NEGOTIABLE INSTRUMENT ACT,

1881
 Introduction –
 This Act is enacted to define and amend laws relating to promissory note, bills of exchange and
cheque.
 This Act is applicable to whole of India including Jammu and Kashmir.
 This act came into force on 1st March 1882.

 Meaning of Negotiable instrument –

piece of Negotiable
transferability
paper Instruments

Negotiable means instrument means piece of

transferability paper or any document

 A negotiable instrument is
actually a written document and is transferrable.
 This document specifies payment to a specific person or the bearer of the instrument at a specific
date.
 Act does not define ‘Negotiable instruments’ however section 13 provides for 3 kind of negotiable
instrument viz. promissory note, bills of exchange and cheque.

Kinds of negotiable
instruments - Section 13

Promissory note - Bills of exchange - Cheque -

Section 4 Section 5 Section 6

Features of Negotiable Instruments –

1) It should be in writing
2) Freely transferable.
 3) It should create a right of a person to receive money and a corresponding liability of a person
to pay money.
4) Holder's title free from defects –
a) A holder in due course acquires a good title irrespective of any defect in a previous holder's
title.
b) A holder in due course is one who receives the instrument:
 for consideration;
 without notice as to the defect in the title of the transferor; i.e. in good faith and
 before maturity
5) Transferability –
A negotiable instrument can be transferred infinitum, i.e., can be transferred any number of
times, till its payment.

Presumptions – Section 118

A negotiable instrument is subject to certain presumptions (Section 118).

a) Consideration –
It shall be presumed that every negotiable instrument was made or drawn for consideration, and
that every such instrument when it was accepted, indorsed, negotiated or transferred, was
accepted, indorsed, negotiated or transferred for consideration.
b) Date –
It shall be presumed that every negotiable instrument bearing a date was made or drawn on such
date.
c) Time of acceptance –
It shall be presumed that every accepted bill of exchange was accepted within a reasonable time
after its date and before its maturity.
d) Transfer –
It shall be presumed that every transfer of the negotiable instrument was made before its maturity.
e) Order of Indorsement –
It shall be presumed that the indorsements were made in the order in which they appear thereon.
f) Stamp –
It shall be presumed that an instrument is duly signed and stamped.

The above presumptions are rebuttable by evidence to the contrary.

 Promissory Note – Section 4

 Meaning –
A Promissory Note is a legal financial instrument issued by one party, promising to pay
the debt owed to another party

Definition –
“A Promissory note is an instrument in writing 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”.

Note – Bank note or currency note is not a promissory note.

Parties to promissory note –

Maker: The person who makes the promissory Payee: The person to whom the payment is to be
note and promises to pay is called the maker. made is called the payee.

Requisites (Essentials) of a Promissory Note –

The promissory note must be in writing.
It must contain an undertaking to pay
There must be an express promise to pay.
The promise to pay should be unconditional
The promissory note must be signed by the maker.
The sum payable must be certain
The instrument must contain a promise to pay money and money only

Other important points –

a) The maker and payee must be certain.

b) Stamping of Promissory Note is essential under The Indian Stamp Act, 1899.
c) An unstamped promissory note is not admissible in evidence and no suit can be
maintained.
d) It must contain date
e) The limitation period for a promissory note to file a suit is 3 years from the date of
execution or from the date of acknowledgement
  Bills of Exchange – Section 5
Meaning –
Bill of Exchange can be understood as a written negotiable instrument, that carries an unconditional
order to pay a specified sum of money to a person or the holder of the
instrument, as directed in the instrument by the maker. The bill of exchange is
either payable on demand, or after a specified term.

Definition –
“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”.

Requisites (Essentials) of a Bill of Exchange –

Other important points –

1) A bill of Exchange must be drawn unconditionally, though the acceptor, or the indorser may
make his liability conditional, direction of payment by the drawer must not be made to depend
upon a contingency. Therefore, it is the essence of a bill of exchange that it should be payable
at all events and it must appear so on its face
2) It is essential that a bill of exchange should point out with certainty the party who enters into
the contract imported by its terms. Thus, the signature of the drawee is necessary and there
cannot be a bill, even if the instrument if accepted without the signature of the drawee
3) It must indicate a drawee who should be called on to accept or pay it. The drawee must be
named or otherwise indicated in the bill with reasonable certainty.
Types of Bills –
1) Inland Bills –
a) Two essential conditions to make an inland instrument are:
(1) the instrument must have been drawn or made in India; and
(2) the instrument must be payable in India or the drawee must be in India.

2) Foreign Bills –
All bills which are not inland are deemed to be foreign bills. Normally foreign bills are drawn in
sets of three copies.

3) Trade Bills –
A bill drawn and accepted for a genuine trade transaction is termed as a trade bill. When a
trader sells goods on credit, he may make use of a bill of exchange.

4) Accommodation Bill –
a) An accommodation bill is a bill in which a person lends or gives his name to oblige a friend
or some person whom he knows.
b) In other words, a bill which is drawn, accepted or endorsed without consideration is called
an accommodation bill.
c) The party lending his name to oblige the other party is known as the accommodating or
accommodation party, and the party so obliged is called the party accommodated.
d) An accommodation party is not liable on the instrument to the party accommodated
because as between them there was no consideration and the instrument was only for
help.
e) But the accommodation party is liable to a holder for value, who takes the
accommodation bill for value, though such holder may not be a holder in due course.

Trade Bill Accommodation Bill

1. Trade bills are drawn and accepted for 1. These bills are drawn and accepted without
same consideration. any consideration.

2. These bills are legally enforceable. 2. These bills are not legally enforceable.

3. Trade bills are the acknowledgment of the 3. Accommodation bills are not the
debt. acknowledgment of debt.

4. The drawer can sue if bill is dishonored. 4. Drawer cannot sue if bill is dishonored.

5. Loss by way of discounting the bill is shared

5. Loss by way of discounting the bill is borne
by drawer and drawee in the ratio of their
by drawer only.
sharing in the proceeds of the bill.

5) Bills in Sets –
a) Foreign bills are usually drawn in sets to avoid the danger of loss.
b) They are drawn in sets of three, each of which is called “Via” and as soon as any one of
them is paid, the others become inoperative.
 c) All these parts form one bill and the drawer must sign and deliver all of them to the payee.
d) The stamp is affixed only on one part and one part is required to be accepted.
e) But if the drawer mistakenly accepts all the parts of the same bill, he will be liable on each
part accepted as if it were a separate bill.

Bank Draft –
When a bill of exchange drawn by one bank on another bank, or by itself on its own branch, and is a
negotiable instrument then it is called as bank draft.

Bank Draft Cheque

A bank draft can be drawn only by a bank on
another bank
It cannot so easily be counter-manded
(Cancelled)
It cannot be made payable to bearer.
Cheque can be drawn by any person
It can be counter-manded (Cancelled)
It can be made payable to bearer

 Cheque – Section 6
Meaning –
Cheque refers to a negotiable instrument that contains an unconditional order to the
bank to pay a certain sum mentioned in the instrument, from the drawer’s account, to
the person to whom it is issued, or to the order of the specified person or the bearer. It
also includes truncated cheque and cheque in electronic form.

Definition –
“A cheque is a bill of exchange drawn upon a specified banker and payable on demand
and it includes the electronic image of a truncated cheque and a cheque in the
electronic form”.
Note –
A cheque is a species of a bill of exchange; but it has the following two additional qualifications:
1. It is always drawn on a specified banker, and
2. It is always payable on demand.

Requisites (Essentials) of a Cheque –

A cheque must be an order in writing.

It must contain an unconditional order

A cheque must be signed by the maker

The amount must be specifically mentioned in figures and words

A cheque may be drawn payable to order or bearer. There are two kinds of cheques prevailing now a
days. They are: a) it may be a bearer or order cheque; and b) it may be a self cheque
The cheque must contain the date.

Payee to be certain
 Acceptance – Section 7
A) Meaning:
The acceptance of a bill is the indication by the drawee of his assent to the order of the drawer.
Section 7 states that an acceptance is the signature of the drawee of a bill who has signed his
assent upon the bill and delivered it. Thus, an acceptor is the drawee who has signed his assent
upon the bill and delivered it to the holder
B) Essentials of Valid Acceptance –
 In writing,
 Signed by the drawee or his agent,
 On bill of exchange,
 Completed by delivery to the holder.
 Writing the word 'Accepted' is immaterial.
 An oral acceptance or writing of the word 'Accepted' without the drawee's signature is not an
acceptance.
C) Acceptor for Honor –
1) Meaning –
Undertaking by a third party to accept and pay (in part or in full) a bill of exchange that was
dishonored, either by non-acceptance or by non-payment by the party on whom it was drawn.
Also called acceptance supra protest.
2) How acceptance for honor should be made –
A person desiring to accept the bill for honor must declare in writing that he accepts under
protest the protested bill for the honor of the drawer or a particular endorser whom he
names.

3) Rights and liabilities of acceptor for honor –

a) He binds himself to pay the amount mentioned in the bill if drawee fails to pay.
b) Liability of acceptor for honor is conditional and it arise only when the drawee makes the
default to pay.
c) He may recover all the losses and damages from the drawee.

Holder – Section 8
1) The "holder" of a promissory note, bill of exchange or cheque means any person entitled in his own
name –
a) to the possession thereof; and
b) to receive or recover the amount due thereon from the parties thereto.
2) His rights and title are dependent on the transferor. He has a right to demand and receive but does
not have a right to sue.
 Note –
It is not every person in possession of the instrument who is called a holder.
To be a holder, the person must be named in the instrument as the payee, or the endorsee, or he must be the
bearer thereof.
A person who has obtained possession of an instrument by theft, or under a forged endorsement, is not a
holder, as he is not entitled to recover the instrument
An agent holding an instrument for his principal is not a holder although he may receive its payment.
The holder implies de jure (holder in law) holder and not de facto (holder in fact) holder.

Holder in Due Course – Section 9

A holder in due course is one who receives the instrument:
a) for consideration;
b) without notice as to the defect in the title of the transferor; i.e. in good faith; and
c) before maturity.

Note –
a) His rights and title are independent on the transferor.
b) He has a right to demand and receive and also have a right to sue.

Payment in Due Course – Section 10

a) Payment in due course refers to a payment in keeping with the evident tenor of the instrument,
in good faith & without negligence to any person in possession thereof.

b) A payment will be regarded as a payment in due course if:

 Payment is done as per apparent tenor of instrument
 It is made in good faith & without negligence
 It is made to the person who possesses the instrument who is entitled as holder to obtain
payment;
 Payment is made in money & money only.

Classification of Negotiable Instruments –

A) Bearer Instruments –
a) There are two important conditions for negotiable instruments to become payable to bearers.
1) parties to the transactions must express it to be so payable; or
2) The only endorsement for it should be an endorsement in blank.
b) A person who is a holder of a bearer instrument can obtain the payment of the
instrument.
B) Order Instruments –
a) They are payable when the instruments expressly state them to be so.
b) They may be payable to order only to a specific person.
c) There should be no prohibition on their transferability.
C) Inland Instruments –
a) An inland instrument is one which is either:
1) drawn and made payable in India, or
2) drawn in India upon some persons resident , even though it is made payable in a
foreign country
D) Foreign Instruments –
 a) Every instrument that is not inland automatically becomes a foreign instrument.
b) These instruments are drawn in a foreign country but may be payable within or outside India.
c) it must be drawn in India and made payable outside India and drawn on a person
resident outside India.
E) Demand Instruments –
a) Negotiable instruments in which no time is mentioned is called as demand instrumnets.
F) Time Instruments –
a) Time instruments carry a fixed future date for payment.
b) Time instruments are payable at a fixed date in the future.
G) Ambiguous Instruments –
a) An ambiguous instrument is basically one that may be either a bill or a note for its holder.
b) Under such circumstances, the holder of such instruments may treat them either as bills of
exchange or as promissory notes.
c) For example, sometimes the drawee may be a fictitious person or he may be incompetent to
contract.
H) Incomplete instruments –
a) Incomplete instruments lack certain essential requirements of typical negotiable instruments.
b) In such cases, the holder of the instrument has the authority to complete it up to the amount
mentioned therein.
c) This, in turn, results in the creation of legally binding negotiable instrument payable by law.
d) Not only the first holder but also any subsequent holder who procures such instruments can
complete them.

