fact, it shall regard such fact as proved unless and until it is disproved. The words
“proved” and “disproved” have been defined in Section 3 of the Evidence Act. Applying the said
definitions to the principle behind Section 118(a) of the Negotiable Instruments Act, the court shall
presume a negotiable instrument to be for consideration unless and until after considering the matter
before it, it either believes that the consideration does not exist or considers the non-existence of
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consideration so probable that a prudent man ought, under the circumstances of the particular case,
to act upon the supposition that the consideration does not exist, M.S. Narayana Menon v. State of
Kerala, (2006) 6 SCC 39.
It is not necessary for the defendant to disprove the existence of consideration by way of direct
evidence; the standard of proof is preponderance of probabilities. Inference of preponderance of
probabilities can be drawn not only from the materials on record but also by reference to the
circumstances upon which he relies, Reverend Mother Marykutty v. Reni C. Kottaram, (2013) 1
SCC 327.
►Drawing of presumption.—Principles summarized regarding drawing of presumption under,
and how said presumption can be rebutted. While prosecution must establish its case beyond
reasonable doubt, accused to prove a defence must only meet standard of preponderance of
probabilities, Basalingappa v. Mudibasappa, (2019) 5 SCC 418.
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
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 54 [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.
Chapter XIV
OF CROSSED CHEQUES
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”, the addition shall be deemed a crossing, and the cheque shall
be deemed to be crossed generally.
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”.
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
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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 crossed 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 had 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.
55
[Explanation 56 [I].—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.]
57 [Explanation II.—It shall be the duty of the banker who receives payment based
on an electronic image of a truncated cheque held with him, to verify the prima facie
genuineness of the cheque to be truncated and any fraud, forgery or tampering
apparent on the face of the instrument that can be verified with due diligence and
ordinary care.]
►Onus to prove good faith.—Onus of proving good faith and without negligence, held, lies on
the Bank claiming protection of Section 131, Kerala State Coop. Marketing Federation v. State
Bank of India, (2004) 2 SCC 425.
58
[131-A. Application of Chapter to drafts.—The provisions of this Chapter shall
apply to any draft, as defined in Section 85-A, as if the draft were a cheque.]
Chapter XV
OF BILLS IN SETS
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.
Chapter XVI
OF INTERNATIONAL LAW
134. Law governing liability of maker, acceptor or indorser of foreign instrument.—
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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.
Illustration
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 59 [India], and is dishonoured. An action on the bill is
brought against B in 60 [India]. He is liable to pay interest at the rate of 6 per cent
only; but, if B is charged as drawer, A is liable to pay interest at the rate of 25 per
cent.
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 endorsed in 61 [India], but accepted payable in France,
is dishonoured. The endorsee 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 62 [outside India] but
in accordance with the 63 [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 64 [within India].
137. Presumption as to foreign law.—The law of any foreign country 65 [* * *]
regarding promissory notes, bills of exchange and cheques shall be presumed to be
the same as that of 66 [India], unless and until the contrary is proved.
67 [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
68 [two] years, 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, 69 [within thirty days] of the
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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.
NOTES ►Effect of Negotiable Instruments (Amendment) Act, 2015.—The Act
vide Section 142(2) r/w Section 142-A appears to have modified the law as laid down
in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, whereby it
was held that the territorial jurisdiction for filing of cheque dishonour complaint is
restricted to the court within whose territorial jurisdiction the offence is committed
i.e., which is the location where the cheque is dishonoured or returned unpaid by the
bank on which it is drawn. Place of issuance or delivery of the statutory notice or
where the complainant chooses to present the cheque for encashment by his bank as
per Dashrath Rupsingh Rathod case were not relevant for purposes of determining
territorial jurisdiction for filing of cheque dishonour complaints.
►Object.—The Negotiable Instruments Act was amended by the Banking, Public Financial
Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 wherein new Chapter XVII was
incorporated for penalties in case of dishonour of cheques due to insufficiency of funds in the
account of the drawer of the cheque. These provisions were incorporated in order to encourage the
culture of use of cheques and enhancing the credibility of the instrument. The insertion is aimed at
early disposal of cases relating to dishonour of cheques, enhancing punishment for offenders,
introducing electronic image of a truncated cheque and a cheque in the electronic form as well as
exempting an official nominees director from prosecution under the Act, Indra Kumar Patodia v.
Reliance Industries Ltd., (2012) 13 SCC 1.
►Interpretation.—The Negotiable Instruments Act was enacted and Section 138 thereof
incorporated with a specific object of making a special provision by incorporating a strict liability so
far as the cheque, a negotiable instrument, is concerned. The laws relating to the Act are, therefore,
required to be interpreted in the light of the objects intended to be achieved by it despite there being
deviations from the general law and the procedure provided for the redressal of grievances to
litigants. Efforts to defeat the objectives of law by resorting to innovative measures and methods are
to be discouraged, Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies Ltd., (2001) 6 SCC
463.
Section 138 of the Negotiable Instruments Act contains a penal provision. It is a special statute. It
creates a vicarious liability. Even the burden of proof to some extent is on the accused. Having
regard to the purport of the said provision as also in view of the fact that it provides for a severe
penalty, the provision warrants a strict construction, Sarav Investments & Financial Consultancy
(P) Ltd. v. Llyods Register of Shipping, Indian Office, Staff Provident Fund, (2007) 14 SCC 753.
Considering the language used in Section 138, it is only the “drawer” of the cheque who can be
made liable for the penal action under the provisions of the Act. It is settled law that strict
interpretation is required to be given to penal statutes, Aparna A. Shah v. Sheth Developers Private
Limited, (2013) 8 SCC 71.
►Bank.—Expression “the bank”, occurring in proviso (a) to Section 138 means the drawee
bank ans not the collecting bank of payee. Hence, in order to attract the criminal liability of the
drawer, the cheque must be presented to the drawee bank within the statutory period either
personally or through a collecting bank, Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd., (2001)
3 SCC 609.
►Ingredients of Offence; Offence when complete.—The law stands elucidated as under:
As per Section 138 of the Negotiable Instruments Act, the return of the cheque by the drawee
bank alone constitutes the commission of the offence. The territorial jurisdiction of the court which
may try the offence has been modified by Section 142(2) r/w Section 142-A as inserted by the
Negotiable Instruments (Amendment) Act, 2015. The ingredients of the offence under Section 138
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are:
(a) cheque is drawn by the accused on an account maintained by him with a banker,
(b) the cheque amount is in discharge of a debt or liability, and
(c) the cheque is returned unpaid for insufficiency of funds or that the amount exceeds the
arrangement made with the bank, the offence standing committed the moment the cheque
is returned unpaid.
Further steps laid down by way of the proviso are distinct from the ingredients of the offence
which the enacting provision creates and makes punishable. Thus, an offence within the
contemplation of Section 138 is complete with the dishonour of the cheque but taking cognizance of
the same by any court is forbidden so long as the complainant does not have the cause of action to
file a complaint in terms of clause (c) of the proviso read with Section 142, Dashrath Rupsingh
Rathod v. State of Maharashtra, (2014) 9 SCC 129.
In declaring the law as above, the Dashrath Rupsingh Rathod Case, (2014) 9 SCC 129,
overruled the law set forth by the Supreme Court previously, identifying five ingredients of the
offence under Section 138:
(1) drawing of the cheque;
(2) presentation of the cheque to the bank;
(3) returning the cheque unpaid by the drawee bank;
(4) giving notice in writing to the drawer of the cheque demanding payment of the cheque
amount;
(5) failure of the drawer to make payment within 15 days of receipt of the notice, K.
Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510 and Shamshad Begum v. B.
Mohammed, (2008) 13 SCC 77.
The decision of a three-judge bench, Yogendra Pratap Singh v. Savitri Pandey, (2014) 10 SCC
713, subsequent and coordinate to that of Dashrath Rupsingh Rathod, (2014) 9 SCC 129, however,
delivered a judgment that had the effect of restoring K. Bhaskaran:
►Dishonour of cheque.—Once a cheque has been signed and issued in favour of holder of
cheque, there is statutory presumption under Section 139 of NI Act that the cheque is issued in
discharge of a legally enforceable debt or liability. However, said presumption is a rebuttable one.
Issuer of cheque can rebut that presumption by adducing credible evidence that the cheque was
issued for some other purpose like security for loan, T.P. Murugan v. Bojan, (2018) 8 SCC 469.
►Mens Rea.—None of the provisions of the Penal Code, 1860 have been rendered nugatory by
Section 138 and both operate on their own. It is trite that mens rea is the quintessential of every
crime. The objective of Parliament was to strengthen the use of cheques, distinct from other
negotiable instruments, as mercantile tender and therefore it became essential for the Section 138
offence to be freed from the requirement of proving mens rea, Dashrath Rupsingh Rathod v. State
of Maharashtra, (2014) 9 SCC 129.
►Presentation of Cheque.—For prosecuting a person for an offence under Section 138, it is
inevitable that the cheque is 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. When a post-dated cheque
is written or drawn, it is only a bill of exchange and so long the same remains a bill of exchange, the
provisions of Section 138 are not applicable to the instrument. The post-dated cheque becomes a
cheque within the meaning of Section 138 on the date which it is written thereon, Ashok Yeshwant
Badave v. Surendra Madhavrao Nighojakar, (2001) 3 SCC 726.
