N Negotiable Instruments Act 1881 Huzaifahaider51 Gmailcom 20231005 214401 1 73

SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 1 Thursday, October 05, 2023

Printed For: Huzaifa Shaikh, University of Lucknow
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------
The
Negotiable Instruments Act, 18811
(Negotiable Instruments Act, 1881)
[Act 26 of 1881 as amended up to Act 20 of 2018 and updated as of 31st

August 2023]
[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
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
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
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
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
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
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
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

[Act 26 of 1881 as amended up to Act 20 of 2018] [9th December,
1881]
An Act to define and amend the law relating to Promissory Notes, Bills
of Exchange and Cheques
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.
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
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 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 [* * *]
[Banker.—“Banker” includes any person acting as a banker and any
7
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 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.
[6. Cheque.—A “cheque” is a bill of exchange drawn on a specified
9
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.]
[Explanation III.—For the purposes of this section, the expressions
11
“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 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.
► Discharge.—Payment to a person other than holder/holder in due course,
when does not amount to a valid discharge, explained, Pradeep Kumar v.
Postmaster General, (2022) 6 SCC 351.
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.
[(2) A negotiable instrument may be payable to two or more
17
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.
[(2) The provisions of this Act relating to a payee shall apply with
19
the necessary modifications to an indorsee.]

17. Ambiguous instruments.—Where an instrument may be
construed either as a promissory note or bill of exchange, the holder
may at his election treat it as either, and the instrument shall be
thenceforward treated accordingly.
18. Where amount is stated differently in figures and words.—If the
amount undertaken or ordered to be paid is stated differently in figures
and in words, the amount stated in words shall be the amount
undertaken or ordered to be paid.
19. 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.
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.
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 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.
[45-A. Holder's right to duplicate of lost bill.—Where a bill of
24
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
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.”
(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.
► Endorsement by recording part-payment of debt in the cheque.—
Under Section 56 r/w Section 15, an endorsement may be made by recording the
part-payment of the debt in the cheque or in a note appended to the cheque.
Further held, when such an endorsement is made, the instrument could still be
used to negotiate the balance amount and, if, the endorsed cheque when
presented for encashment of the balance amount is dishonoured, then the drawee
can take recourse to the provisions of Section 138, Dashrathbhai Trikambhai
Patel v. Hitesh Mahendrabhai Patel, (2023) 1 SCC 578.
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.
[Where authorised by agreement or usage, a presentment through
26
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.
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.
[Where authorised by agreement or usage, a presentment through
29
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.
[(2) Notwithstanding anything contained in Section 6, where an
30
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 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.
[75-A. Excuse for delay in presentment for acceptance or payment.
32
—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 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.
— [(1)] Any person liable to pay, and called upon by the holder
37
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.

[(2) Where the cheque is an electronic image of a truncated
38
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, 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.
[(2) Where a cheque is originally expressed to be payable to
42
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.]
[85-A. Drafts drawn by one branch of a bank on another payable to
43
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;
(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.
[(2) Where the cheque is an electronic image of a truncated
45
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.
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 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.
[A notary public may make the demand mentioned in clause (c) of
46
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 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.
[104-A. When noting equivalent to protest.—For the purposes of
47
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.
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 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 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.
► Presumption of consideration.—If presumption under Section 118 can be
raised in the facts and circumstances of the case, non-examination of witness to
pronote will have no effect, Kapil Kumar v. Raj Kumar, (2022) 10 SCC 281.
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 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.
[Explanation56 [I].—A banker receives payment of a crossed cheque
55
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.]
-----------------------------------------------------------------------------------------------------------------------------------------------------------
[Explanation II.—It shall be the duty of the banker who receives