When the amount stated in words and figures are different – Section 18
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.

Maturity – Section 22 23 and 24

A) Meaning of Maturity –
The maturity of a promissory note or bill of exchange is the date at which it falls due.
B) Days of grace –
a) 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.
b) All instruments except for the instrument payable on demand are entitled for 3 days grace
period.
Note –
1) No grace period is allowed in the following cases –
 A cheque
 A bill or note payable ‘at sight’ or ‘on presentment’ or ‘on demand’, in which no time is
mentioned
2) Where the instrument is payable on installment then each installment is entitled for 3 days
grace period.

C) Calculation of days of maturity –

 Where a negotiable instrument is payable on specified date then it shall become payable
on that specified date + 3 days of grace.
  Where a negotiable instrument is payable on a stated number of days after date or after
sight or after happening of certain event then it shall become payable on –
 The date on which the negotiable instrument is drawn + 3 days of grace.
 The date on which negotiable instrument is presented for sight + 3 days of
grace.
 The date on which the event happens + 3 days of grace.

 Where a negotiable instrument is payable on a stated number of months after date or

after sight or after happening of certain event then it shall become payable on –
 The corresponding day of relevant month (The date on which the negotiable
instrument is drawn) + 3 days of grace.
 The corresponding day of relevant month (The date on which negotiable
instrument is presented for sight) + 3 days of grace.
 The corresponding day of relevant month (The date on which the event
happens) + 3 days of grace.

Examples –
1. A negotiable instrument dated 31st January, 2020, is made payable at one months
after date. The instrument is at maturity on the third day after the 28th February,
2020, i.e. on 3rd March, 2020.
2. A negotiable instrument dated 30th August, 2020, is made payable three months after
date. The instrument is at maturity on 3rd December, 2020.
3. A negotiable instrument dated the 31st August, 2020, is made payable three months
after date. The instrument is at maturity on 3rd December, 2020.

 If the last day of grace is a public holiday, then the instrument will be due on preceding
business day – Section 25

 If the day of maturity is an emergency or unforeseen holiday, then the maturity day will
be the following business day.

Negotiation (Transfer) of negotiable instruments –

A) Meaning of Negotiation –
When the instrument is transferred from one person to another with a view to make the other
person as holder then the instrument is deemed to have been negotiated.
B) Modes of Negotiation –

In case of PN, BoE,

payable to bearer by Delivery
Cheque
Mode of negotiation
In case of PN, BoE,
Payable to order indorsement + Delivery
Cheque

C) Negotiation Back –
 1) Where an endorser negotiates an instrument and again becomes its holder, the instrument is
said to be negotiated back to that endorser and none of the intermediary endorsees are then
liable to him.
Example –
Raju, the holder of a bill endorses it to Shyam, Shyam endorses to Babu Bhai, and Babu Bhai
to Anuradha, and endorses it again to Raju. Raju, being a holder in due course of the bill by
second endorsement by Anuradha, can recover the amount thereof from Shyam, Babu Bhai,
or Anuradha and himself being a prior party is liable to all of them. Therefore, Raju having
been relegated by the second endorsement to his original position, cannot sue Shyam, Babu
Bhai and Anuradha.
2) Where an endorser so excludes his liability and afterwards becomes the holder of the
instrument, all the intermediate endorsers are liable to him.
Example –
An illustration will make the point clear. Raju is the payee of a negotiable instrument. He
endorses the instrument ‘sans recourse’ to Shyam, Shyam endorses to Babu Bhai, Babu Bhai
to Anuradha, and Anuradha again endorses it to Raju. In this case, Raju is not only
reinstated in his former rights but has the right of an endorsee against Shyam, Babu Bhai
and Anuradha.

Delivery – Section 46
The making, acceptance or indorsement of a promissory note, bill of exchange or cheque is completed
by delivery which may be actual or constructive.

What is Endorsement –
A) Meaning of Endorsement –
a) Endorsement means signing at the back of the instrument for the purpose of negotiation.
b) The act of the signing a cheque, for the purpose of transferring to the someone else, is
called the endorsement of Cheque.
c) If no space is left on the instrument then the Endorsement may be made on a separate
slip to be attached to the instrument.

B) Definition of Endorsement –
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
(attached) thereto, or so signs for the same purpose a stamped paper intended to be completed
as a negotiable instrument, he is said to endorse the same, and is called the “endorser”.

C) Kinds of Endorsement –
(a) Endorsement in Blank / General –
An endorsement is said to be blank or general when the endorser puts his signature only on
the instrument and does not write the name of anyone to whom or to whose order the
payment is to be made.

(b) Endorsement in Full / Special –

 An endorsement is 'special' or in 'full' if the endorser, in addition to his signature also
mention the name of the person to whom or to whose order the payment is to be made.
  There is direction added by endorser to the person specified called the endorsee, of the
instrument who now becomes its payee entitled to sue for the money due on the
instrument.

- Partial Endorsement – Instrument which transfers the amount mentioned in the

instrument partially and not fully is called as partial endorsement.
- As per section 56 is invalid under law.

(c) Conditional Endorsement –

 An endorsement is conditional or qualified which limits or negatives the liability of the
endorser.

An endorser may limit his liability in

any of the following ways –

By making his liability depending

By sans recourse endorsement upon happening of a specified event

(d) Restrictive Endorsement –

 Restrictive endorsement seeks to put an end the principal characteristics of a Negotiable
Instrument and seals its further negotiability.
 This may sound a little unusual, but the endorsee is very much within his rights if he so
signs that its subsequent transfer is restricted.
 This prevents the risk of unauthorized person obtaining payment through fraud
or forgery and the drawer losing his money.

(e) Endorsement Sans Recourse –

 Sans Recourse which means without recourse or reference.
 As such a when the property in a negotiable instrument is transferred sans recourse, the
endorser, negatives his liability and excludes himself from responsibility to all subsequent
endorsees.
 It is one of the commonest forms of qualified endorsement and virtually prohibits
negotiation since the endorser says in effect.

Who may negotiate instrument – Section 51

Every sole maker, drawer, payee or endorsee, or all of several joint makers, drawers, payees or
endorsees, of a negotiable instrument may, indorse and negotiate the same.

Instrument obtained by unlawful means or unlawful consideration – Section 58

 When a negotiable instrument has been lost or
 has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud,
or for an unlawful consideration,
  no possessor or endorsee 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 endorsee is, or some person through whom he claims was, a holder in
due course.

Liabilities of Parties –
A) Liability of a minor –
It may be noted that a minor, being incompetent to contract, cannot bind himself by becoming a
party to a negotiable instrument. Whether he is the drawer, maker, acceptor or endorser, he is
not liable on the instrument. Section 26 categorically excludes minor's liability by stating that a
minor binds all parties except himself.

B) Liability of an agent –
a) Every person capable of legally entering into a contract, may make, draw, accept indorse,
deliver and negotiate a promissory note, bill of exchange or cheque, himself or through a
duly authorized agent.
b) A general authority to transact business and to discharge debt does not confer upon an
agent the power to indorse bills of exchange so as to bind his principal.
c) An agent cannot escape personal liability unless he indicates that he signs as an agent and
does not intend to incur personal liability

C) Liability of Legal Representative –

A legal representative' of a deceased person, who signs his own name on an instrument, is
personally liable for the entire amount; but he may expressly limit his liability to the extent of
the assets received by him as legal representative.

D) Liability of Drawer:
a) Usually, the liability of the drawer of a bill or cheque is secondary and conditional.
b) The liability of the acceptor and maker of the bill and drawee of the cheque is primary and
unconditional.
c) The drawer's liability is conditional, i.e., it arises only in the event of a dishonor by the
drawee or acceptor.
d) Once there has been dishonor and the notice of dishonor has been given to the drawer, he
is liable to compensate the holder whatever be the state of the account between himself
and the drawee or acceptor.

E) Liability of drawee Bank of cheque –

Wrongful dishonor of customer's cheque entails exemplary damages against banker and the
amount of damages is inversely related to the amount of the cheque dishonored.

F) Liability of drawee of Bill of Exchange/ Maker of Promissory Note –

a) The maker of a promissory note is bound to pay the amount at maturity.
b) The liability of the drawee only arises when he accepts the bills.
c) Drawee's liability is primary and unconditional.
d) He is liable for Principal amount along with interest and noting/ protesting charges if any.
 G) Liability of maker, drawer and acceptor as principals –
a) The maker of a promissory note is liable as the principal debtor.
b) In a bill of exchange, the acceptor acts as a principal debtor and the drawer acts a surety as
drawer is liable to pay only if acceptor defaults.

H) Effect of forged indorsement on acceptor's liability –

a) A bill may be accepted before or after indorsement by the payee.
b) An acceptor of a bill of exchange already indorsed is not relieved from liability by reason
that such indorsement is forged.

I) Liability of acceptor of a bill drawn in a fictitious name –

The acceptor is not relieved from liability by proving that the drawer is fictitious.

J) Liability on an instrument made drawn etc. without consideration –

An instrument made, drawn, accepted, indorsed, or transferred without consideration creates
no obligation of payment between the parties to the instrument.

Presentment – Section 61 to section 67

Presentment is classified as follows -

Presentment for acceptance – A)Presentment for payment – BOE,

PN and Cheque must be presented for
payment

A) Presentment for acceptance –

a) Only Bills of exchange requires presentment for acceptance.
b) Bill of exchange should be presented within a reasonable time, on business day and during
business hours to the drawee for acceptance.
c) Following bills must be presented for acceptance –
1) A bill payable after sight – Presentment is necessary in order to fix maturity of the bills
2) Express condition – A bill in which there is an express condition shall be presented for
acceptance before it is presented for payment.
d) In case it is not presented for acceptance the bill is dishonored due to non-acceptance and
no party is liable.

B) Bills of exchange should be presented to whom for acceptance?

The following are the persons to whom a bill of exchange should be presented –
a) The drawee or his agent
 b) If there are many drawees, bill must be presented to all of them.
c) The legal representatives of the drawee if drawee is dead.
d) The official receiver or assignee of insolvent drawee.
e) To a drawee in case of need, if there is any
f) The acceptor for honour.

C) Drawee’s time for deliberation –

Holder of the bills of exchange should allow 48 hours to the drawee for accepting the bill of
exchange.

D) Presentment for payment –

a) Promissory notes, bill 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.
b) In default of such presentment, the other parties thereto are not liable thereon to such
holder.

E) Hours for presentment –

Presentment for payment must be made during the usual hours of business and, if at a banker’s,
within banking hours.

When presentment unnecessary –

Presentment for payment is unnecessary, and the instrument is dishonored at the due date for presentment, in
any of the following cases:
 if the maker, drawee or acceptor intentionally prevents the presentment of the instrument, or
 If the instrument being payable at his place of business, he closes such place on a business day during the
usual business hours, or
 If the instrument being payable at some other specified place, neither he nor any person authorized to pay
it attends at such place during the usual business hours, or
 If the instrument not being payable at any specified place, he cannot after due search be found;
 if the maker has agreed to pay even without presentment.
 if the maker has done the part-payment even without presentment.

Presentment for acceptance is unnecessary in the following cases –

 Where the drawee cannot be found after reasonable search.
 Where drawee is a fictitious person.
 Where although the presentment is irregular, acceptance has been refused on some other
ground.
 Where drawee is incompetent to contract, e.g., minor or lunatic.
 Where one or more of the several drawees (not being partners) refuse to accept the bill.