The crucial date for computing the period of limitation is the date of filing of the complaint or
initiating criminal proceedings and not the date of taking cognizance by the magistrate, Indra Kumar
Patodia v. Reliance Industries Ltd., (2012) 13 SCC 1.
►Dishonour of Interest Warrant.—Advocate for the petitioner contended that interest warrant
is a Bill of Exchange and every bill of exchange is not a cheque. It is difficult to accept the
contention because the cheque is defined as a bill of exchange and therefore if interest warrant is a
bill of exchange, then the definition of the cheque applies to it and therefore provisions of Section
138 also apply where interest warrant is dishonoured, Ashok Chaturvedi v. Nirmala Jaywant Patil,
2002 SCC OnLine Bom 1235 : 2003 Cri LJ 3824.
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►Recovery of Unaccounted Amount.—In order to attract Section 138 the debt or liability has
to be a “legally recoverable” debt or liability. Provision of Section 138 cannot be resorted to for
recovery of unaccounted amount. A cheque issued in discharge of alleged liability of repaying
“unaccounted” cash amount cannot be said to be a cheque issued in discharge of a legally
enforceable debt or liability within the meaning of Explanation to Section 138 of the Act. Such an
effort to misuse the provision of Section 138 has to be discouraged, Sanjay Mishra v. Kanishka
Kapoor, (2009) 4 Mah LJ 155.
►Commission and Cognizance of Offence.—Applying Dashrath Rupsingh Rathod v. State of
Maharashtra, (2014) 9 SCC 129, the Court held that:
• an offence under Section 138 is committed no sooner the cheque is issued on an account
maintained by the drawer with a bank and representing discharge of a debt or a liability in full or
part is dishonoured on the ground of insufficiency of funds or on the ground that the same exceeds
the arrangements made with the banker.
• Prosecution and cognizance of the commission of the offence is, however, deferred by the
proviso to Section 138 till such time the complainant has the cause of action to institute such
proceedings, Vinay Kumar Shailendra v. Delhi High Court Legal Services Committee, (2014) 10
SCC 708.
Proviso to Section 138 simply postpones the actual prosecution of the offender till such time he
fails to pay the amount within the statutory period prescribed for such payment. Parliament in its
wisdom considered it just and proper to give to the drawer of a dishonoured cheque an opportunity
to pay up the amount before permitting his prosecution, no matter the offence is complete the
moment the cheque was dishonoured, Dashrath Rupsingh Rathod v. State of Maharashtra, (2014)
9 SCC 129.
►Offender.—The offender in Section 138 of the Act is the drawer of the cheque. He alone
would have been the offender thereunder if the Act did not contain other provisions. It is because of
Section 141 of the Act that penal liability under Section 138 is cast on other persons connected with
the company, Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1.
►Maintainability of Complaint.—The accused has a right to pay the money within 15 days
from the date of the service of notice and only when it fails to pay, is it open to for the complainant
to file a case under Section 138. That being the position and in the complaint itself having not been
mentioned that the notice had been served, the complaint itself is not maintainable, Shakti Travel &
Tours v. State of Bihar, (2002) 9 SCC 415.
The complaint under Section 138 of the Act, without signature, is maintainable when such
complaint is verified by the complainant and the process is issued by the Magistrate after due
verification, Indra Kumar Patodia v. Reliance Industries Ltd., (2012) 13 SCC 1.
►Continuance of Criminal Proceedings.—There being no dispute that the cheques had been
given to Bank of Credit and Commerce International (Overseas) Ltd. (BCCI) and the same on being
dishonoured the criminal complaint had been lodged by BCCI and the Magistrate had already taken
cognizance of the same. The successor [of the complainant company] SBICIB would be fully
entitled to pursue the criminal litigation, particularly in view of the terms of agreement between BCCI
and SBICIB, Bombay Offshore Services Ltd. v. Shankar Narayan, (2000) 10 SCC 375.
►Nature of Punishment.—With respect to the offence of dishonour of cheques, it is the
compensatory aspect of remedy which should be given priority over punitive aspect, Damodar S.
Prabhu v. Sayed Babalal H., (2010) 5 SCC 663.
►Quashing of Complaint.—The quashing of FIR or a complaint in exercise of the inherent
powers of the High Court should be limited to very extreme exceptions, State of Haryana v. Bhajan
Lal, 1992 Supp (1) SCC 335.
Merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. [It is
untenable that] the provision incorporated in the agreement for referring the disputes to arbitration is
an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a
remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator
cannot conduct a trial of any act which amounted to an offence albeit the same act may be
connected with the discharge of any function under the agreement. Hence, those are not good
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reasons for the High Court to axe down the complaint at the threshold itself, Trisuns Chemical
Industry v. Rajesh Agarwal, (1999) 8 SCC 686.
It was submitted that when the cheques were dishonoured, a separate liability arose in terms of
Section 138 of the Act, whereas the arbitration proceedings were under the agreement signed
between the parties; the commencement and continuance of the arbitration proceedings could in no
way affect the criminal proceedings taken separately. It was held by the Court that there can be no
bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise
from separate causes of action, Sri Krishna Agencies v. State of Andhra Pradesh, (2009) 1 SCC
69.
►Liability Incurred by Drawer of Cheque.—The words ‘any cheque’ and ‘other liability’
occurring in Section 138 are the two key expressions which stand as clarifying the legislative
intent…These expressions leave no manner of doubt that for whatever reason it may be, the liability
under Section 138 cannot be avoided in the event the cheque stands returned by the banker unpaid.
Any contra-interpretation would defeat the intent of the legislature, ICDS Ltd. v. Beena Shabeer,
(2002) 6 SCC 426.
If the cheque is given towards any liability or debt which might have been incurred even by
someone else, the person who is the drawer of the cheque can be made liable under Section 138 of
the Act, Anil Sachar v. Shree Nath Spinners Private Limited, (2011) 13 SCC 148.
►Liability of Company to be Wound Up.—A company cannot escape from penal liability
under Section 138 of the Negotiable Instruments Act on the premise that a petition for winding up of
the company has been presented and was pending during the relevant time; the contention that the
creditor would be disabled from legally enforcing the debt with the commencement of winding-up
proceedings was rejected.
There is no provision in the Companies Act which prohibits enforcement of the debt due from a
company. When a company goes into liquidation, enforcement of debt due from the company is
only made subject to the conditions prescribed therein; the debt does not become unenforceable
altogether. The words “the drawer of such cheque fails to make the payment” are ostensibly
different from saying “the drawer refuses to make payment”. Failure to make payment can be for
reasons beyond the control of the drawer, Pankaj Mehra v. State of Maharashtra, (2000) 2 SCC
756.
►Corporate Criminal Liability.—In response to the question as to whether a company can be
proceeded against when a mandatory imprisonment is prescribed in law, the Court set forth (inter
alia, on the basis of the principle of lex non cogit ad impossibilia):
• As the company cannot be sentenced to imprisonment, the court has to resort to punishment of
imposition of fine which is also a prescribed punishment; as the company cannot be sentenced to
imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the
prescribed punishment the court can impose the punishment of fine which could be enforced
against the company.
• Such a discretion is to be read into the section so far as the juristic person is concerned. Of
course, the Court cannot exercise the same discretion as regards a natural person. Then the court
would not be passing the sentence in accordance with law, Standard Chartered Bank v. Directorate
of Enforcement, (2005) 4 SCC 530.
There can be no quarrel against the proposition that a company can be proceeded against in the
criminal proceeding even where the imposition of sentence is provided for. However, there is
nothing to suggest that there cannot be prosecution of the signatory alone in the absence of the
company, Aneeta Hada v. Godfather Travels and Tours Private Limited, (2008) 13 SCC 703.
Even if the prosecution proceedings against the company were not taken or could not be
continued, it is no bar for proceeding against the other persons falling within the purview of sub-
sections (1) and (2) of Section 141 of the Act [read with Section 138], Anil Hada v. Indian Acrylic
Ltd., (2000) 1 SCC 1.
►Liability of Surety of Debtor.—The question posed is whether A can issue a cheque in
discharge of the liability of B, in spite of the fact that the liability of B has been taken over by A. In
the absence of any documents, the mere statement that the cheque was issued by A on behalf of B
will not be sufficient to give the cause of action for a complaint under Section 138; even in the notice
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sent to petitioner, it has not been mentioned that A [the drawer of the cheque] has taken over the
liability of B. “Any liability” occurred in the section is only to mean that any kind of liability of the
drawer; and not any others liability, unless the payee, the drawer and the original debtor entered
into any agreement to that effect. In order to entertain a complaint, the Magistrate should have
material before him to the effect that there is tripartite agreement in the above nature. Sometime, a
surety of debtor will also issue a cheque. In that case also section 138 will attract in the case of
dishonour, Hiten Sagar v. IMC Ltd., (2001) 3 BOM LR 563 : 2001 Cri LJ 4311.
►Legal Fiction.—Section 138 creates a legal fiction. A legal fiction, though required to be given
full effect, has its own limitations. Legal fiction cannot be taken recourse to for any purpose other
than the one mentioned in the statute itself. Parameters for invoking Section 138 are limited. Refusal
on the part of the bank to honour the cheque on the ground that the cheque has been reported as
lost would not bring the matter within the mischief of Section 138, Raj Kumar Khurana v. State (NCT
of Delhi), (2009) 6 SCC 72.
►Guarantor's/Surety's Rights and Liabilities.—“Any debt or other liability” under Section 138
NI Act need not be only of person who has directly/primarily enjoyed benefit thereof like the
principal debtor. Person who is secondarily liable, such as surety or guarantor may also be
convicted under Section 138 of NI Act if the ingredients thereof are satisfied, Don Ayengia v. State
of Assam, (2016) 3 SCC 1 : (2016) 1 SCC (Cri) 673 : (2016) 2 SCC (Civ) 1.
In case of dishonour of post-dated cheque described as ‘security’ towards repayment of
instalment of already disbursed loan amount, proceedings under Section 138, held, maintainable,
crucial point is whether cheque represents discharge of existing enforceable debt or liability or
whether it represents advance payment without there being any subsisting liability. Once loan