57
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.
► Standard of care to be exercised in encashment of financial
instruments.—Bank can escape only when the banker acts in good faith and
without negligence and the latter is the sine qua non for a banker to get absolved
under Section 131. Hence, to claim statutory protection the bank will have to meet
the statutory conditions, and the courts will not accept any attempt to override and
get over such obligation. Standard of care to be exercised by the collecting
banker to escape the charge of negligence depends upon the general practice of
the bankers, which may change from time to time. Further, the question of good
faith and negligence is to be judged from the standpoint of the true owner towards
whom the banker owes no contractual liability but statutory duty, Pradeep Kumar
v. Postmaster General, (2022) 6 SCC 351.
[131-A. Application of Chapter to drafts.—The provisions of this
58
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.—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 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 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.
► 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.
► Maintainability of complaint — Prerequisites.—When a company is
payee of cheque based on which a complaint is filed under Section 138 of the NI
Act, the complainant necessarily should be the company represented by an
authorised employee. For maintainability of complaint in such cases, prima facie
indication in complaint and sworn statement (either orally or by an affidavit) before
court to the effect that complainant company is represented by an authorised
person who has knowledge about transaction in question, would be sufficient.
Such averment and prima facie material is enough to take cognizance and issue
process. Issue as to whether aforesaid authorisation and knowledge about
transaction is proper, is a matter for trial, TRL Krosaki Refractories Ltd. v. SMS
Asia (P) Ltd., (2022) 7 SCC 612.
► 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 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 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 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.
► 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.
► Section 138 vis-à-vis offences under IPC.—Gravity of complaint under
Section 138 of the NI Act cannot be equated with offences under Penal Code,
1860, Triyambak S. Hegde v. Sripad, (2022) 1 SCC 742.
► Quashment of proceedings against corporate debtor.—Sections
138/141 of the NI Act proceeding against corporate debtor is covered by Section
14 (1)(a) IBC. Hence, corporate debtor cannot be proceeded against under
Section 138 of the NI Act, Nag Leathers (P) Ltd. v. Dynamic Mktg. Partnership,
(2022) 2 SCC 271.
► Complaint on behalf of company — Manner and form in which to be
filed.—Complaint filed by Managing Director on behalf of Company, held, cannot
be dismissed only on ground that name of Managing Director is mentioned first
followed by post held in company. There could be a format where Company's
name is described first, suing through Managing Director but merely because
name of Managing Director is stated first followed by post held in Company, held,
would not amount to a fundamental defect warranting dismissal of the complaint at
the threshold, Bhupesh Rathod v. Dayashankar Prasad Chaurasia, (2022) 2 SCC
355.
► Effect of part-payment of debt prior to presentation of cheque for
encashment.—For attracting Section 138, as per proviso (b) a demand notice
needs to be made by the drawee of the cheque and an omnibus demand notice
-----------------------------------------------------------------------------------------------------------------------------------------------------------
without specifying as to what was the amount due under the dishonoured cheque
would not subserve the requirement of law. Further, when a part-payment of the
debt is made after the cheque was drawn but before the cheque is encashed,
such payment, held, must be endorsed on the cheque under Section 56 and the
cheque cannot be presented for encashment without recording the part-payment.
Therefore, if the unendorsed cheque is dishonoured on presentation, the offence
under Section 138 would not be attracted since the cheque does not represent a
legally enforceable debt at the time of encashment, Dashrathbhai Trikambhai
► Post-dated cheques and cheque issued for purpose of security
against a loan.—Principles explained regarding difference in manner of
treatment between post-dated cheques and cheque issued for purpose of security
against a loan, Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel,
(2023) 1 SCC 578.
► Phrase “debt or other liability” — Meaning and scope.—This phrase
takes within its meaning a “sum of money promised to be paid on a future day by
reason of a present obligation”. Further, a post-dated cheque issued after the debt
was incurred, held, would be covered within the meaning of “debt” and, thus,
Section 138 would also include cases where the debt is incurred after the cheque
is drawn but before it is presented for encashment, Dashrathbhai Trikambhai
► Dishonour of Post-dated cheques.—Relevant date for determination of
whether the cheque in question represents legally enforceable debt is at the time
of maturity or encashment. If there has been a material change in the
circumstance such that the sum in the cheque does not represent a legally
enforceable debt at the time of maturity or encashment, then the offence under
Section 138 is not made out, Dashrathbhai Trikambhai Patel v. Hitesh
Mahendrabhai Patel, (2023) 1 SCC 578.
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.
► 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.
► Rebuttable presumption — Probable defence.—Accused can rebut the
presumption by establishing probable defence that no consideration was received
from complainant, Tedhi Singh v. Narayan Dass Mahant, (2022) 6 SCC 735.
► 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.
[Provided further that where a person is nominated as a Director of
70
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.
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.
► Liability of Directors.—Proceedings against non-executive independent
Directors of accused Company, when maintainable, principles clarified.
Conditions required to be satisfied to rope in such non-signatory Directors i.e.
Directors other than a Managing or Joint Managing Director, namely : (i)
involvement in the day-to-day affairs of the company or in the running of its
business, and (ii) specific averments in the pleadings to substantiate such
contention. Mere statement that all Directors of an accused Company are in
charge of and responsible for the conduct of the business of the company, without
anything more, is not sufficient, Sunita Palita v. Panchami Stone Quarry, (2022)
10 SCC 152.
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 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.
[(2) The offence under Section 138 shall be inquired into and tried
73
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 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.
[142-A.
74 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.]
[143. Power of court to try cases summarily.—(1) Notwithstanding
75
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.
[143-A.
76
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
77
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
78
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.
[146. Bank's slip prima facie evidence of certain facts.—The court
79
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
80
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.
[148. Power of Appellate Court to order payment pending appeal
81
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
Enactments Repealed
82
[* * *]
———
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. for “all the Provinces of India” by the A.O. 1950.
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. Omitted by Act 12 of 1891. Prior to omission 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. Omitted by Act 53 of 1952, S. 16 (w.e.f. 14-2-1956). Prior to omission 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 (w.e.f. 30-1-1885). Prior to substitution it read as:
“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 Act 5 of 1914, S. 3.
20. Subs. by Act 3 of 1951, for “the States”.
21. The words “New Year's Day, Christmas Day, if either of such days falls on a Sunday, the
next following Monday” were omitted by S. 3 of Act 37 of 1955.
22.
Subs. by the A.O. 1937, for “Local Government”.
23. By Govt. of India Noti. No. 20/25-56-Pub-1, dated June 8, 1957 the power is exercisable
by the State Government.
24. Ins. by Act 2 of 1885, S. 3 (w.e.f. 30-1-1885).
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 (w.e.f. 30-1-1885).
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 (w.e.f. 30-1-1885).
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”.