Payment and interest –

A) To whom payment should be made?
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.
 Rate of interest

Where interest rate is specified in Where interest rate is not specified in

Negotiable instrument negotiable instrument

interest rate should be take @ 18% p.a

Rate specified should be considered

Discharge from Liabilty

Meaning –
Discharge from liability implies when the liability of the parties ceases to exist. Following are the
different modes of discharge of instrument.
Modes of discharge:
One or more parties to a negotiable instrument may be discharged from liability in either of the following
ways:
1) By cancellation, Release or Payment:
a) By cancellation: Cancellation of acceptor’s name will discharge the instrument and
cancellation of any other party will discharge the party.
b) By release: Release of acceptor will discharge the instrument and release of any other party
will discharge the party.
c) By payment: When the amount due on the instrument is paid by the party primarily liable on
the instrument, the instrument is discharged.
2) By allowing drawee more than 48 hours: If the holder of a bill of exchange allows the drawee
more than 48 hours, exclusive of public holiday(s) to consider whether he will accept the same,
all previous parties not consenting to such allowance are discharged from liability to such holder.
3) By delay in presenting cheques: If a cheque is not presented within a reasonable time of its issue,
and the bank fails and drawer suffers actual damages through such delay, he is discharged from
the liability to the holder to the extent of such damage.
4) Forgery of Endorser’s signature in case of Cheque: The Bank is discharged by PIDC even if the
signature of endorser is forged.
5) By qualified acceptance: If the holder of a bill of exchange agrees to accept qualified acceptance,
all the previous parties whose consent is not obtained to such acceptance are discharged from
liability, unless the holder gives notice thereof and the parties give their assent to such qualified
acceptance.
6) By material alteration.: Any material alteration of a negotiable instrument renders the same void
as against anyone 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. Again, it may be noted that alteration should be material and immaterial alterations will
not affect the instrument and will not discharge any liability.
 7) Discharge of Bank: As per Section 89, bank is discharged by payment in due course in case of
alteration not apparent from records.
8) As per Section 90, when the acceptor of bill of exchange or maker of promissory note becomes
holder on or after maturity, the instrument is discharged.

DISHONOUR OF BILL OF EXCHANGE/ PROMISSORY NOTE –

Dishonour is classified as follows -

Dishonour by Non-Acceptance Dishonour by Non-payment

(only for BOE)

A bill is said to be dishonoured by non- A promissory note, bill of exchange or

acceptance in the following cases – cheque is said to be dishonoured by
a) When the drawee does not accept it non-payment when the maker of the
within 48 hours, note, acceptor of the bill or drawee of
b) When presentment for acceptance is the cheque makes default in payment
excused and the bill remains unaccepted
c) When the drawee is incompetent to
contract.
d) When the drawee is a fictitious person or
after reasonable search can not be found
e) Where the acceptance is a qualified one.

Dishonor of bill of exchange/ promissory note by non-payment – Section 92

An instrument is dishonored by non- payment when the party primarily liable, makes default in payment.
Notice of dishonor (Section 93 & 94):
 By whom notice to be given: When an instrument is dishonored either by non-acceptance or by
non-payment, the holder thereof or some party thereto who remains liable thereon must give
notice of dishonor.
 To whom notice is to be given: Notice must be given to such parties whom the holder proposes
to charge with liability severally or jointly, e.g., the drawer and the endorsers. Notice may be given
either to the party himself or to his agent, or to his legal representative on his death, or to the
official assignee on his insolvency. It is not necessary to give notice to the maker of a note or the
drawee or acceptor of a bill or cheque.
 Effect of non-service of notice: If a notice of dishonor is not sent to any prior party who is entitled
to such notice within a reasonable time, he is discharged from liability.
  Mode of service of notice : The notice, if written, may be given by post at the place of business
or at the residence of party for whom it is intended.

Notice of dishonor is not required in the following cases:

 When there is no intention to make prior party liable.
 When prior party is discharged.
 When drawer and drawee are same
 When drawer is fictitious.
 When the prior party has signed the indorsement ‘without recourse’.
 When the party entitled to notice cannot, after reasonable search, be found.
 Where the party liable to give notice is unable, without any fault of its own to give it, e.g., death or
serious illness of the holder or his agent or any other accident.
 When the prior party is incompetent.

Noting – Section 99
 When a promissory note or bill of exchange has been dishonored by non-acceptance or non-
payment, the holder may cause such dishonor 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 dishonor, and must specify the date of
dishonor, the reason, if any, assigned for such dishonor, or, if the instrument has not been
expressly dishonored, the reason why the holder treats it as dishonored, and the notary’s
charges.

Protest – Section 100

When a promissory note or bill of exchange has been dishonored by non-acceptance or non-payment,
the holder may, within a reasonable time, cause such dishonor 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.

Protest of foreign bills – Section 104

Foreign bills of exchange must be protested for dishonor when such protest is required by the law of the
place where they are drawn.

 Crossing a cheque –
A) Meaning of crossing a cheque –
Crossing a cheque refers to drawing two parallel transverse lines on the cheque on the corner
of the cheque.
by crossing the cheque the drawer instruct the banker to not to pay it over the counter but only
credit to the account of the person named therein.
It means the banker should pay the money only through banker.
It adds to the security and thus ensures payment to the payee or to his order
 The crossing of cheque had developed gradually as a means of
protection against misusing of cheques.
Payment is made to payee’s banker only, and not directly to
the person presenting it at the counter. This ensures that
payment is made to the actual payee.

B) Who can cross a cheque?

The drawer of a cheque
The holder of a cheque –
Where a cheque is issued uncrossed it may be crossed by the holder generally or specially
The banker in whose favour the cheque has been crossed specially may again cross it specially in
favour of another banker. The later bank in such a case acts as the agent of the former.

C) Object of Crossing –
to give protection and safeguard to the owner of the cheque

to prevent fraud

to prevent misutiisation of cheque and detect the fraud

D) Kinds of crossing –
1) General crossing – Section 123
 Meaning –
Two parallel transverse lines are drawn on the face of the cheque, generally, on the top left
corner of the cheque
Holder or payee cannot get the payment at the counter but through the bank only
Including the name of the banker is not essential, hence, the amount can be encashed by
any banker
The words, “& Company”, “Not Negotiable”, “A/C. Payee” may or may not be written
It can be converted into Special Crossing.

 Effect of General Crossing –

the banker on whom it is drawn shall only pay to a banker.
this type of cheque cannot be paid at counter.
The payment should be made through an account only
General crossing gives protection and avoids fraudulent withdrawals.
It is the liability of the paying banker to verify proper payment in proper account.
The banker is answerable to his customer, if he pays the money to a third person without
the direction of his customer

2) Special Crossing – Section 124

 Meaning –
It is also known as Restricted Crossing
Two transverse lines are not necessary to be drawn
Name of the banker is added across the face of the cheque
 The Name of the Banker may or may not carry the
abbreviated word, ‘& Co.’, ‘Account payee’ or ‘Not
Negotiable’
Payment can be made only through the bank
mentioned in the Crossing.
Specially Crossed Cheques can never be converted to
General Crossing.

 Effect of Special Crossing –

It prevents the fraudulent transactions
It is direction to the paying banker to pay the amount to the account holder of that bank, but
not to others.
If a cheque specially crossed on a particular bank, and if such cheque is presented in another
bank, the paying bank should refuse the payment.
Special crossing gives more protection than general crossing.

3) Account Payee Crossing –

 Meaning –
It has developed in the trade and in common to use these terms on the left side of the cheque
between the two transverse lines.
However, there is no law mentioned about this type of crossing
The terms mean that the amount should not be paid at counter but should be credited into
the account of the payee only.
However, the meaning of other crossings is also the same.
This type of crossing only gives additional protection to the cheque.

 Effect of Account Payee Crossing –

It is only in the form of direction to the receiving bank that the drawer desires to pay the
particular cheque into bank which keeps the account of the payee.
The collecting banker should credit the cheque only to the mentioned account of the payee.
If the banker credits the cheque to another’s account and not to the account of the payee,
the banker shall be held responsible for his negligence, and shall be held liable to pay the
compensation.

4) Not Negotiable Crossing – Section 130

 Meaning –
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.
It gives more protection than General Crossing and Special Crossing
It is a warning upon the paying and collecting bankers. Both of them should be very careful in
the transaction of this type of cheques.
Note –
The words “Not Negotiable” do not mean “not transferable”.
  Objective –
The true owner is protected by this type of crossing more perfectly.
If it is stolen, the finder cannot cash it so easily. The good title cannot be passed to him.
He will be compelled to return it to the true owner.
The owner’s right is preserved safely against any subsequent holder.

 Effects –
It gives more protection and safe to the holder of the cheque.
A third person cannot cash it so easily.
It can be transferred like any other cheque.
If the banker is negligent and transfers the amount of that cheque to another account, he will
be held responsible and he will be liable to make the compensation to the sufferer.

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

When Banker may Refuse Payment –

In the following cases the banker may refuse to pay a customer’s cheque:
a) When the cheque is post-dated.
b) When the banker has no sufficient funds of the drawer with him and there is no communication
between the bank and the customer to honour the cheque.
c) When the cheque is of doubtful legality.
d) When the cheque is not duly presented, e.g., it is presented after banking hours
e) When the cheque on the face of it is irregular, ambiguous or otherwise materially altered.
f) When the cheque is presented at a branch where the customer has no account.
g) When some persons have joint account and the cheque is not signed jointly by all or by the
survivors of them.
h) When the cheque has been allowed to become stale, i.e., it has not been presented within 3
months of the date mentioned on it.

When Banker must Refuse Payment –

In the following cases the banker must refuse to honour cheques issued by the customer –
a) When a customer countermands payment i.e., where or when a customer, after issuing a
cheque issues instructions not to honour it, the banker must not pay it.
b) When the banker receives notice of customer’s death.
c) When customer has been adjudged an insolvent.
d) When the banker receives notice of customer’s insanity.
 e) When an order of the Court, prohibits payment.
f) When the customer has given notice of assignment of the credit balance of his account.
g) When the holder’s title is defective and the banker comes to know of it.
h) When the customer has given notice for closing his account.
Protection of liability of the paying banker –
 Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the
drawee is discharged by payment in due course.
 Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by
payment in due course to the bearer thereof, notwithstanding any endorsement whether in full
or in blank appearing, thereon, and notwithstanding that any such endorsement purports to
restrict or exclude further negotiation.
 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 generally, 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.
 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.
 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.
 Non-liability of banker receiving payment of cheque.– Section 131
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
In order to avail such protection, the banker needs to prove the following –
 The banker has received the payment of crossed cheque.
 That the collection was made by the bank on behalf of the customer.
 That the collecting bank must have acted in in good faith.

Dishonour of Cheque –
 1) Sections 138 to 142 deals with dishonor of cheques and provides for criminal penalties in the event
of dishonor of cheques for insufficiency of funds.
2) Penalty for dishonour of cheque –
The drawer, under Section 138, may be punished with imprisonment up to 2 years or with a fine up
to twice the amount of the cheque or with both.
However, in order to attract the aforesaid penalties, following conditions must be satisfied:
 The cheque should have been dishonored due to insufficiency of funds in the account
maintained by him with a banker for payment of any amount of money to another person
from out of that account.
 The payment for which the cheque was issued should have been in discharge of a legally
enforceable debt or liability in whole or part of it.
 The cheque should have been presented within 3 months from the date on which it is
drawn.
Presumption in favor of holder - Section 139
It shall be presumed that the holder of a cheque received the cheque for the discharge of any debt or
other liability.

Defense which may not be allowed in any prosecution under section 138 - Section 140
It shall not be a defense in a prosecution of an offence under section 138 that the drawer had no reason
to believe when he issued the cheque that the cheque may be dishonored on presentment because of
insufficiency of funds

Offences by Companies - Section 141

If the person committing an offence is a company, every person, who at the time the offence was
committed and the company shall be jointly liable for the offence.

Procedure to be followed before charging penalty –

 Cheque is issued by drawer
 The payee/holder presents it for payment.
 The collecting bank informs payee/holder about dishonor of cheque.
 The payee or the holder in due course of the cheque should have given notice demanding
payment within 30 days from the drawer in receipt of information of dishonor of cheque from
the bank.
 Notice can be served by ordinary post or even telegram.
 The drawer is liable only if he fails to make the payment within 15 days of such notice period.
 The payee or holder in due course of the cheque dishonored should have made a complaint
within one month of cause of action arising out of Sec. 138.
 Cognizance of offences – Section 142
A) Filing case –
1) Court shall take cognizance of any offence punishable under section 138 only if it is in writing.
2) Time limit for filing the complaint is 1 month.
3) 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.