amount was disbursed and as per agreement instalments had fallen due on date of issuance of
cheque, dishonour of such cheque would fall under Section 138. Such issuance of cheque
undoubtedly represent outstanding liability, Sampelly Satyanarayana Rao v. Indian Renewable
Development Agency Ltd., (2016) 10 SCC 458 : (2017) 1 SCC (Cri) 149 : (2017) 1 SCC (Civ) 126.
►Misjoinder of parties.—In case of misjoinder of parties, complaint is not maintainable,
Jitendra Vora v. Bhavana Y. Shah, (2015) 16 SCC 744 : (2015) 4 SCC (Cri) 900 : (2016) 3 SCC
(Civ) 754.
►Stop payment.—When complaint has been filed in respect of pay order issued by Bank for
stopping payment of pay order by payee of pay order in such circumstances, there is no
transaction between the bank and the payee and hence no liability or debt owed to payee by the
Bank to attract Section 138 of NI Act, ING Vysya Bank Ltd. v. State of Rajasthan, (2015) 15 SCC
763 : (2016) 3 SCC (Cri) 395 : (2016) 3 SCC (Civ) 471.
Stop payment instruction is sufficient to attract offence under Section 138, HMT Watches Ltd. v.
M.A. Abida, (2015) 11 SCC 776 : (2015) 4 SCC (Cri) 552.
►Constructive/vicarious liablitiy.—For fastening Directors of company with vicarious liability,
issuance of individual notices under Section 138 to them, held, not required as summary remedy
created for benefit of payee of dishonoured cheque, will thus be rendered completely cumbersome
and capable of getting frustrated, Kirshna Texport & Capital Markets Ltd. v. Ila A. Agrawal, (2015)
8 SCC 28 : (2015) 3 SCC (Cri) 423 : (2015) 3 SCC (Civ) 742.
►Discharge of debt.—Maintainability of criminal proceedings for Dishonour of post-dated
cheque issued for discharge of debt or liability depends upon facts of each case. Post dated
cheque is well recognised mode of payment. Section 138 of NI Act is attracted, if on date of
issuance of cheque, there existed liability or debt or amount which had become legally recoverable.
Issuance of cheque and admission of signature thereon would invoke presumption of legally
enforceable debt in favour of holder. Accused needs to rebut such presumption, Sampelly
Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458 :
(2017) 1 SCC (Cri) 149 : (2017) 1 SCC (Civ) 126.
►Sentence and compensation.—Waiver of imprisonment in lieu of payment of additional
compensation is permissible under exceptional circumstances, Priyanka Nagpal v. State (NCT of
Delhi), (2018) 3 SCC 249.
►Notice.—When two consecutive notices were sent by payee by registered post to correct
address of drawer of cheque: first one sent within limitation period of 15 days but same was
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returned with postal endorsement “intimation served, addressee absent”, whereas second one sent
after expiry of stipulated period of limitation. Held, first notice would be deemed to have been duly
effected by virtue of Section 27 of General Clauses Act and Section 114 of Evidence Act. Though
drawer entitled to rebut that presumption, but in absence of rebuttal, requirement of Section 138
proviso (b) would stand complied with. Subsequent notice should be treated only as reminder and
would not affect validity of first notice. Provisions should be so interpreted in consonance with object
which legislation sought to achieve that right of honest lender is not defeated, N. Parameswaran
Unni v. G. Kanna, (2017) 5 SCC 737 : (2017) 2 SCC (Cri) 668 : (2017) 3 SCC (Civ) 219.
►Scope of Demand notice.—It should contain only cheque amount and mentioning any other
amount higher than cheque amount is not permissible. Where cheque amount and loan amount are
the same, held, demand notice would be valid even if the loan amount (equal to the cheque amount)
is mentioned. It is only in those cases where loan amount is higher than the cheque amount that
mentioning the loan amount would vitiate the demand notice, Vijay Gopala Lohar v. Pandurang
Ramchandra Ghorpade, (2020) 14 SCC 806.
►Rebuttal of presumption.—Proper stage for rebuttal of said presumption is at stage of trial
and rebuttal of presumption cannot be considered at stage of taking cognizance when all ingredients
for taking of cognizance of case under Section 138 are satisfied, Shiv Kumar v. Ramavtar Agarwal,
(2020) 12 SCC 500.
►Trial proceedings.—Offence under Section 138 primarily in nature of civil wrong and
proceedings primarily compensatory in nature. Summary procedure should normally be followed
except where exercise of power under second proviso to Section 143 considered necessary. Court
has jurisdiction under Section 357(3) CrPC to award suitable compensation with default sentence
under Section 64 IPC with further powers of recovery under Section 431 CrPC. Court may close
proceedings if accused deposits amount as assessed by it having regard to cheque amount,
interest/costs, etc. within stipulated period. Compounding at initial stage and even at later stage is
acceptable. Certain proceedings can be conducted online. Affidavit evidence can be received as
evidence at all stages of trial or proceedings, Meters and Instruments (P) Ltd. v. Kachan Mehta,
(2018) 1 SCC 560.
►Necessary conditions for constituting offence under Section 138.—In order to make out
offence under Section 138 necessary conditions to be fulfilled are (i) presentation of cheque to
bank within six months from date on which it is drawn or within period of its validity, whichever is
earlier; (ii) demand being made in writing by payee or holder of cheque in due course by issuance
of notice in writing to drawer of cheque within thirty days of receipt of information from bank of
return of cheques; and (iii) failure of drawer to make payment of amount of money to payee or
holder in due course within fifteen days of receipt of notice. Only upon compliance with these
conditions, offence under Section 138 can be said to have been committed by person issuing
cheque. Further held, commission of offence by company is express condition precedent to attract
vicarious liability of others. When company can be prosecuted, then only persons mentioned in
other categories could be vicariously liable for offence subject to pleadings and proof. While
prosecuting Directors, company must be arraigned as accused, Himanshu v. B. Shivamurthy,
(2019) 3 SCC 797.
►Maintainability of prosecution.—Prosecution based on second or successive default where
drawee did not bring prosecution after first default and issuance of statutory notice, is maintainable,
Sicagen India Ltd. v. Mahindra Vadineni, (2019) 4 SCC 271.
►Legally enforceable debt or liability.—Cheques issued in pursuance of agreement to sell
qualify as being towards legally enforceable debt or liability and amenable for prosecution under
Section 138 in case of dishonour. Though agreement to sell does not create interest in immovable
property, however it constitutes enforceable contract between parties. Any payment made in
pursuance of such agreement is duly enforceable debt or liability for purpose of Section 138,
Ripudaman Singh v. Balkrishna, (2019) 4 SCC 767.
►Liability of legal heirs in case of death of convicted accused.—Legal heirs, in such case,
are neither liable to pay fine nor to undergo imprisonment. However, they have right to challenge
conviction of their predecessor, only for the purpose, that he was not guilty of any offence, M.
Abbas Haji v. T.N. Channakeshava, (2019) 9 SCC 606.
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►Filing and proof of statutory notice.—Service of statutory notice calling upon drawer of
cheque (after it has been dishonoured) to pay amount of cheque is a necessary precondition for
filing of complaint under Section 138. It was incumbent upon respondent to produce such statutory
notice on record to prove same as well, H.N. Jagadeesh v. R. Rajeshwari, (2019) 16 SCC 730.
►Expeditious disposal of cheque dishonour cases.—The need for comprehensive
mechanism for expeditious disposal of cheque dishonour cases, emphasized. Setting up
mechanism for online disposal of cheque dishonour cases, directed. Steps to be taken for securing
presence of accused, enumerated. Duty of banks to provide email ID and other details of accused
for speedy disposal of cases, emphasized. Legal Services Authority directed to develop mechanism
for pre-litigation stage settlements, Makwana Mangaldas Tulsidas v. State of Gujarat, (2020) 4
SCC 695.
CIRCULAR
RBI/2011-12/251
DBOD.AML BC.NO.47/14.01.001/2011-12
November 4, 2011
The Chairmen/Chief Executive Officers
All Scheduled Commercial Banks (excluding RRBs)/Local Area Banks
Dear Sir,
Payment of Cheques/Drafts/Pay Orders/Banker's Cheques
In India, it has been the usual practice among bankers to make payment of only
such cheques and drafts as are presented for payment within a period of six months
from the date of the instrument.
2. It has been brought to the notice of Reserve Bank by Government of India that
some persons are taking undue advantage of the said practice of banks of making
payment of cheques/drafts/pay orders/banker's cheques presented within a period of
six months from the date of the instrument as these instruments are being circulated
in the market like cash for six months. Reserve Bank is satisfied that in public interest
and in the interest of banking policy it is necessary to reduce the period within which
cheques/drafts/pay orders/banker's cheques are presented for payment from six
months to three months from the date of such instrument. Accordingly, in exercise of
the powers conferred by Section 35-A of the Banking Regulation Act, 1949, Reserve
Bank hereby directs that with effect from April 1, 2012, banks should not make
payment of cheques/drafts/pay orders/banker's cheques bearing that date or any
subsequent date, if they are presented beyond the period of three months from the
date of such instrument.
3. Banks should ensure strict compliance of these directions and notify the holders
of such instruments of the change in practice by printing or stamping on the cheque
leaves, drafts, pay orders and banker's cheques issued on or after April 1, 2012, by
issuing suitable instruction for presentment within the period of three months from the
date of the instrument.
4. Please acknowledge receipt
Yours faithfully,
(Deepak Singhal)
Chief General Manager in-Charge
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.
►Ingredients and scope.—Accused may adduce evidence to rebut presumption under Section
139, but mere denial regarding existence of debt shall not serve any purpose. In the event accused
is able to raise a probable defence which creates doubt with regard to existence of a debt or liability,
the presumption may fail, Kishan Rao v. Shankargouda, (2018) 8 SCC 165.
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►Nature and scope.—This section raises presumption of law that cheque duly drawn was in
discharge of debt or liability. However, presumption is rebuttable and onus lies on drawer to rebut it
by adducing cogent evidence to the contrary. This presumption is not in conflict with human right of
presumption of innocence of accused which prosecution is required to dislodge by proving its case
against accused beyond reasonable doubt, Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197.
►Presumption.— Drawing of presumption that holder of cheque has received cheque for
discharge, wholly or in part, of any debt or liability and rebuttal of such presumption. Principles and
modalities thereof, summarized. Rohitbhai Jivanlal Patel v. State of Gujarat, (2019) 18 SCC 106.
►Presumptions in favour of holder of cheque.—Mere issuance of cheque by client may not