-----------------------------------------------------------------------------------------------------------------------------------------------------------
34. This section was inserted by S. 2 of the Negotiable Instruments Act and Indian Limitation
Act (Temporary 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. Ins. by Act 2 of 1885, S. 5 (w.e.f. 30-1-1885).
47. Ins. by Act 2 of 1885, S. 6 (w.e.f. 30-1-1885).
48.
Last portion was omitted by Act 2 of 1885, S. 7 (w.e.f. 30-1-1885). 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.”
49. Subs. for “in the presence of a notary public subscribes the bill with his own hand and” by
Act 2 of 1885, S. 8(a) (w.e.f. 30-1-1885).
50.
The words “and such declaration must be recorded by the notary in his register” omitted
by Act 2 of 1885, S. 88(b) (w.e.f. 30-1-1885).
51. Ins. by Act 2 of 1885, S. 9 (w.e.f. 30-1-1885).
52. The words, figures and brackets “(except in cases provided for by the Code of Civil
Procedure, S. 532)” were omitted by Act 30 1926, S. 3 (w.e.f. 3-9-1926).
53.
Subs. for “six per centum” by Act 66 of 1988, S. 3 (w.e.f. 30-12-1988).
54.
Subs. for “payable to, or to the order of, a specified person” by Act 8 of 1919, S. 5 (w.e.f.
19-3-1919).
55. Ins. by Act 18 of 1922, S. 2 (w.e.f. 3-10-1922).
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 (w.e.f. 18-4-1947).
59.
Subs. for “the States” by Act 3 of 1951 (w.e.f. 1-4-1951).
60.
61.
62.
Subs. for “out of British India” by the A.O. 1948; the A.O. 1950 and Part B States (Laws)
Act, 1951 (3 of 1951) (w.e.f. 1-4-1951).
63. Subs. for “law of British India” by the A.O. 1948; the A.O. 1950 and Part B States (Laws)
Act, 1951 (3 of 1951) (w.e.f. 1-4-1951).
64. Subs. for “in British India” by the A.O. 1948; the A.O. 1950 and Part B States (Laws) Act,
1951 (3 of 1951) (w.e.f. 1-4-1951).
65.
The words “or the State of Jammu and Kashmir” omitted by Act 62 of 1956, S. 2 and Sch.
66. Subs. for “British India” by the A.O. 1948; the A.O. 1950 and Part B States (Laws) Act,
1951 (3 of 1951) (w.e.f. 1-4-1951).
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’ omitted by Act 53
of 1952 (w.e.f. 14-2-1956).
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;”.
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. Ins. 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 55 of 2002, S. 10 (w.e.f. 6-2-2003).
78. Ins. by Act 55 of 2002, S. 10 (w.e.f. 6-2-2003).
79. Ins. by Act 55 of 2002, S. 10 (w.e.f. 6-2-2003).
80. Ins. by Act 55 of 2002, S. 10 (w.e.f. 6-2-2003).
81. Ins. by Act 20 of 2018, S. 2 (w.e.f. 1-9-2018).
82.
Omitted 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 The whole
of Exchange.
3 & 4 Anne, c. 8 An Act for giving like remedy upon promissory The whole
-----------------------------------------------------------------------------------------------------------------------------------------------------------
notes as 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 The whole

concerning the negotiation of Bills of
Exchange.
V of 1866 An Act to amend in certain respects the Sections 11, 12 and 13

Commercial 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.

N Negotiable Instruments Act 1881 Huzaifahaider51 Gmailcom 20231005 214401 1 73

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

N Negotiable Instruments Act 1881 Huzaifahaider51 Gmailcom 20231005 214401 1 73

Uploaded by

Copyright:

Available Formats

SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Thursday, October 05, 2023

[Act 26 of 1881 as amended up to Act 20 of 2018 and updated as of 31st

1. Short title, local extent, saving of usages relating to hundis,

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

19. Instrument payable on demand

20. Inchoate stamped instruments

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

23. Calculating maturity of bill or note payable so many months

24. Calculating maturity of bill or note payable so many days after

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

45-A. Holder's right to duplicate of lost bill

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

58. Instrument obtained by unlawful means or for unlawful

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

67. Presentment for payment of promissory note payable by

68. Presentment for payment of instrument payable at specified

69. Instrument payable at specified place

70. Presentment where no exclusive place specified