B) Place of Jurisdiction of court for the trail of offence:

The offence under section 138, which deals with the dishonor of cheque, shall be inquired into and
tried only by a court within whose local jurisdiction -
a) if the cheque is delivered for collection through an account, the branch of the bank where the
payee or holder in due course, as the case may be, maintains the account, is situated; or
b) if the cheque is presented for payment by the payee or holder in due course,
otherwise through an account, the branch of the drawee bank where the drawer maintains the
account, is situated.

Power of Court to try cases summarily – Section 143

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.
Power to direct interim compensation – Section 143A
1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, 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 20% of the amount of the
cheque.
3. The interim compensation shall be paid within 60 days from the date of the order or within
such further period not exceeding 30 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 60 days
from the date of the order, or within such further period not exceeding 30 days as may be
directed by the Court on sufficient cause being shown by the complainant.

Offences to be compoundable – Section 147

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 every offence punishable
under this Act shall be compoundable.

Power of Appellate Court to order payment pending appeal against conviction – Section 148
1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, 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 20%. 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 143A.
2) The amount mentioned above shall be deposited within 60 days from the date of the order, or
within such further period not exceeding 30 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 60 days from the date of
the order, or within such further period not exceeding 30 days as may be directed by the Court on
sufficient cause being shown by the complainant

Hundis –
A) Meaning –
1) Hundis are negotiable instruments written in an oriental language.
2) They are sometimes bills of exchange and sometimes promissory notes, and are not
covered under the Negotiable Instruments Act, 1881.
3) They are governed by the customs and usages in the locality but if custom is silent on the
point in dispute before the Court, this Act applies to the hundis.

B) Types of Hundis –
Types Description
Shah Jog “Shah” means a respectable and responsible person or a man of worth in the bazar. Shah
Hundi Jog Hundi means a hundi which is payable only to a respectable holder, as opposed to a
hundi payable to bearer. In other words the drawee before paying the same has to satisfy
himself that the payee is a ‘SHAH’.
Jokhmi A “jokhmi” hundi is always drawn on or against goods shipped on the vessel mentioned in
Hundi the hundi. It implies a condition that money will be paid only in the event of arrival of the
goods against which the hundi is drawn. It is in the nature of policy of insurance. The
difference, however, is that the money is paid before hand and is to be recovered if the
ship arrives safely
Jawabee According to Macpherson, “A person desirous of making a remittance writes to the payee
Hundi and delivers the letter to a banker, who either endorses it on to any of his correspondents
near the payee’s place of residence, or negotiates its transfer. On the arrival, the letter is
forwarded to the payee, who attends and gives his receipt in the form of an answer to the
letter which is forwarded by the same channel of the drawer or the order.” Therefore,
this is a form of hundi which is used for remitting money from one place to another.
 Nam jog It is a hundi payable to the party named in the bill or his order. The name of the payee is
Hundi specifically inserted in the hundi. It can also be negotiated like a bill of exchange. Its
alteration into a Shah Jog hundi is a material alteration and renders it void.
Darshani This is a hundi payable at sight. It is freely negotiable and the price is regulated by
Hundi demand and supply. They are payable on demand and must be presented for payment
within a reasonable time after they are received by the holder.
Miadi Hundi This is otherwise called muddati hundi, that is, a hundi payable after a specified period of
time. Usually money is advanced against these hundis by shroffs after deducting the
advance for the period in advance. There are other forms of hundis also like.
Dhani Jog A hundi which is payable to “dhani” i.e., the owner.
Hundi
Firman Jog which is payable to order if can be negotiated by endorsement and delivery
Hundi

National Electronic Funds Transfer (NEFT)

1) National Electronic Fund Transfer (NEFT) is a nation-wide payments system that allows the
transfer of funds from one bank's account to another.
2) Under this Scheme, individuals, firms and corporates can electronically transfer funds from any
bank branch to any individual, firm or corporate having an account with any other bank branch
in the country participating in the Scheme
3) NEFT is generally for transactions with smaller amout.
4) NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS)
basis which settles transactions in batches.
5) In DNS, the settlement takes place with all transactions received till the particular cutoff time.
Real Time Gross Settlement (RTGS) –
 Real Time Gross Settlement, abbreviated as RTGS systems are specialist funds transfer systems
where the transfer of money or securities takes place from one bank to any other bank on a
"real-time" and on a "gross" basis
 It is a safe and secure system for funds transfer.
 Real-time gross settlement is generally employed for large-value interbank funds transfers
16/12/2023, 14:33 Partnersship Act Notes Pro. Yatin Pandit

Notes on Partnership & Sale of Goods Act by Pro. Yatin Pandit

The Indian Partnership Act, 1932

Partnership:
Section 4 of the Indian Partnership Act, 1932 defines ‘ Partnership’ as “Partnership is a relation
between persons who have agreed to share the profits of business carried on by all or any of
them acting for all.”

A contract of Partnership is a special type of contract. The persons entering into the contract are
called ‘Partners’ and the collectively are called a ‘Firm’.

Essential Features of Partnership Firm:

1) Association of two or more persons: There must be atleast two persons to form a
partnership. If the partnership firm is engaged in a banking business the maximum number of
partners permissible is 10 and in case the partnership firm is in any other business the
maximum number of partners permissible is 20.

2) Presence of a Contract: There is a contractual relationship between the partners. Therefore

there must be a agreement between the partners. The agreement may be express or implied. This
agreement must fulfill all the essentials of a valid contract under the Indian Contract Act.

3) To conduct Business: The idea of few persons coming together and doing some activity for
charitable purpose cannot be termed as partnership. The intention to conduct business is
essential for the partnership. The term business is defined in Section 2(b) as ‘business includes
every trade, occupation and profession.’ The word business generally covers the intention of
doing transactions to achieve some goal.

4) Sharing of profits: The purpose of partnership should be to earn profits. The term profits
means ‘net profits’.

5) Unlimited Liability: The liability of the partners in the partnership Firm is Unlimited.

“The law of partnership is an extention of the law of principal and agent”:

Section 6 of the Partnership Act, specifies that in determining whether a group of
persons is or is not a firm, or whether a person, is or is not a partner in a firm, regard shall be
had to the real relation between the parties shown b all relevant facts taken together. The
intention of the partners will have to be decided with reference to the terms of the agreement
and all the surrounding circumstances.
The true test in determining the existence of partnership is ‘Agency and Authority’. In
determining the existence of partnership, it is essential to find out the real intention of the parties
to the agreement and circumstances of the case. The question to be asked is – Whether the
relation of principal and agent exists between the parties? Section 18 also provides that subject
to the provisions of Partnership Act a partner is the agent of the firm for the purposes of the
business of the firm.

In Cox Vs. Hickman it was held that the receipt by a person of a share in the profit is a prima-
facie evidence that he is a partner but this is not a conclusive test the question whether a person

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Notes on Partnership & Sale of Goods Act by Pro. Yatin Pandit

is a partner or not therefore depends in all cases upon whether or not he has the authority to act
for other partners and whether or not the other partners have the authorities to act for him. Thus
a partners assumes a dual role; (a) he is an agent of the firm with regards to third parties and can
thus bind the firm by his acts. (b) he is principal in respect of the act of the other partners.

PARTNERSHIP HINDU UNDIVIDED FAMILY

Partnership is the relation between persons who
1. Definition
have agreed to share the profits of a business
carried on by all or any of them acting for all.
2. Agreement It can arise only by an agreement of
the Partners.
3. Admission of A new partner can be admitted in the
interest Partnership, only with the consent of
all the Partners.
4. Acquisition of A partner acquires interest in the
interest business only by an agreement.
5. Number There is a statutory limit on
maximum number of Partners i.e. 10
in case of a firm carrying on banking
business and 20 in any other
business.
6. Minor A minor cannot become a full
members fledged partner. He can only be
admitted to the benefits of
partnership with the consent of all
the partners.
7. Mutual There is a relationship of agency
agency between the partner i.e. all the
partners are mutual agents.
8. Implied Every Partner has an implied
Authority authority to bind the firm by his acts
done in the ordinary course of the
business.
9. A Partner is personally liable for the
Liability business obligations of the firm. The
share of each partner in the
partnership property and profits
alongwith his private property is
liable for the discharge of debts of
the partnership.
10. It is dissolved on the death or
Effect of death/ insolvency of any one partner.
insolvency
11. A Partner has right to demand A member has no right to ask for
Right to demand inspect and copy any accounts of the accounts of the past dealings of
A Joint hindu Family which
carries on business handed down
from its ancestors.
It arises by operation of law. It
cannot be created by an agreement
of the members.
A person becomes the member
only by birth in the family.
A person acquires interest in the
business by birth in the family.
There is no statutory limit on
maximum number of members.
A male minor is the full-fledged
member. He becomes member
merely by birth in the family.
There is no such agency
relationship between all the
members of the family. The Karta
(i.e. manager) of the family is the
only representative of the family.
Only the Karta has an implied
authority to bind the family by his
acts. Other members of the family
do not have such authority.
A member is not personally liable
for the business obligations of the
family. Only his share of property
and profits in the family is liable
for the discharge of the debts of
the family. However, the karta is
personally liable for the business
obligations of the family.
It is not dissolved on the death or
insolvency of any member.

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Notes on Partnership & Sale of Goods Act by Pro. Yatin Pandit

accounts firm. Moreover, he also has the right the family. There is no concept of
to demand the dissolution of the dissolution of the family.
firm.
12. A partner has right to demand for A member has right to demand the
Dissolution dissolution. partition of the joint family
property.
13. Registration is not optional but the There is no concept of registration
Registration unregistered firm suffers certain of Hindu Undivided family.
disabilities.

PARTNERSHIP
1.Definition Partnership is the relation between
persons who have agreed to share the
profits of a business carried on by all
or any of them acting for all.
2.A Legal Person A firm is not a legal Entity.
3. Liability In a Partnership, the liability of
partners is unlimited.
4.Transfer of In a firm, a partner cannot transfer or
Shares assign the whole of his share without
the consent of all the partners of the
firm
5.Mutual Agents In a firm, all partners are mutual
agents.
6.Registration Registration of a firm is not
compulsory under the Partnership
Act, 1932.
7.Management Management vests in the hands of
the Partners except in the case of
Sleeping Partners.
8.Creditors Creditors of firm are also creditors of
the partners individually as well.
9.Statutory A partnership has less statutory
obligations obligations
10.Accounts Accounts of a partnership firm need
not be audited by the auditor.
11. To whom The property of affirm belongs
property belong. collectively to the partners.
12.Effect of In the case of a firm, death or
death of insolvency of a partner resolution the
partners and dissolution of the firm, unless there
members is a contract to the contrary.
13.Contract with A Partner cannot enter into a contract
the firm or with the firm, in which he is a
COMPANY
A Company means a company
formed and registered under this
Act or an exiting Company.
A Company on the other hand , is
a Legal Person.
In case of a company, which is
limited, the liability of the
members is limited to the extent
of its share capital.
In a company, a shareholder can
transfer his share subject to the
provisions of the Articles of the
Company.
In a company, a member is not an
agent of the other member.
Registration of a company is
compulsory under the Companies
Act, 1956.
Management vests in the board of
Directors, elected periodically by
the shareholders.
Creditors are only the creditors of
the company and not of the
individual shareholders.
A company is strictly regulated
under the Companies Act, 1956.
Accounts of a company must be
audited by an auditor.
The property of a company, on the
other hand, belongs to the
company, and not to the
shareholders.
In the case of a company, death or
insolvency of a member of the
company does not result in the
dissolution of the company.
A shareholder, on the other hand,
can enter into a contract with the

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company partner, because the firm is not a company, of which he is a

legal person. member, because the company is
a legal person.
14. Power to A partner can dispose of the property A Shareholder cannot dispose of
dispose of of the firm. the property of the company.
property
15.Effect of In a partnership firm, when In the case of a company, the
Restrictions on restrictions are imposed on the restrictions of a company are
authority authority of a partner, they are of no absolutely valid, because the
avail against third person who has no memorandum and articles of
knowledge of it. company serve as a public notice.
16.Limit on In the case of a firm, the number of In the case of a company, a
number of partners must not exceed 10 for Private Company : Minimum 2
members carrying on banking business and 20 and Maximum 200 and in case of
for any other business. Public Company :
: Minimum 7 and Maximum
unlimited.