debar client from contesting liability to pay fees claimed by advocate. If liability is disputed, advocate
has to independently prove contract. A contingent fee claim cannot be the basis for a complaint by
an advocate under Section 138, NI Act. In any case contingent fee claim is a professional
misconduct and against public policy, B. Sunitha v. State of Telangana, (2018) 1 SCC 638.
►Burden of rebuttal of presumption.—The presumption mandated by Section 139 does
indeed include the existence of a legally enforceable debt or liability. Bare denial of the passing of
the consideration and existence of debt, is not enough to rebut the presumption. To rebut the
statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt
as is expected of the complainant in a criminal trial. Rather, something which is probable has to be
brought on record for getting the burden of proof shifted to the complainant. To disprove the
presumptions, the accused should bring on record such facts and circumstances, upon
consideration of which, the court may either believe that the consideration and debt did not exist or
their non-existence was so probable that a prudent man would under the circumstances of the case,
act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the
consideration did not exist, or that he had not incurred any debt or liability, the accused may also
rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the
burden may likewise shift again on to the complainant. Accused may also rely upon presumptions of
fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions
arising under Sections 118 and 139 of the NI Act, Uttam Ram v. Devinder Singh Hudan, (2019) 10
SCC 287.
►Burden of proof.—Once cheque is issued by drawer, a presumption under Section 139
arises in favour of holder. Section 139 creates a statutory presumption that cheque received of the
nature referred to under Section 138 is for the discharge in whole or in part of any debt or other
liability. Initial burden lies upon complainant to prove the circumstances under which cheque was
issued in his favour and that same was issued in discharge of a legally enforceable debt. It is for
accused to adduce evidence of such facts and circumstances to rebut the presumption that such
debt does not exist or that the cheques are not supported by consideration, Shree Daneshwari
Traders v. Sanjay Jain, (2019) 16 SCC 83.
►Legally enforceable debt.—Presumption in case of voluntarily signed blank cheque leaf as to
legally enforceable debt, held, available against the accused even in case when he voluntarily signed
and handed over a blank cheque leaf towards some payment, Kalamani Tex v. P.
Balasubramanian, (2021) 5 SCC 283.
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. Offences by companies.—(1) 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.
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70
[Provided further that where a person is nominated as a Director of a company by
virtue of his holding any office or employment in the Central Government or State
Government or a financial corporation owned or controlled by the Central Government
or the State Government, as the case may be, he shall not be liable for prosecution
under this chapter.]
(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.
►Nature of Provision.—The normal rule in the cases involving criminal liability is against
vicarious liability, that is, no one is to be held criminally liable for for an act of another. This normal
rule is, however, subject to exception on account of specific provision being made in the statutes
extending liability to others. Section 141 is an instance of specific provision which in case of
offence under Section 138 is committed by a company, extends criminal liability for dishonour of a
cheque to officers of a company. Section 141 contains conditions which have to be satisfied before
the liability can be extended to officers of the company. Since the provision creates criminal liability,
the conditions have to be strictly complied with, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla,
(2005) 8 SCC 89.
There is no vicarious liability in criminal law unless the statute takes that also within its fold, Sham
Sunder v. State of Haryana, (1989) 4 SCC 630.
The laudable object of preventing bouncing of cheques and sustaining the credibility of
commercial transactions resulting in enactments of Sections 138 and 141 has to be borne in mind.
These provisions create a statutory presumption of dishonesty, exposing a person to criminal liability
if payment is not made within the statutory period even after issue of notice, Monaben Ketanbhai
Shah v. State of Gujarat, (2004) 7 SCC 15.
►Person in charge of the business of company.—The words refer to a person who is in
overall control of the day-to-day business of the company. A person may be a Director and thus
may belong to the group of persons making the policy followed by the company, but yet may not be
in charge of the business of the company; that a person may be a manager who is in charge of the
business but may not be in overall charge of the business; and that a person may be an officer who
may be in charge of only some part of the business, K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48.
Section 291 of the Companies Act, 1956 [corresponding to Section 179 of the Companies Act,
2013] provides that subject to the provisions of that Act, the Board of Directors of a company shall
be entitled to exercise all such powers, and to do all such acts and things, as the company is
authorised to exercise and do. A company, though a legal entity, can act only through its Board of
Directors. The settled position is that a Managing Director is prima facie in charge of and
responsible for the company's business and affairs and can be prosecuted for offences by the
company. But insofar as other Directors are concerned, they can be prosecuted only if they were
in charge of and responsible for the conduct of the company's business, K.K. Ahuja v. V.K. Vora,
(2009) 10 SCC 48.
►Company.—For the purpose of Section 141, a firm comes within the ambit of a company,
Monaben Ketanbhai Shah v. State of Gujarat, (2004) 7 SCC 15.
►Offence by Company/Samiti.—When cheque has been issued on behalf of Company/Samiti,
impleadment, as accused, of company/samiti in trial, mandatory, applying Aneeta Hada, (2012) 5
SCC 661. Aforesaid decision may be prospective, but that will be applicable to all pending cases
including trial, appeal or revision or SLP/appeal pending before Supreme Court, Ajit Balse v. Ranga
Karkere, (2015) 15 SCC 748 : (2016) 3 SCC (Cri) 379 : (2016) 3 SCC (Civ) 465.
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To fasten vicarious liability under Section 141 on a person, law is well settled by Supreme Court,
that complainant should specifically show as to how and in what manner accused was responsible.
Simply because a person is a Director of defaulter Company, does not make him liable under the
Act. Only the person who was at the helm of affairs of the Company and in charge of and
responsible for conduct of business at the time of commission of an offence, will be liable for
criminal action. Hence, for making a Director of a Company liable for offences committed by
Company under Section 141, there must be specific averments against Director showing as to how
and in what manner the Director was responsible for conduct of business of Company, Ashoke Mal
Bafna v. Upper India Steel Manufacturing & Engineering Co. Ltd., (2018) 14 SCC 202.
►Nature of Liability.—Liability arises on account of conduct, act or omission on part of a
person and not merely on account of holding an office or a position in a company. Therefore in
order to bring a case within Section 141 of the Act, the complaint must disclose the necessary facts
which make a person liable. Vicarious Liability has been fastened on those who are in charge of
and responsible to the company for the conduct of its business, Monaben Ketanbhai Shah v. State
of Gujarat, (2004) 7 SCC 15.
It was held by the court that the liability of a Director of a company (as also “every person”, as
contemplated in Section 141) is a vicarious one in terms of Section 141 of the Negotiable
Instruments Act, Dilip S. Dhanukar v. Kotak Mahindra Co. Ltd., (2007) 6 SCC 528.
Vicarious liability on part of the person must be pleaded and proved and not inferred, National
Small Industries Corp. Ltd. v. Harmeet Singh Paintal, 2010 (4) Mh.L.J. (SC) 269 : 2010 (2)
Mh.L.J. (Cri) (SC) 627 : 2010 ALL MR (Cri) 921 (SC).
Section 141 postulates constructive liability of the Directors of the Company or other persons
responsible for its conduct or the business of the company, N.K. Wahi v. Shekhar Singh, (2007) 9
SCC 481 and Saroj Kumar Poddar v. State (NCT of Delhi), (2007) 3 SCC 693.
►Constructive vicarious liability.—Merely a person acting as Director does not make him
responsible for cheque issued on behalf of company. Director must be in charge and responsible
for conduct of business of company and there has to be specific averment in complaint that person
accused was in charge of conduct of business of company at the time of commission of offence,
T.N. News Print & Papers Ltd. v. D. Karunakar, (2016) 6 SCC 78 : (2016) 2 SCC (Cri) 519 :
(2016) 3 SCC (Civ) 78.
►Vicarious liability of person(s) in charge.—It is necessary to specifically aver in complaint
under Section 141, that at the time offence was committed, person accused was in charge of, and
responsible for conduct of business of company. Such averment is essential requirement of Section
141 and has to be made in complaint. Without such averment, requirements of Section 141 cannot
be said to be satisfied. Liability depends on role one plays in affairs of company and not on his
designation or status. Further, there cannot be any vicarious liability unless there is prosecution
against company, Standard Chartered Bank v. State of Maharashtra, (2016) 6 SCC 62 : (2016) 2
SCC (Cri) 505 : (2016) 3 SCC (Civ) 62.
►Corporate criminal liability.—Penal Code, 1860 does not provide for vicarious liability for
any offence alleged to be committed by a company. If and when a statute contemplates creation of
such a legal fiction, it provides specifically therefor e.g Negotiable Instruments Act, 1881, HDFC
Securities Ltd. v. State of Maharashtra, (2017) 1 SCC 640 : (2017) 1 SCC (Cri) 485.
►Legal Fiction.—The liability of a Director must be determined on the date on which the
offence is committed. There may be a large number of Directors but some of them may not
associate themselves in the management of the day-to-day affairs of the company and thus, are not
responsible for the conduct of the business of the company. The averments must state the person
who is vicariously liable for the commission of the offence and was both in charge of and
responsible for the conduct of the business of the company. Requirements laid down thereunder
must be read conjointly and not disjunctively. When a legal fiction is raised, the ingredients therefor
must be satisfied, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 4 SCC 70.
142. Cognizance of offences.—71 [(1)] 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
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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 proviso to Section 138:
72 [Provided that the cognizance of a complaint may be taken by the court after
the prescribed period, if the complainant satisfies the court that he had
sufficient cause for not making a complaint within such period.]
(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.
73 [(2) The offence under Section 138 shall be inquired into and tried only by a court
within whose local jurisdiction,—