Consequences of non registration of a Partnership Firm:

The Indian Partnership Act does not make registration of a firm compulsory nor does it
impose any penalty for non registration. It is optional for the firm to get itself registered or not.
However, Section 69 puts down certain disabilities to a non registered firm which normally
forces the partners the partners to get the firm registered. The effects of non registration are as
follows:

(a) No suit by a partner against other partners or firm – a partner of an unregistered firm
cannot sue the firm or any partner of the firm to enforce a right arising from the contract or
conferred by the Partnership Act. He can do so only if the firm is registered and the person suing
is shown as a partner in the register of firms.

(b) No suit against any third party – an unregistered firm cannot sue a third party to enforce a
right arising from a contract. The firm can only do so if the firm is registered and the person
suing is shown as a partner in the register of firms.

(c) No right to counter claim or to claim setoff – an unregistered firm or any partner thereof
cannot claim setoff in the proceedings instituted against a firm by a third party to enforce a right
arising from a contract. Setoff means a claim by the firm which would reduce the amount of
money payable to the claimant.

(d) Arbitration proceedings – in Jagdish Chandra Gupta Vs. Kajaria Traders (India)
Limited it was held that arbitration proceedings were barred if the firm was unregistered.

Exceptions:

Non registration of the firm however, does not effect the following rights:

(i) The right of a third party to sue the unregistered firm or its partners.

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(ii) The right of a partner to sue for dissolution of a firm or for accounts of a dissolved firm or
any right to realise the property of the dissolved firm.
(iii) The Power of a official assignee or court receiver to realise the property of an insolvent
partner.
(iv) The right of a firm or partners of a firm having no place of business in India.
(v) The right of a unregistered firm to enforce a right arising otherwise then out of a contract.
(vi) One partner can bring a suit for damages for misconduct against the other partner.
(vii) The right to claim Setoff in a suit for an amount not exceeding Rs.100/- in value.

Types of Partnership:
The following are the different types of Partnership:

(i) Partnership for a fixed Term – Where Partners have agreed to carry on the business for a
definite period of time, the partnership is said to be for a fixed period. It shall come to an end
only after the expiry of the stipulated period. Where the partners continue the business even
after the stipulated time the partnership gets converted into a partnership –at-will.

(ii) Particular Partnership – Where two or more persons agree to do a business in a particular
adventure or undertaking such a partnership is called a ‘particular partnership’. For example : A
and B enter into a partnership for producing of film.

(iii) Partnership-at-will – when no provision is made by the contract between the partners for
the duration of the partnership or for the determination of the partnership, the partnership is
called partnership-at-will. The partnership-at-will has no fixed or definite date of termination
and therefore death or retirement of any of the partner does not affect the existence of the
partnership. A partnership-at-will can be dissolved by any partner by giving notice in writing to
all the remaining partners about the intention of such dissolution.

Types of Partners:
The different types of Partners are:

(i) Active Partner – A person who is actively, actually or effectively engaged in the conduct of
business of the partnership firm is known as an Active Partner. He is the agent of the other
partners and has authority to bind the firm and the other partners in the ordinary course of
business.

(ii) Sleeping or Dormant Partner – A sleeping partner is one who does not take and active part
in the conduct of business of the firm. He invests capital and share the profits of the firm and is
also equally liable along with other partners for all the liabilities of the firm.

(iii) Nominal Partner – A person who lends his name to the firm, without having any real
interest in it is called a Nominal Partner. He does not invest any capital in the business nor does
he takes any active part in the business nor does he share any profit of the firm. However he is
liable along with other partners for all the liabilities of the firm.

(iv) Partner in Profit only – Where a partner agrees with the other partners that he shall share
only profits and shall not be liable for any losses of the firm he is called Partner in Profit only.

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However he remains liable to the creditors for the debts of the firm since under the Partnership
Act the liabilities of the partners is joint, several and unlimited.

(v) Sub-Partner – Where a partner agrees to share his profits earned form the firm with a third
person then that third person is known as the sub-partner. A sub-partner has no rights against the
firm and cannot represent himself as a partner of the firm. He is in no way connected with the
firm and is thus not liable for the liabilities of the firm.

(vi) Partner by Estoppel or by Holding Out - Sometimes strangers represents themselves to

be partners in a firm and thereby induce third parties to give credits to the firm such strangers
are called as partners by Estoppel or Partners by Holding Out.

Section 28 of the Partnership Act prescribes that a person be liable as a partner by Holding out
must fulfill the following condition:

(a) he must have by words, written or spoken or by his conduct, represented himself to be a
partner or
(b) he must have knowingly permitted himself to be represented as a partner to the other person
and
(c) the other person must have acted on the faith of such representation and have given credit to
the firm.

(vii) Minor Partner – As per Section 11 of the Indian Contract Act, 1872 a minor cannot enter
into an agreement. However Section 30 of the Partnership Act provides that with the consent of
all the partners for the time being a minor may be admitted to the benefits of Partnership.

Rights of partners in a partnership Firm:

(i) To take active part in the business – Every partner has a right to take active part in the
conduct and management of the business of the firm.

(ii) To share Profits – Every partner has a right to share profits earned and are liable to
contribute to the losses incurred by the firm.

(iii) To be consulted - Every partner has a right to be consulted in all matters affecting the
business of the partnership firm before any decision is been taken. In case of difference of
opinion it may be settled by decision of majority of the partners.

(iv) To have access to the accounts - Every partner has a right to have access, inspect and copy
the books of accounts of the firm.

(v) To be indemnified - Every partner has a right to be indemnified for the expenses incurred or
payments made in the ordinary course of business.

(vi) To use the property of the firm - Every partner has a right to use the property of the firm
for the purposes of the business of the firm. If the partner uses the firms property of the private
purpose then he is liable to compensate the firm for the same.

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(vii) Interest on capital - Every partner has a right to receive interest on capital at a certain rate
as may be specified and agreed in the partnership agreement. Such interest is payable only out
of profits, in any, earned by the firm.

(viii) Interest on loan - Every partner has a right to receive interest on loan at the rate of 6%
p.a. on any loans or advance payments made by him beyond the capital. Such interest is payable
not only out of the profits but also from the assets of the firm.

(ix) To act as agent of the firm - Every partner has a right to act as the agent of the firm and to
bind the firm and other partners for acts done by him in ordinary course of business.
(x) To retire – A partner has a right to retire (a) with the consent of all the other partners, or (b)
in accordance with the express agreement between the partners or (c) in case of Partnership-at-
will by giving notice to all the other partners of his intention to retire.

Duties of partners in a partnership Firm:

(i) To carry on the business to the common advantage – Every partner is bound to;

(a) Carry on the business of the firm to the greatest common advantage.
(b) To be just and faithful to each other in the mutual dealings.
(c) To use reasonable care and skill in the performance of his duties and
(d) Render true accounts and full information of all things, affecting the firm, to any partner or
his legal representative.

(ii) To indemnify – Every partner is bound to indemnify the firm;

(a) For any loss cause to it by his fraud in the conduct of business of the firm.
(b) For any loss incurred due to his willful neglect in the conduct of the business of the firm.

(iii) To attend diligently to his duties – Every partner is bound to attend diligently to his duties
in the conduct of the business of the firm. He must use his knowledge and skill for the benefit of
the firm.

(iv) To account for private profits – If a partner derives any benefit, without the consent of the
other partners from any transactions of the firm or from any use of the partnership property,
name or business connection. He must account for it and compensate it to the firm. There exists
a fiduciary relationship between partners and therefore no partner is entitled to make any
personal profit.

(v) To account for profit in competing business – A partner must not carry a business as of
competing nature with the firm. If he does that then he is bound to account for and compensate
to the firm all the profits made by him in that competing business.

(vi) To act within authority – Every partner is bound to act within the scope of his actual or
implied authority.

(vii) To hold and use the property of the firm exclusively for firms business – Every partner
is bound to hold and use the property of the firm exclusively for the purposes of the business of
the firm.

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(viii) Not to assign his rights – A partner cannot assign rights and interest in the firm to an
outsider so as to make him the partner of the firm. He can, however, assign his share of the
profit and share in the assets of the firm.

(ix) To be liable jointly and severally – Every partner is liable jointly with all the other
partners and also severally for all the acts of the firms done during the period he his the partner.

Property of Partnership Firm:

Property of the firm is taken to mean the joint property of all the partners. The Partners in fact
by an agreement amongst themselves may determine, what constitutes the property of the firm.
In the absence of such agreement, the following shall constitute the property of the firm.

(i) Property Originally brought in by the firm – Any property which is brought by the
partners, at the commencement of the partnership and put into joint stock of the firm.

(ii) Property acquired afterwards – Any property which is acquired by or for the firm, after
the commencement of the partnership is the property of the firm.

(iii) Partner’s personal property in the firm’s use – Where the personal property of a partner
is used in the business of the firm, it depends upon the intention of the parties whether it has
become the property of the firm or not.

Example: A partner’s personal car is been used exclusively for firm’s purpose, the car becomes
the property of the firm and the partner becomes creditor for that amount.

(iv) Conversion of joint properties into separate property – Where a property is bought with
the money of the firm, but in the name and for the exclusive benefit of a partner, the partner
becomes a debtor to the firm for the purchase money; and the property becomes the personal
property of the partner. Similarly, where a part of the joint properties is allotted to a partner, on
the dissolution of a firm, it becomes his separate, personal property.

Example: Car bought of the joint fund of the firm is used by A, a partner for private use only.
The car should become the property of A and he becomes a debtor to the firm for the car
amount.

(v) Goodwill – The term goodwill has been not been defined in the act. It means every
advantage and good representation and reputation which the firm has acquired while carrying
out its business. Goodwill is the property of the firm and it can be sold either separately or along
with the other property of the firm. Hence goodwill is the part of the property of the firm

B] Partner by holding out

Sometimes strangers represents themselves to be partners in a firm and thereby induce third
parties to give credits to the firm such strangers are called as ‘Partners by Estoppel or Partners
by Holding Out’. Section 28 of the Partnership Act prescribes that a person be liable as a
partner by Holding out must fulfill the following condition:
(a) he must have by words, written or spoken or by his conduct, represented himself to be a
partner or
(b) he must have knowingly permitted himself to be represented as a partner to the other person
and

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(c) the other person must have acted on the faith of such representation and have given credit to
the firm.
It is immaterial whether the person making representation does or does not know the
representation has reached the other person.
The commonest example of partner by holding out arises where the partner has retired
from a firm and no public notice has been issued regarding his retirement and the continuing
partner still use his name as a partner on firms letter heads and other documents. He will be
personally liable to the creditors who have acted on the faith of he being a partner.
Section 28 (2) further specifies that the doctrine of holding out does not extend to bind
the estate of the deceased partner, where after partners death, the business of the firm is
continued in the old firms name. It does not apply where a partner has been adjudicated as an
insolvent. After attaining majority and before giving public notice, a person may be held liable
for holding himself as a partner.

Position of a minor in a Partnership Firm:

As per Section 11 of the Indian Contract Act, 1872 a minor cannot enter into an agreement.
However Section 30 of the Partnership Act provides that with the consent of all the partners for
the time being a minor may be admitted to the benefits of Partnership. This provision is based
on the rule that a minor cannot be a promisor but he can be a promisee or a beneficiary.

Rights of a Minor before attending the age of Majority:

(i) He has a right to share the profits and the property of the firm as may be agreed.
(ii) He has a right to have access to and inspect the books of accounts of the firm.
(iii) Right to sue for payments of his share of profit or property in case of his severance of
connection with the firm.
(iv) He has a right to elect to become a partner on attaining the age of Majority.
(v) He has a right to elect not to become a partner on attaining the age of Majority.

Liabilities of a Minor before attending the age of Majority.

(i) A minor’s share is liable for the acts of the firm.
(ii) He is not personally liable for sharing any liabilities or losses of the firm in his personal
capacity nor is his personal property liable.

Position of the Minor on Attending the age of Majority

On attending Majority the minor partner has to decide within six month whether he want
to continue as partner in the firm or discontinue as a partner from the firm. The period of six
months start from the date of his majority or from the date when he first comes to know that he
has been admitted to the benefits of the partnership, whichever is later. Within the said period of
six months he should give a public notice of his choice whether to continue as a partner or not to
continue as a partner.
If he fails to give a public notice he is deemed to have become a partner in the firm on
the expiry of the said six month.

Position of a minor if he elects to become the Partner after attending the age of Majority.
(i) He becomes personally liable to third parties for all acts of the firm done since he was
admitted to the benefits of the partnership.
(ii) His share to the profits of the firm is the same as he was entitled to as a minor partner.

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Position of a minor if he elects not to become the Partner after attending the age of
Majority.
(i) His rights and liabilities of the partner as a minor continue up to the date of the notice.
(ii) His share is not liable for any acts of the firm done after the date of the public notice.
(iii) He is entitled to sue the partners for his share of the profits and property of the firm.
Dissolution of Partnership Firm:

The dissolution of a partnership between all the partners of a firm is called the “dissolution of
the firm”. There is a difference between dissolution of partnership and dissolution of firm.

Dissolution of Partnership: Dissolution of partnership refers to the change in the existing

relations of the partners. The firm continues its business after being reconstituted. This may
happen on admission, retirement or death of a partner or change in profit sharing ratio in the
firm:

Dissolution of Firm: Dissolution of a firm means the dissolution of partnership between all the
partners of a firm. In such a situation, the business of the firm is discontinued, its assets are
realised, the liabilities are paid off and the surplus (if any) is distributed among the partners
according to their rights.

Modes of Dissolution of Firm

i) Dissolution by agreement - A firm may be dissolved with the consent of all the partners or
in accordance with the contract between the partners. The partnership agreement may contain a
proviso that the firm will be dissolved on the happening of certain contingency

ii) Dissolution by Operation of Law - A firm may be dissolved by Operation of Law in

following cases;
 Insolvency of Partners
 By the happening of any event which makes it unlawful for the business of the firm to
carry on
 By the death of a partner
If constituted to carry out one or more adventures or undertakings, by its completion.

iii) Dissolution by Court - A firm may be dissolved by Court in following cases;

 Insanity of Partner
 Permanent Incapacity of Partner
 Misconduct of Partner
 Breach of Partnership Agreement
 Transfer of Interest of a Partner
 Loss
 Just & Equitable

The rights of a partner on dissolution of a firm are as under:

(i) Right to an equitable lien (Section 46) – Every partner is entitled to have the property of the
firm applied in payment of outside debts and liabilities of the firm and to have the surplus
distributed among the partners in accordance with their rights. Such a right of a partner is called
as ‘equitable lien’ of partners.

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(ii) Right of partners to have the business wound up (Section 47) – The authority of each
partner to bind the firm and the other mutual rights and obligations of the partners continue to
wind up the affairs of the firm.

(iii) Right to have the debts of the firm settled out of the property of the firm (Section 49) –
When a firm is dissolved, the debts of the firm are settled out of the property of the firm, and if
there is any surplus it is utilized towards the payment of the private debts of the partners.
Similarly, the separate property of any partner (private estate) shall be applied first in the
payment of his separate debts and surplus, if any, in the payment of debts of the firm.

(iv) To account for personal profits after dissolution (Section 50) – In case of transactions by
any surviving partner or by the representatives of a deceased partner undertaken after the firm is
dissolved on account of the death of a partner and before its affairs have been completely wound
up, he shall account for the profits he derives from such transactions and pay it to the firm.
However, this rule will not apply in cases where any partner or his representative has bought the
goodwill of the firm on its dissolution.

(v) Right to return of premium on premature dissolution (Section 51) – Where a partner has
paid a premium on entering into partnership for a fixed term and the firm is dissolved before the
expiration of the term, he is entitled to repayment of the whole or part of the premium. However,
no refund shall be paid to him if the dissolution –
(a) Is due to the death of a partner
(b) Is due to the misconduct of the partner who has paid the premium or
(c) Is in the pursuance of an agreement which contains no provision for the refund of the
premium.

(vi) Right where partnership contract is rescinded for fraud or misrepresentation (Section
52) – Where partnership is rescinded on the ground of fraud or misrepresentation of one of the
partners, the partner entitled to rescind has the following rights -
(a) Right to lien on the surplus assets – He has a lien on the surplus assets after the debts of the
firm have been paid, for any sum paid by him for the purchase of his share in the firm and for
any capital contributed by him.
(b) Right of subrogation – If a partner pays off a creditor from his pocket, he steps into the shoes
of that creditor and can claim money from the firm as that creditor.
(c) Right to be indemnified – He also has a right to be indemnified by the partners or partner
guilty of fraud or misrepresentation against all the debts of the firm.

(vii) Right to restrain from use of firm name or firm property (Section 53) – After the firm
is dissolved, every partner may restrain any other partner from carrying on a similar business in
the firm’s name or from using any of the property of the form for his own benefit, until the
affairs of the firm have been completely wound up, unless a partner has purchased the goodwill
of the firm.

The liabilities of a partner on dissolution are as under:

(i) Liability for acts of partners done after dissolution – Until public notice of dissolution of
the firm is given, partners continue to be liable to third parties for any act done by any of them.

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However this liability does not apply to a partner who is dead or who is adjudged as insolvent or
a sleeping partner.

(ii) Continuing authority of partners for purpose of winding up – After dissolution of a firm,
the authority of each partner to bind the firm and the other mutual rights and obligations of the
partners continue, so far as may be necessary –
(a) to wind up the affairs of the firm and
(b) To complete transactions began but unfinished, at the time of the dissolution.

(iii) Liability to share profits earned after dissolution – If any partner earns any profit from
any transaction connected with the firm, after the dissolution, he must share it with the other
partners and the legal representative of any deceased partner.

Public Notice (Sec 72)

A public notice has to be given on:
i) retirement or expulsion of a partner from a registered firm;
ii) the dissolution of a registered firm;
iii) the election to become or not to become a partner in a registered firm by a minor on attaining
majority.

Mode of giving Notice:

As per section 72 of the Act a public notice under this Act is given-
(a) where it relates to the retirement or expulsion of a partner from a registered firm, or to the
dissolution of a registered firm, or to the election to become or not to become a partner in a
registered firm by a person attaining majority who was admitted as a minor to the benefits of
partnership, by notice to the Registrar of Firms under section 63, and by publication in the
Official Gazette and in at least one vernacular newspaper circulating- in the district where the
firm to which it relates has its place or principal place of business, and
(b) in any other case, by publication in the Official Gazette and in at least one vernacular
newspaper circulating in the district where the firm to which it relates has its place or principal.

Consequences if public notice is not given:

i) A retired partner can be held liable for acts of the firm after his retirement.[Sec 32]
ii) In case of expulsion of a partner, if public notice is not given, the expelled and other partners
continue to be held liable to third parties as in case of retirement.(Sec 33)
iii) If public notice of dissolution is not given, the partners continue to be liable to third parties.
(Sec 45)
iv) If a minor partner does not want to continue partnership on attaining major, he needs to give
public notice; otherwise he continues to be held liable to third parties as a partner(Sec 30)

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 NOTES BY AJITABH MISHRA

NOTES ON

THE SPECIFIC RELIEF ACT,

1963

BY AJITABH MISHRA
S. No. TOPIC LINK YOU-TUBE
LINK
1. Specific Relief – meaning, nature and VIEW
scope
2. Recovering possession of property VIEW
(Sections 4-8)
3. Specific Performance of Contracts (9 -14) VIEW
4. Persons for or against whom contracts may VIEW
be
specifically enforced (Sections 15 - 19)
5. Substituted Performance of Contract VIEW
(Section 20)
Special provisions for Infrastructure
Projects, Special Courts and Expeditious
Disposal of suits (Section 20A-C, 21-24)
6. Rectification (Section 26) VIEW
7. Rescission (Sections 27-30) VIEW
8. Cancellation ((Sections 31-33) VIEW
9. Declaratory Decree (Sections 34-35) VIEW
10. Injunctions (Sections 37-42) VIEW

NOTES BY AJITABH MISHRA

 NOTES BY AJITABH MISHRA

SPECIFIC RELIEF – MEANING, NATURE AND SCOPE

I. Introduction to Specific Relief

A. Definition: Specific relief refers to the remedy provided by the court to enforce a
specific performance or prevent the breach of an obligation.

B. The Specific Relief Act, 1963: The act provides the legal framework for granting
specific relief in civil cases.

In other words, Specific relief refers to a legal remedy provided by courts to enforce
a specific obligation or obtain a specific performance from a party in a civil dispute. It
is a discretionary remedy granted by the court and is aimed at ensuring justice in cases
where monetary compensation is not an adequate solution. And The Specific Relief Act,
1963 is an Indian legislation that governs the principles and procedures for granting
specific relief. It defines the various forms of specific relief and lays down the
conditions under which such relief can be granted.

II. Meaning and Nature of Specific Relief

Meaning of Specific Relief: Specific relief is a remedy that is specific to the subject
matter of the dispute. It aims to restore the party to the position he or she would have
been in if the contract or agreement had been performed as agreed. It may involve
compelling a party to carry out their contractual obligations or restraining them from
committing a wrongful act.

Nature of Specific Relief: Specific relief is an equitable remedy, which means it is

based on principles of fairness and justice rather than strict legal rules. It is discretionary
in nature, and the court considers various factors, such as the nature of the contract, the
conduct of the parties, and the practicality of enforcing the relief, before granting
specific relief.

The Meaning and nature of Specific relief also covers the following points:

A. Specific Performance: Specific relief may involve the court ordering the
performance of a specific act as required by a contract or legal obligation.

NOTES BY AJITABH MISHRA

 NOTES BY AJITABH MISHRA

B. Injunctions: Specific relief can also include the issuance of injunctions,

which are court orders that prohibit a person from doing a particular act.

C. Discretionary Remedy: Specific relief is a discretionary remedy, meaning

that the court has the discretion to grant or deny it based on the circumstances
of each case.

D. Alternative to Damages: Specific relief is an alternative to monetary

damages and aims to restore the parties to their original positions.

III. Scope of Specific Relief

The scope of specific relief is broad and covers a wide range of contractual and civil
disputes. It applies to cases involving contracts for the sale or lease of property,
partnerships, intellectual property rights, specific performance of trusts, and breach of
contract, among others.

A. Contracts: Specific relief can be sought in cases involving breach of

contract, where the court may order the defaulting party to perform their
contractual obligations.

B. Property Disputes: Specific relief can be granted in cases concerning the

ownership or possession of property, where the court may order the restoration
of possession or specific acts related to the property.

C. Trusts and Trustees: Specific relief is available in cases involving trusts and
trustees, allowing the court to enforce the duties and obligations of trustees.

D. Tortious Acts: Specific relief can be sought in cases involving tortious acts,
where the court may grant injunctions to prevent or restrain the wrongful actions
of individuals.

E. Intellectual Property: Specific relief is available in cases of infringement

of intellectual property rights, where the court may order the cessation of the
infringing activity.

F. Other Circumstances: The court has the power to grant specific relief in
other cases as well, depending on the circumstances and the relief sought.

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IV. Limitations of Specific Relief

The Specific Relief Act, 1963 imposes certain limitations on the grant of specific relief.
These include cases where monetary compensation is an adequate remedy, cases
involving personal service contracts, contracts dependent on the personal qualifications
of the parties, and cases where the performance of the contract involves continuous
supervision by the court. Following are some points of limitations also:

A. Adequacy of Damages: Specific relief may not be granted if monetary

damages would be an adequate remedy for the aggrieved party.