(a) if the cheque is delivered for collection through an account, the branch of the
bank where the payee or holder in due course, as the case may be, maintains
the account, is situated; or
(b) if the cheque is presented for payment by the payee or holder in due course,
otherwise through an account, the branch of the drawee bank where the
drawer maintains the account, is situated.
Explanation.—For the purposes of clause (a), where a cheque is delivered for
collection at any branch of the bank of the payee or holder in due course, then, the
cheque shall be deemed to have been delivered to the branch of the bank in which the
payee or holder in due course, as the case may be, maintains the account.]
NOTES ►Effect of Negotiable Instruments (Amendment) Act, 2015.—The Act
vide Section 142(2) r/w Section 142-A appears to have modified the law as laid down
in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, whereby it
was held that the territorial jurisdiction for filing of cheque dishonour complaint is
restricted to the court within whose territorial jurisdiction the offence is committed
i.e., which is the location where the cheque is dishonoured or returned unpaid by the
bank on which it is drawn. Place of issuance or delivery of the statutory notice or
where the complainant chooses to present the cheque for encashment by his bank as
per Dashrath Rupsingh Rathod case were not relevant for purposes of determining
territorial jurisdiction for filing of cheque dishonour complaints.
►Interpretation/construction.—Words “… as if [S. 142(2)] had been in force at all material
times…” used in Section 142-A(1), held give retrospectivity to them, Bridgestone India (P) Ltd. v.
Inderpal Singh, (2016) 2 SCC 75 : (2016) 1 SCC (Cri) 472 : (2016) 1 SCC (Civ) 588.
►Cognizance of Offence.—While an offence under Section 138 is committed no sooner the
cheque is issued on an account maintained by the drawer with a bank (and representing discharge
of a debt or a liability in full or part) is dishonoured on the ground of insufficiency of funds or on the
ground that the same exceeds the arrangements made with the banker, the prosecution and
cognizance of the commission of the offence is deferred by the proviso to Section 138 till such time
the complainant has the cause of action to institute such proceedings, Dashrath Rupsingh Rathod
v. State of Maharashtra, (2014) 9 SCC 129 and Vinay Kumar Shailendra v. Delhi High Court Legal
Services Committee, (2014) 10 SCC 708.
Concept of “taking cognizance of offence and not offender” is not applicable to proceedings
under Section 138/Section 142. Hence, absence of cognizance against company concerned,
cannot be cured on ground that cognizance had been taken against Director concerned, N.
Harihara Krishnan v. J. Thomas, (2018) 13 SCC 663.
►Complaint filed through power-of-attorney holder.—Filing of complaint petition under
Section 138, NI Act, 1881 through power-of-attorney holder is perfectly legal and competent.
However, such power-of-attorney holder or legal representative(s) should have due knowledge about
the transaction(s) in question. Clarified, there is no serious conflict between M.M.T.C. Ltd. case,
(2002) 1 SCC 234 and Janki Vashdeo Bhojwani, (2005) 2 SCC 217 and ruling of law herein
reconciles view taken in both cases. In M.M.T.C. Ltd. case, view taken was that if complaint is filed
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for and on behalf of payee or holder in due course, that is good enough compliance with Section
142, NI Act and Janki Vashdeo Bhojwani case, (2005) 2 SCC 217, concluded that a complaint by a
power-of-attorney holder on behalf of the original plaintiff is maintainable provided he has personal
knowledge of the transaction in question. Clarified however, power-of-attorney holder cannot file a
complaint in his own name as if he was the complainant. Power-of-attorney holder can only initiate
criminal proceedings on behalf of the principal, A.C. Narayanan v. State of Maharashtra, (2014) 11
SCC 790 : (2014) 4 SCC (Civ) 343.
74
[142-A. Validation for transfer of pending cases.—(1) Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974) or any judgment,
decree, order or direction of any court, all cases transferred to the court having
jurisdiction under sub-section (2) of Section 142, as amended by the Negotiable
Instruments (Amendment) Ordinance, 2015, shall be deemed to have been
transferred under this Act, as if that sub-section had been in force at all material
times.
(2) Notwithstanding anything contained in sub-section (2) of Section 142 or sub-
section (1), where the payee or the holder in due course, as the case may be, has filed
a complaint against the drawer of a cheque in the court having jurisdiction under sub-
section (2) of Section 142 or the case has been transferred to that court under sub-
section (1) and such complaint is pending in that court, all subsequent complaints
arising out of Section 138 against the same drawer shall be filed before the same court
irrespective of whether those cheques were delivered for collection or presented for
payment within the territorial jurisdiction of that court.
(3) If, on the date of the commencement of the Negotiable Instruments
(Amendment) Act, 2015, more than one prosecution filed by the same payee or holder
in due course, as the case may be, against the same drawer of cheques is pending
before different courts, upon the said fact having been brought to the notice of the
court, such court shall transfer the case to the court having jurisdiction under sub-
section (2) of Section 142, as amended by the Negotiable Instruments (Amendment)
Ordinance, 2015, before which the first case was filed and is pending, as if that sub-
section had been in force at all material times.]
75 [143. Power of court to try cases summarily.—(1) Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences under this
chapter shall be tried by a Judicial Magistrate of the first class or by a Metropolitan
Magistrate and the provisions of Sections 262 to 265 (both inclusive) of the said Code
shall, as far as may be, apply to such trials:
Provided that in the case of any conviction in a summary trial under this section, it
shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not
exceeding one year and an amount of fine exceeding five thousand rupees:
Provided further that when at the commencement of, or in the course of, a
summary trial under this section, it appears to the Magistrate that the nature of the
case is such that a sentence of imprisonment for a term exceeding one year may have
to be passed or that it is, for any other reason, undesirable to try the case summarily,
the Magistrate shall after hearing the parties, record on order to that effect and
thereafter recall any witness who may have been examined and proceed to hear or
rehear the case in the manner provided by the said Code.
(2) The trial of a case under this section shall, so far as practicable, consistently
with the interests of justice, be continued from day to day until its conclusion, unless
the court finds the adjournment of the trial beyond the following day to be necessary
for reasons to be recorded in writing.
(3) Every trial under this section shall be conducted as expeditiously as possible
and an endeavour shall be made to conclude the trial within six months from the date
of filing of the complaint.
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76
[143-A. Power to direct interim compensation.—(1) Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974), the Court trying an
offence under Section 138 may order the drawer of the cheque to pay interim
compensation to the complainant—
(a) in a summary trial or a summons case, where he pleads not guilty to the
accusation made in the complaint; and
(b) in any other case, upon framing of charge.
(2) The interim compensation under sub-section (1) shall not exceed twenty per
cent of the amount of the cheque.
(3) The interim compensation shall be paid within sixty days from the date of the
order under sub-section (1), or within such further period not exceeding thirty days as
may be directed by the Court on sufficient cause being shown by the drawer of the
cheque.
(4) If the drawer of the cheque is acquitted, the Court shall direct the complainant
to repay to the drawer the amount of interim compensation, with interest at the bank
rate as published by the Reserve Bank of India, prevalent at the beginning of the
relevant financial year, within sixty days from the date of the order, or within such
further period not exceeding thirty days as may be directed by the Court on sufficient
cause being shown by the complainant.
(5) The interim compensation payable under this section may be recovered as if it
were a fine under Section 421 of the Code of Criminal Procedure, 1973 (2 of 1974).
(6) The amount of fine imposed under Section 138 or the amount of compensation
awarded under Section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall
be reduced by the amount paid or recovered as interim compensation under this
section.]
►Nature of power to grant compensation.—Power to direct interim compensation under
Section 143-A is prospective. Scheme of Section 143-A, discussed and distinction between Section
143-A and Section 148 in their operation, explained, G.J. Raja v. Tejraj Surana, (2019) 19 SCC
469.
144. Mode of service of summons.—(1) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 (2 of 1974), and for the purposes of this chapter, a
Magistrate issuing a summons to an accused or a witness may direct a copy of
summons to be served at the place where such accused or witness ordinarily resides or
carries on business or personally works for gain, by speed post or by such courier
services as are approved by a Court of Session.
(2) Where an acknowledgment purporting to be signed by the accused or the
witness or an endorsement purported to be made by any person authorised by the
postal department or the courier services that the accused or the witness refused to
take delivery of summons has been received, the court issuing the summons may
declare that the summons has been duly served.
145. Evidence on affidavit.—(1) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974), the evidence of the complainant may be given
by him on affidavit and may, subject to all just exceptions be read in evidence in any
enquiry, trial or other proceeding under the said Code.
(2) The court may, if it thinks fit, and shall, on the application of the prosecution or
the accused, summon and examine any person giving evidence on affidavit as to the
facts contained therein.
►Retrospective Operation.—A bare perusal of Section 145 shows that both the sub-sections
(1) and (2) as introduced by the Negotiable Instruments (Amendment and Miscellaneous Provisions)
Act, 2002 fall within the realm of procedural law and hence they would be applicable to the pending
cases (or retrospectively) since there is no vested right in an accused in the procedural law,
Peacock Industries Ltd., Udaipur v. Budhrani Finance Ltd., Bombay, 2006 SCC OnLine Bom 703.
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146. Bank's slip prima facie evidence of certain facts.—The court shall, in respect of
every proceeding under this chapter, on production of bank's slip or memo having
thereon the official mark denoting that the cheque has been dishonoured, presume the
fact of dishonour of such cheque, unless and until such fact is disproved.
147. Offences to be compoundable.—Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act
shall be compoundable.]
►Considerations for Compounding of an Offence.—It is evident that the permissibility of the
compounding of an offence is linked to the perceived seriousness of the offence and the nature of
the remedy provided, Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663.
►Overriding Effect of Non Obstante Clause.—Once a person is allowed to compound a case
as provided for under Section 147 of the Negotiable Instruments Act, the conviction under Section
138 of the said Act should also be set aside. As far as the non obstante clause included in Section
147 of the 1881 Act is concerned, the 1881 Act being a special statute, the provisions of Section
147 will have an overriding effect over the provisions of Code of Criminal Procedure relating to
compounding of offences (Section 320), K.M. Ibrahim v. K.P. Mohammed, (2010) 1 SCC 798.
In view of the non obstante clause, the compounding of offences under the Negotiable
Instruments Act is controlled by Section 147 and the scheme contemplated by Section 320 of the
Code of Criminal Procedure will not be applicable in the strict sense since the latter is meant for the
specified offences under the Penal Code, 1860. Section 320 of the Code deals with offences which
are compoundable, either by the parties without the leave of the Court or by the parties but only with
the leave of the court. Section 147 of the Negotiable Instruments Act is in the nature of an enabling
provision, thereby serving as an exception to the general rule incorporated in sub-section (9) of
Section 320 of the Code which states that “No offence shall be compounded except as provided by
this section”, Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663.
77 [148.
Power of Appellate Court to order payment pending appeal against
conviction.—(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under
Section 138, the Appellate Court may order the appellant to deposit such sum which
shall be a minimum of twenty per cent of the fine or compensation awarded by the
trial Court:
Provided that the amount payable under this sub-section shall be in addition to any
interim compensation paid by the appellant under Section 143-A.
(2) The amount referred to in sub-section (1) shall be deposited within sixty days
from the date of the order, or within such further period not exceeding thirty days as
may be directed by the Court on sufficient cause being shown by the appellant.
(3) The Appellate Court may direct the release of the amount deposited by the
appellant to the complainant at any time during the pendency of the appeal:
Provided that if the appellant is acquitted, the Court shall direct the complainant to
repay to the appellant the amount so released, with interest at the bank rate as
published by the Reserve Bank of India, prevalent at the beginning of the relevant
financial year, within sixty days from the date of the order, or within such further
period not exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the complainant.]
►Applicability of Section 148 (as amended by Act 20 of 2018 w.e.f 1-9-2018).—Even in
such appeals which were preferred after 1-9-2018 even if original complaint is filed prior to its
amendment, power under Section 148 can be exercised on application of original complainant or
while suspending sentence on application of accused. Use of word “may” in Section 148 has to be
read as “shall” and appellate courts must ordinarily order deposit of minimum 20% of compensation
or fine amount imposed by trial court, Surinder Singh Deswal v. Virender Gandhi, (2019) 11 SCC
341.
SCHEDULE
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-
Enactments Repealed
78 [* * *]
———
1.For the S.O.R. see Gaz. of India, 1876, p. 1836, for the Reports of the Select Committee, see ibid., 1877, Pt.
V, p. 321; 1878, Pt. V, p. 145; 1879, Pt. V, p. 75; 1881, Pt. V, p. 85; for discussions in the Council, see ibid.,
1876, Supplement, p. 1081; and ibid., 1881, Supplement, p. 1409.
2. Subs. by the A.O. 1950 for “all the Provinces of India”.
3.The words “except the State of Jammu and Kashmir” were omitted by the Jammu and Kashmir (Extension of
Law) Act, 1956.
4. See now the Reserve Bank of India Act, 1934 (11 of 1934).
5. Repealed by Act 12 of 1891. Prior to repeal it read as:
“2. Repeal of enactments.—On and from that day the enactments specified in the schedule hereto annexed
shall be repealed to the extent mentioned in the third column thereof.”
6.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. Prior to omission it read as:
‘India.—“India” means the territory of India excluding the State of Jammu and Kashmir.’
7.
Subs. by S. 2 of Act 37 of 1955.
8. Repealed by Act 53 of 1952, S. 16 (w.e.f. 14-2-1956). Prior to repeal it read as:
‘Notary public.—“Notary public” includes also any person appointed by the Governor-General in Council to
perform the functions of a notary public under this Act.’
9.
Subs. by Act 55 of 2002, S. 2 (w.e.f. 6-2-2003).
10. Subs. by Act 26 of 2015, S. 2(i) (w.r.e.f. 15-6-2015). Prior to substitution it read as:
‘(a) “a cheque in the electronic form” means a cheque which contains the exact mirror image of a paper
cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with
the use of digital signature (with or without biometrics signature) and asymmetric crypto system;’
11.
Ins. by Act 26 of 2015, S. 2(ii) (w.r.e.f. 15-6-2015).
12. Subs. by Act 2 of 1885, S. 2 for “When acceptance is refused and the bill is protested for non-acceptance”
13. Subs. by Act 8 of 1919, S. 2 for “payable to, or to the order of, a payee”.
14. Subs. by Act 36 of 1957, S. 3 and Sch. 11, for “a State”.