B. Personal Services: Specific performance of personal services is generally

not enforceable by the court.

C. Continuous Supervision: Specific relief requiring continuous supervision

may not be feasible for the court to enforce.

D. Discretion of the Court: The court has the discretion to deny specific relief
if it deems it inappropriate or unjust in a particular case.

V. Conclusion

• Specific relief is a legal remedy provided by the court to enforce specific

performance or prevent the breach of obligations.
• The Specific Relief Act, 1963, governs the granting of specific relief in civil cases.
• Specific relief can take the form of specific performance or injunctions.
• The scope of specific relief covers various areas, including contracts, property
disputes, trusts, torts, and intellectual property.
• However, there are limitations to the availability of specific relief, and its granting
is at the discretion of the court.

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RECOVERING POSSESSION OF PROPERTY (SECTIONS 5-8)

The provisions outlined in Sections 5-8 of the Specific Relief Act, 1963, establish the legal
framework for individuals seeking to recover possession of immovable property. These
sections are designed to protect the rights of rightful owners who have been dispossessed or
wrongfully kept out of their property. Recovering possession of property is a crucial aspect of
property law, ensuring that individuals can regain their rightful ownership and prevent
unauthorized occupation. The explanation of sections are provided below:

• Section 5: Right to Specific Immovable Property: Section 5 of the Specific Relief Act,
1963 grants the right to recover possession of specific immovable property. It states that
a person who is dispossessed or has been wrongfully kept out of the property can file a
suit to recover possession.
• Section 6: Suit by Person Dispossessed: Section 6 deals with suits filed by a person
who has been dispossessed of immovable property without their consent. It allows the
person to claim possession and seeks to restore them to the position they were in before
the dispossession.
• Section 7: Actual Possession Essential: Section 7 emphasizes the importance of actual
possession in claims for recovery of immovable property. It states that a person can
only seek recovery of possession if they were in actual possession of the property at the
time of dispossession, or they have a valid title to the property.
• Section 8: Specific Restitution of Immovable Property: Section 8 provides for specific
restitution of immovable property. It empowers the court to order the return of the
property to the rightful owner if it determines that the person in possession of the
property is not entitled to it.

Purpose of Recovery of Possession: The provisions related to recovering possession of

property aim to protect the rights of individuals and ensure that they are not wrongfully
deprived of their property. It allows rightful owners to regain possession and prevents unlawful
and unauthorized occupation.

Conditions for Recovery of Possession: In order to succeed in a suit for recovery of

possession, certain conditions must be met. These may include establishing the prior

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possession, proving wrongful dispossession, demonstrating a valid title to the property, and
complying with any procedural requirements set forth in the law.

Discretion of the Court: The court has discretionary powers when deciding cases related to
the recovery of possession. It considers factors such as the nature of the property, the conduct
of the parties, the merits of the case, and the overall interests of justice before granting the
relief.

Limitations and Exceptions: It is important to note that there may be certain limitations and
exceptions to the recovery of possession. For instance, there may be restrictions on recovery if
a person has acquiesced to the dispossession or if the property is subject to specific laws or
regulations.

Remedies Available: If successful in a suit for recovery of possession, the court may order the
eviction of the unauthorized occupant and the restoration of possession to the rightful owner.
In some cases, the court may also award damages or compensation for any loss or harm suffered
due to the dispossession.

Importance of Section 5-8: Sections 5-8 of the Specific Relief Act, 1963 provide a legal
framework for individuals to seek the recovery of possession of immovable property. These
provisions serve as an essential safeguard for protecting property rights and ensuring justice in
cases of dispossession or unlawful occupation.

Overall, Sections 5-8 of the Specific Relief Act, 1963 play a significant role in protecting
property rights and ensuring justice in cases of dispossession or unlawful occupation. They
provide individuals with a legal framework to assert their rights and recover possession of their
immovable property.

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SPECIFIC PERFORMANCE OF CONTRACT

Section 9: Defences Respecting Suits for Relief Based on Contract

• This section explains that in case a relief is claimed under this chapter in respect to a
contract, the person against whom the relief is claimed can use any defense that is
available to them under any law relating to contracts.
• It means that if someone is claiming relief in a contract dispute, the other party can
defend themselves by using any legal grounds they have.
• For example, if someone wants specific performance of a contract, the other party can
use any legal grounds to argue why specific performance should not be enforced.

Section 10: Specific Performance in Respect of Contracts

• This section states that the specific performance of a contract can be enforced by the
court, subject to the provisions contained in sub-section (2) of section 11, section 14,
and section 16.
• It means that if someone breaches a contract, the other party can seek specific
performance, which is a court order that requires the breaching party to fulfill their
contractual obligations.
• However, the specific performance of a contract is subject to certain provisions in the
law, as mentioned in the section.

Section 11: Cases in Which Specific Performance of Contracts Connected with Trusts
Enforceable

• This section explains that specific performance of a contract shall be enforced when the
act agreed to be done is in the performance wholly or partly of a trust, except as
otherwise provided in this act.
• It means that if a contract is connected to a trust, the court can enforce specific
performance of the contract, subject to the provisions of this act.
• However, if a trustee makes a contract in excess of their powers or in breach of trust,
that contract cannot be specifically enforced.

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Section 12: Specific Performance of Part of Contract

• This section explains that the court will not direct the specific performance of a part of
a contract, except as otherwise provided in this section.
• If a party to a contract is unable to perform the whole of their part of it, but the part that
must be left unperformed is only a small proportion of the whole in value and admits
of compensation in money, the court may direct the specific performance of so much
of the contract as can be performed, and award compensation in money for the
deficiency.
• If a party to a contract is unable to perform the whole of their part of it, and the part that
must be left unperformed forms a considerable part of the whole, though admitting of
compensation in money, or does not admit of compensation in money, they are not
entitled to obtain a decree for specific performance.
• However, the court may direct the party in default to perform specifically so much of
their part of the contract as they can perform, if the other party pays the agreed
consideration for the whole of the contract reduced by the consideration for the part that
must be left unperformed and relinquishes all claims to the performance of the
remaining part of the contract and all right to compensation, either for the deficiency or
for the loss or damage sustained by them through the default of the defendant.
• If a part of a contract can be specifically performed and stands on a separate and
independent footing from another part of the same contract that cannot or should not be
specifically performed, the court may direct specific performance of the former part.

Section 13: Rights of Purchaser or Lessee Against Person with No Title or Imperfect Title

• This section explains that if a person contracts to sell or let certain immovable property
having no title or only an imperfect title, the purchaser or lessee has certain rights.
• These rights include compelling the vendor or lessor to make good the contract out of
any interest they subsequently acquire in the property, or to procure the concurrence or
conveyance of other persons necessary for validating the title.

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Section 14 of the Indian Specific Relief Act, 1963 lists the types of contracts that cannot
be specifically enforced,

• which means that a court cannot force the parties to carry out the specific terms of the
contract. Here are the explanations of each point:
• If one party has obtained substituted performance of the contract in accordance with
section 20 of the Act, the contract cannot be specifically enforced. Section 20 allows a
party to obtain performance of the contract by someone other than the other party, and
the cost of such performance is then recovered from the other party. For example, if A
has agreed to sell his car to B, but later refuses to do so, B can obtain substituted
performance of the contract by buying a similar car and recovering the cost from A.
Once substituted performance has been obtained, the contract cannot be specifically
enforced.
• If the performance of the contract involves a continuous duty that the court cannot
supervise, then the contract cannot be specifically enforced. This means that if the court
cannot monitor or oversee the performance of the contract on an ongoing basis, then it
cannot force the parties to perform it. For example, if A agrees to teach B a particular
skill over a period of time, but there is no way for the court to monitor whether A is
actually teaching B, then the contract cannot be specifically enforced.
• If the contract is so dependent on the personal qualifications of the parties that the court
cannot enforce specific performance of its material terms, then the contract cannot be
specifically enforced. This means that if the contract is so specific to the abilities,
expertise or qualifications of the parties that the court cannot force them to perform it.
For example, if A agrees to paint a portrait of B, but A is the only artist with the skill to
paint that particular style of portrait, the court cannot force A to perform the contract,
as it is too specific to A's personal abilities.
• If the contract is in its nature determinable, then it cannot be specifically enforced. A
determinable contract is one where the parties have agreed to a certain course of action
but have also included provisions for its termination. For example, if A agrees to lease
a property to B for a period of one year, but includes a clause that the lease will be
terminated if A decides to sell the property, then the contract is determinable and cannot
be specifically enforced.

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Moving on to section 14A, this section deals with the power of the court to engage experts
in a specific relief suit. Here's what it means:

• If the court feels that it requires an expert opinion to assist in a specific relief suit, it
may engage one or more experts and direct them to report on the specific issue in
question. The expert may be required to attend court and provide evidence, including
producing relevant documents.
• The court may also require any person to give relevant information to the expert or to
produce, or to provide access to, any relevant documents, goods, or other property for
their inspection.
• The opinion or report given by the expert becomes part of the record of the suit. The
court, or with the permission of the court any of the parties to the suit, may examine the
expert personally in open court on any of the matters referred to them or mentioned in
their opinion or report, or as to their opinion or report, or as to the manner in which they
have made the inspection.
• The expert is entitled to a fee, cost or expense as fixed by the court. This is payable by
the parties in such proportion, and at such time, as directed by the court.
• In summary, section 14 lists the types of contracts that cannot be specifically enforced,
while section 14

In summary, the provisions in Sections 9-14 of the Indian Specific Relief Act, 1963, provide a
framework for the enforcement and limitations of specific performance as a remedy for
contractual disputes. These provisions ensure that parties have the opportunity to defend
themselves, while also providing guidance on when specific performance can be granted and
the circumstances under which it may not be enforced.

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PERSONS FOR OR AGAINST WHOM CONTRACTS MAY BE SPECIFICALLY

ENFORCED (SECTION 15-19)

Section 15: Who may obtain specific performance

• This section explains who can obtain a specific performance of a contract under the act.
• Any party to the contract can obtain specific performance, as well as their representative
or principal, unless the contract explicitly states otherwise.
• However, if the personal qualities of a party are a material ingredient in the contract or
the contract forbids assignment of the interest, then the representative or principal
cannot claim specific performance unless the party has already fulfilled their part of the
contract, or the other party has accepted the performance from the representative or
principal.
• In some specific cases such as settlement on marriage, compromise of doubtful rights
between members of the same family, a tenant for life in exercise of power, reversioners
in possession or remainder, and limited liability partnership or company after
amalgamation, specific performance can be obtained by other parties as well.

Section 16: Personal bars to relief

• This section lays down the conditions under which specific performance of a contract
cannot be enforced.
• If a person has obtained a substituted performance of the contract under Section 20,
they cannot claim specific performance.
• If a person becomes incapable of performing their part of the contract, violates any
essential term of the contract, acts in fraud of the contract, or acts in a manner that
subverts the relationship intended to be established by the contract, then they cannot
claim specific performance.
• Additionally, if a person has failed to prove that they have performed or are ready and
willing to perform the essential terms of the contract which are to be performed by
them, except the terms prevented or waived by the defendant, they cannot claim specific
performance.

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Section 17: Contract to sell or let property by one who has no title, not specifically
enforceable

• This section states that a contract to sell or let any immovable property cannot be
specifically enforced in favour of a vendor or lessor who does not have a title to the
property, or who, at the time fixed for the completion of the sale or letting, cannot
provide a title free from reasonable doubt.
• The same provisions apply to contracts for the sale or hire of movable property as well.

Section 18: Non-enforcement except with variation

• This section explains that if a plaintiff seeks specific performance of a written contract,
to which the defendant sets up a variation, the plaintiff cannot obtain the performance
sought, except with the variation set up.
• This applies in cases where the written contract is different from what the parties agreed
to, or does not contain all the terms agreed to, or where the parties have varied the terms
subsequently.