15. Subs. by Act 36 of 1957, S. 3 and Sch. 11, for “a State”.
16.
Subs. by Act 8 of 1919, S. 3.
17. Ins. by Act 5 of 1914, S. 2.
18. Renumbered as sub-section (1) and sub-section (2) was ins. by S. 3 of Act 5 of 1914.
19. Ins. by S. 3 of Act 5 of 1914.
20. Subs. by Act 3 of 1951, for “the States”.
The words “New Year's Day, Christmas Day, if either of such days falls on a Sunday, the next following
21.
Monday” were deleted by S. 3 of Act 37 of 1955.

22. Subs. by the A.O. 1937, for “Local Government”.
By Govt. of India Noti. No. 20/25-56-Pub-1, dated June 8, 1957 the power is exercisable by the State
23.
Government.
24. Ins. by Act 2 of 1885, S. 3.
25. Subs. by Act 8 of 1919, S. 4, for “payable to the order of a specified person or to specified person or order”.
26. Ins. by Act 2 of 1885, S. 4.
27.
Subs. by Act 12 of 1921, S. 2, for “twenty-four”.
-----------------------------------------------------------------------------------------------------------------------------------------------------------
-
28. Section 64 re-numbered as sub-section (1) by Act 55 of 2002, S. 3 (w.e.f. 6-2-2003).
29. Ins. by Act 2 of 1885, S. 4.

30. Ins. by Act 55 of 2002, S. 3 (w.e.f. 6-2-2003).
31. Ins. by Act 6 of 1897, S. 2.
32. Ins. by Act 25 of 1920, S. 2.

33. Subs. by Act 12 of 1921, S. 3, “for payment”.
This section was inserted by S. 2 of the Negotiable Instruments Act and Indian Limitation Act (Temporary
34.
Amendment) Ordinance No. 31 of 1947, promulgated under S. 42 of the Govt. of India Act, 1935. Omitted by
Repealing and Amending Act, 1957 (36 of 1957). Prior to omission it read as:
“75-B. Presentment of negotiable instruments in riot areas unnecessary.—(1) Notwithstanding anything
contained in this Act or in any other law for the time being in force no, presentment for acceptance or
payment of a negotiable instrument shall be necessary, and the instrument shall be deemed to be
dishonoured at the due date for presentment if it is not possible for the holder thereof, being a bank, to
present the instrument for acceptance or payment on account of the prevalence of riot or other
disturbances in the area in which such payment is to be made.
(2) Every bank which treats any negotiable instrument as dishonoured under sub-section (1) shall send to
the Reserve Bank of India a return signed by two responsible officers of the bank in such form and manner as
may be prescribed by the Reserve Bank of India.
Explanation.—For the purpose of this section a bank shall include a company or corporation incorporated by
or under any law in force in any place in or outside the Provinces of India, which transacts the business of
banking in any of the Provinces of India.”
35.
Subs. by Act 30 of 1926, S. 2, for “except in cases provided for by the Code of Civil Procedure, S. 522”.
36.
Subs. for “six per centum” by Act 66 of 1988, S. 2 (w.e.f. 30-12-1988).
37. Section 81 renumbered as sub-section (1) by Act 55 of 2002, S. 4 (w.e.f. 6-2-2003).
38.
Ins. by Act 55 of 2002, S. 4 (w.e.f. 6-2-2003).
39.
Subs. by Act 12 of 1921, S. 21, for “twenty-four”.
40. Subs. by Act 6 of 1898, S. 3.
41. Renumbered by Act 17 of 1934, S. 2.

42. Ins. by Act 17 of 1934, S. 2.
43. Ins. by Act 25 of 1930, S. 2.
44.
Section 89 renumbered as sub-section (1) by Act 55 of 2002, S. 5 (w.e.f. 6-2-2003).
45. Ins. by the Act 55 of 2002, S. 5 (w.e.f. 6-2-2003).
46.
Added by Act 2 of 1885, S. 5.
47.
Ins. by Act 2 of 1885, S. 6.
48. Last portion was omitted by S. 7 of Act 2 of 1885. Prior to omission it read as:
“Unless the person who intends to accept supra protest first declares, in the presence of a notary, that he
does it for honour, and has such declaration duly recorded in the notarial register at the time, his acceptance
shall be a nullity.”
Subs. by Act 2 of 1885, S. 8, for “in the presence of a notary public subscribes the bill with his own hand
49.
and”.
50.The words “and such declaration must be recorded by the notary in his register” repealed by Act 2 of 1885,
S. 8.
51. Ins. by Act 2 of 1885, S. 9.
The words, figures and brackets “(except in cases provided for by the Code of Civil Procedure, S. 532)” were
52.
omitted by Act 30 1926, S. 3.

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-
53. Subs. for “six per centum” by Act 66 of 1988, S. 3 (w.e.f. 30-12-1988).
54. Subs. by Act 8 of 1919, S. 5, for “payable to, or to the order of, a specified person”.
55.
Added by Act 18 of 1922, S. 2.
56. Explanation renumbered as Explanation I by Act 55 of 2002, S. 6 (w.e.f. 6-2-2003).
57. Ins. by Act 55 of 2002, S. 6 (w.e.f. 6-2-2003).
58.
Ins. by Act 33 of 1947, S. 2.
59. Subs. by Act 3 of 1951, for “the States”.
60.
Subs. by Act 3 of 1951, for “the States”.
61.
Subs. by Act 3 of 1951, for “the States”.
62.The words “out of British India” have been successively substituted by A.C.A.O. 1948; A.L.O., 1950 and Part
B States (Laws) Act, 1951 (3 of 1951), to read as above.
63.The words “law of British India” have been successively substituted by A.C.A.O. 1948; A.L.O., 1950 and Part
B States (Laws) Act, 1951 (3 of 1951), to read as above.
64.
The words “in British India” have been successively substituted by A.C.A.O. 1948; A.L.O., 1950 and Part B
States (Laws) Act, 1951 (3 of 1951), to read as above.
65. The words “or the State of Jammu and Kashmir” omitted by Act 62 of 1956, S. 2 and Sch.
66.The words “British India” have been successively substituted by A.C.A.O., 1948; A.L.O., 1950 and Part B
States (Laws) Act, 1951 (3 of 1951) to read as above.
67.
Chapter XVII covering Ss. 138 to 142 ins. by Act 66 of 1988, S. 4 (w.e.f. 1-4-1989 vide S.O. 240(E), dt. 29-3
-1989). Earlier Chap. XVII relating to ‘Notaries Public’ repealed by Act 53 of 1952.
68. Subs. for “one” by Act 55 of 2002, S. 7 (w.e.f. 6-2-2003).
* Ed.: The period of “six months” mentioned in S. 138 proviso (a) remains unchanged as there has been no
amendment in this regard. However, RBI vide Circular RBI/2011-12/251 DBOD AML BC No. 47/14.01.001/2011-12,
dated 4-11-2011, in exercise of the power under S. 35-A of the Banking Regulation Act, 1949 has changed the
default period within which a cheque may be presented for payment, from a period of six months from the date
of the instrument, to a period of only three months from such date, w.e.f. 1-4-2012. The operative part of the
said Circular reads:
“Accordingly, in exercise of the powers conferred by Section 35-A of the Banking Regulation Act, 1949,
Reserve Bank hereby directs that w.e.f. April 1, 2012, banks should not make payment of cheques/drafts/pay
orders/banker's cheques bearing that date or any subsequent date, if they are presented beyond the period
of three months from the date of such instrument.”
The result is that the impact of the above RBI Circular is covered by the latter part of proviso (a), namely,
“or within the period of its validity, whichever is earlier;”. The complete RBI circular dt. 4-11-2011 is given
below at p. 42.
69. Subs. for “within fifteen days” by Act 55 of 2002, S. 7 (w.e.f. 6-2-2003).
70.
Ins. by Act 55 of 2002, S, 8 (w.e.f. 6-2-2003).
71. Renumbered by Act 26 of 2015, S. 3 (w.r.e.f. 15-6-2015).
72. Ins. by Act 55 of 2002, S. 9 (w.e.f. 6-2-2003).
73.
Ins. by Act 26 of 2015, S. 3 (w.r.e.f. 15-6-2015).
74. Ins. by Act 26 of 2015, S. 4 (w.r.e.f. 15-6-2015).
75. Sections 143 to 147 inserted by Act 55 of 2002, S. 10 (w.e.f. 6-2-2003).
76.
Ins. by Act 20 of 2018, S. 2 (w.e.f. 1-9-2018).
77. Ins. by Act 20 of 2018, S. 2 (w.e.f. 1-9-2018).
78. Repealed by the Amending Act, 1891 (XII of 1891). Prior to omission it read as:
-----------------------------------------------------------------------------------------------------------------------------------------------------------
-
“SCHEDULE
(a) Statutes
Year and chapter Title Extent of repeal
9 Wm. III, c. 17 An Act for the better payment of Inland Bills of The whole
Exchange.
3 & 4 Anne, c. 8 An Act for giving like remedy upon promissory notes as The whole
is now used upon Bills of Exchange, and for the better
payment of Inland Bills of Exchange.
(b) Acts of the Governor-General in Council
Number and year Title Extent of repeal
VI of 1840 An Act for the amendment of the law concerning the The whole
negotiation of Bills of Exchange.
V of 1866 An Act to amend in certain respects the Commercial Sections 11, 12 and 13
Law of British India
XV of 1874 The Laws Local Extent Act, 1874 The first schedule, so far as
relates to Act VI of 1840,
and Act V of 1866, Sections
11, 12 and 13.”
Disclaimer: While every effort is made to avoid any mistake or omission, this casenote/ headnote/ judgment/ act/ rule/ regulation/ circular/
notification is being circulated on the condition and understanding that the publisher would not be liable in any manner by reason of any mistake
or omission or for any action taken or omitted to be taken or advice rendered or accepted on the basis of this casenote/ headnote/ judgment/ act/
rule/ regulation/ circular/ notification. All disputes will be subject exclusively to jurisdiction of courts, tribunals and forums at Lucknow only. The
authenticity of this text must be verified from the original source.

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SCC Online Web Edition, Copyright © 2021

Page 1 Tuesday, September 28, 2021

OF NOTES, BILLS AND CHEQUES

9. “Holder in due course”

10. “Payment in due course”

11. “Inland instrument”

12. “Foreign instrument”

13. “Negotiable instrument”

16. Indorsement “in blank” and “in full” “Indorsee”

17. Ambiguous instruments

18. Where amount is stated differently in figures and words

20. Inchoate stamped instruments

21. “At sight”, “On presentment”, “After sight”

25. When day of maturity is a holiday

PARTIES TO NOTES, BILLS AND CHEQUES

26. Capacity to make, etc., promissory notes etc

28. Liability of agent signing

29. Liability of legal representative signing

30. Liability of drawer

31. Liability of drawee of cheque

32. Liability of maker of note and acceptor of bill

33. Only drawee can be acceptor except in need or for honour

34. Acceptance by several drawees not partners

35. Liability of indorser

36. Liability of prior parties to holder in due course

37. Maker, drawer and acceptor principals

38. Prior party a principal in respect of each subsequent party

40. Discharge of indorser's liability

41. Acceptor bound, although indorsement forged

42. Acceptance of bill drawn in fictitious name

43. Negotiable instrument made, etc., without consideration

44. Partial absence or failure of money-consideration

45. Partial failure of consideration not consisting of money

47. Negotiation by delivery

48. Negotiation by indorsement

49. Conversion of indorsement in blank into indorsement in full

50. Effect of indorsement

51. Who may negotiate

52. Indorser who excludes his own liability or makes it conditional

53. Holder deriving title from holder in due course

54. Instrument indorsed in blank

55. Conversion of indorsement in blank into indorsement in full

56. Indorsement for part of sum due

57. Legal representative cannot, by delivery only, negotiate instrument indorsed by

58. Instrument obtained by unlawful means or for unlawful consideration

59. Instrument acquired after dishonour or when overdue

60. Instrument negotiable till payment or satisfaction

61. Presentment for acceptance

62. Presentment of promissory note for sight

63. Drawee's time for deliberation

64. Presentment for payment

65. Hours for presentment

66. Presentment for payment of instrument payable after date or sight

67. Presentment for payment of promissory note payable by instalments

70. Presentment where no exclusive place specified

72. Presentment of cheque to charge drawer

73. Presentment of cheque to charge any other person

74. Presentment of instrument payable on demand

75. Presentment by or to agent, representative of deceased assignee of insolvent

75-A. Excuse for delay in presentment for acceptance or payment

75-B. Presentment of negotiable instruments in riot areas unnecessary

76. When presentment unnecessary

OF PAYMENT AND INTEREST