Section 19: Relief against parties and persons claiming under them by subsequent title

• This section states that specific performance of a contract can be enforced against either
party to the contract, as well as any other person claiming under them by a title arising
subsequently to the contract, except a transferee for value who has paid his money in
good faith and without notice of the original contract.
• It also applies to any person claiming under a title that, although prior to the contract
and known to the plaintiff, could have been displaced by the defendant.

In conclusion, the provisions regarding "Persons for or Against Whom Contracts May Be
Specifically Enforced" within the Indian Specific Relief Act, 1963, establish the parameters for
determining the parties who can seek specific performance and those against whom it can be
enforced. These provisions ensure that the court has the authority to compel the party in breach
of the contract to fulfil their obligations as agreed upon. Specific performance can be sought
by individuals or entities who are party to the contract and have a legitimate interest in its
performance. Conversely, the court may refuse to grant specific performance if it determines
that the enforcement would be inequitable or impracticable. Overall, these provisions provide
clarity and guidance on the scope and limitations of specific performance in contract disputes.

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SUBSTITUTED PERFORMANCE OF CONTRACT (SECTION 20)

SPECIAL PROVISIONS FOR INFRASTRUCTURE PROJECTS,

SPECIAL COURTS, AND EXPEDITIOUS DISPOSAL OF SUITS
(SECTION 20A-C, 21-24)

Section 20 - Substituted Performance of Contract:

• Party suffering from breach can opt for substituted performance through a third party
or by their own agency.
• They can recover the expenses and costs incurred from the party committing the breach.
• Notice of at least thirty days must be given to the party in breach before opting for
substituted performance.
• If the contract is performed through a third party or by the suffering party's own agency,
they cannot claim specific performance against the party in breach.
• The party suffering from breach can still claim compensation from the defaulting party.

Section 20A - Special Provisions for Infrastructure Projects:

• No injunction can be granted in suits involving infrastructure projects specified in the

Schedule.
• Granting injunction would hinder or delay the progress or completion of the
infrastructure project.
• The term "infrastructure project" refers to projects and infrastructure sub-sectors
mentioned in the Schedule.
• The Central Government can amend the Schedule based on the requirements for
infrastructure project development.

Section 20B - Special Courts:

• The State Government, in consultation with the Chief Justice of the High Court, can
designate one or more civil courts as special courts.
• Special courts have jurisdiction to try suits under the Act related to contracts concerning
infrastructure projects.

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• The purpose is to ensure specialized jurisdiction and effective resolution of disputes

related to infrastructure projects.

Section 20C - Expeditious Disposal of Suits:

• Suits filed under the Act must be disposed of by the court within twelve months from
the date of service of summons to the defendant.
• The court can extend the period for a maximum of six months, provided it records the
reasons for the extension in writing.

Section 21 - Power to Award Compensation:

• In a suit for specific performance, the plaintiff can also claim compensation for breach
of the contract.
• If specific performance is not granted, but the contract has been breached, the court can
award compensation.
• If specific performance is granted but deemed insufficient, the court can award
compensation in addition to specific performance.
• The court determines the amount of compensation based on the principles specified in
Section 73 of the Indian Contract Act, 1872.
• The plaintiff must claim compensation in the plaint, or the court may allow amendment
of the plaint to include a claim for compensation.

Section 22 - Relief for Possession, Partition, Refund of Earnest Money, etc.:

• A person suing for specific performance of a contract for the transfer of immovable
property can also seek possession, partition, or other relief.
• The relief must be specifically claimed in the plaint, or the court may allow the plaintiff
to amend the plaint to include the claim.
• The power of the court to grant relief is without prejudice to its power to award
compensation under Section 21.

Section 23 - Liquidation of Damages Not a Bar to Specific Performance:

• A contract suitable for specific performance can still be enforced, even if a sum is
named in the contract as the amount to be paid in case of breach.
• The court determines if the named sum was intended to secure performance rather than
offer the defaulting party the option to pay money instead.

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• When enforcing specific performance, the court does not decree payment of the named
sum in the contract.

Section 24 - Bar of Suit for Compensation after Dismissal of Suit for Specific
Performance:

• Dismissal of a suit for specific performance does not prevent the plaintiff from suing
for compensation for the breach of the same contract.
• The dismissal bars the plaintiff's right to sue for compensation for breach of contract,
but other reliefs may still be pursued.

These provisions collectively aim to provide a framework for the enforcement of contracts,
particularly in the context of infrastructure projects, while ensuring efficient resolution of
disputes and protecting the rights of the parties involved. By offering options for substituted
performance, compensation, and other reliefs, the Act seeks to promote fairness and justice in
contractual relationships.

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RECTIFICATION (SECTION 26)

Section 26 of the Specific Relief Act, 1963 addresses the rectification of contracts or other
written instruments in cases where the expressed terms do not reflect the real intention of the
parties due to fraud or mutual mistake. The section outlines the following provisions:

• Parties' Remedies: Either party or their representative can initiate a lawsuit to rectify
the instrument, or the plaintiff can include a claim for rectification in a suit where the
rights arising from the instrument are in question. Additionally, a defendant in such a
suit can request rectification as a defense.
• Court's Discretion: If the court finds, in a suit seeking rectification, that the instrument
fails to express the true intention of the parties due to fraud or mistake, it can exercise
its discretion to direct the rectification of the instrument to align with their actual
intention. However, this rectification should not prejudice the rights of third parties who
have acquired rights in good faith and for value.
• Rectification and Specific Performance: A written contract that has been rectified, upon
the prayer of the party seeking rectification in their pleading and at the discretion of the
court, may subsequently be specifically enforced.
• Claim Requirement: No relief for rectification can be granted unless it has been
specifically claimed by the party. However, the court has the authority to allow the
amendment of the pleading to include such a claim at any stage of the proceeding if it
deems it just to do so.

Section 26 provides a legal recourse for parties to rectify written instruments when their true
intentions have been misrepresented due to fraud or mutual mistake. By allowing for
rectification and subsequent enforcement, the section aims to uphold the integrity and fairness
of contractual agreements.

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RESCISSION (SECTIONS 27-30)

Section 27 of the Specific Relief Act, 1963 deals with the circumstances in which a contract
may be rescinded or refused to be rescinded. The section provides the following provisions:

• Grounds for Rescission: Any person with a vested interest in a contract can sue for its
rescission. The court may adjudicate the rescission of the contract in the following
cases:
o The contract is voidable or terminable by the plaintiff.
o The contract is unlawful for reasons not apparent on its face, and the defendant
is more responsible for the unlawfulness than the plaintiff.
• Grounds for Refusal of Rescission: Notwithstanding the provisions in sub-section (1),
the court may refuse to rescind the contract in the following situations:
o The plaintiff has expressly or implicitly ratified the contract.
o Due to circumstances that have occurred since the contract was made (not due
to any act of the defendant), the parties cannot be substantially restored to their
original positions.
o Third parties have acquired rights in good faith and for value during the
existence of the contract.
o Only a part of the contract is sought to be rescinded, and such part is inseparable
from the rest of the contract.

Section 28 addresses the rescission of contracts for the sale or lease of immovable property
when a decree for specific performance has been granted but the purchaser or lessee fails to
pay the required amount within the specified time. The provisions state that the vendor or lessor
may apply for rescission of the contract, either partially or entirely, and the court may order
such rescission as it deems just. The court may also direct the restoration of possession to the
vendor or lessor and the payment of accrued rents and profits. If the purchaser or lessee pays
the required amount within the given period, the court may award further relief, including the
execution of a conveyance or lease and delivery of possession.

Section 29 allows a plaintiff in a suit for specific performance to pray alternatively for
rescission and cancellation of the contract if specific enforcement is not possible. If the court

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refuses to enforce the contract specifically, it may order the contract to be rescinded and
delivered up for cancellation.

Section 30 empowers the court, upon granting rescission of a contract, to require the party
receiving such relief to restore any benefit received from the other party and make any
compensation deemed just by the court.

These sections provide a legal framework for the rescission of contracts and outline the
circumstances under which rescission may be granted or refused. The court's discretion plays
a significant role in determining whether rescission is appropriate and the subsequent equitable
actions to be taken.

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CANCELLATION ((SECTIONS 31-33)

Section 31 of the Specific Relief Act, 1963 deals with the circumstances in which cancellation
of a written instrument may be ordered. The section provides the following provisions:

• Grounds for Cancellation: Any person against whom a written instrument is void or
voidable, and who has reasonable apprehension that the instrument, if left outstanding,
may cause serious injury, may file a lawsuit seeking to have the instrument declared
void or voidable. The court has the discretion to adjudicate the instrument as void or
voidable and order its delivery and cancellation.
• Effect on Registered Instruments: If the instrument has been registered under the
Indian Registration Act, 1908, the court must send a copy of its decree to the officer in
whose office the instrument has been registered. The officer will then note the
cancellation of the instrument in their records.

Section 32 states that in cases where an instrument is evidence of different rights or obligations,
the court may, in an appropriate situation, partially cancel the instrument and allow it to remain
valid for the remaining parts.

Section 33 deals with the power of the court to require the restoration of benefits or
compensation when an instrument is cancelled or successfully resisted as void or voidable.

• Cancellation of Instrument: When an instrument is cancelled by the court, the court

may require the party receiving relief to restore any benefit received from the other
party and make any compensation as deemed just by the court.
• Successful Resistance: If a defendant successfully resists a suit on the ground that the
instrument sought to be enforced against them is voidable or that the agreement sought
to be enforced is void due to their incapacity to contract, the court may require the
defendant to restore any benefit received under the instrument or agreement to the other
party, to the extent that they have benefited from it.

These sections provide the legal framework for the cancellation of written instruments. They
allow individuals to seek the cancellation of void or voidable instruments that may cause them
harm, and provide the court with the power to order the delivery, cancellation, and restoration
of benefits or compensation.

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DECLARATORY DECREE (SECTIONS 34-35)

Section 34 of the Specific Relief Act, 1963 deals with the discretion of the court regarding the
declaration of status or right. The section provides the following provisions:

• Right to Institute Suit: Any person who is entitled to a legal character or a right to any
property can file a lawsuit against any person who denies or has an interest in denying
their title to such character or right.
• Court's Discretion: The court, in its discretion, may make a declaration in the suit
stating that the plaintiff is entitled to the claimed character or right. The plaintiff is not
required to seek any further relief in such a suit.
• Limitation on Court's Power: However, the court cannot make a declaration if the
plaintiff is capable of seeking further relief beyond a mere declaration of title but
chooses not to do so.

Explanation: The section further explains that a trustee of property is considered a "person
interested to deny" a title adverse to the title of someone who is not in existence, and for whom,
if they were in existence, the trustee would act as a trustee.

Section 35 states the effect of a declaration made under this chapter. The declaration is binding
only on the parties involved in the suit and persons claiming through them. If any of the parties
are trustees, the declaration is also binding on the persons for whom they would act as trustees
if those persons were in existence at the time of the declaration.

In summary, these sections provide a mechanism for individuals to seek a declaration of their
legal character or right to property. The court has the discretion to make such a declaration, and
once made, it is binding on the parties to the suit and those claiming through them. However,
the declaration does not extend its binding effect beyond the parties and their successors unless
the parties involved are trustees, in which case it also affects the beneficiaries of the trust.

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INJUNCTIONS (SECTIONS 37-42)

Chapter VII of the Specific Relief Act, 1963, deals with injunctions as a form of preventive
relief. Here are the key provisions:

36. Grant of Preventive Relief: Preventive relief, in the form of injunctions, either temporary
or perpetual, can be granted at the discretion of the court.

37. Temporary and Perpetual Injunctions:

• Temporary injunctions are granted for a specific period or until further orders from the
court. They can be granted at any stage of a suit and are governed by the Code of Civil
Procedure, 1908.
• Perpetual injunctions can only be granted through a decree made at the final hearing of
the suit. They permanently restrain the defendant from asserting a right or committing
an act that would infringe upon the plaintiff's rights.

Perpetual Injunctions:

38. Granting of Perpetual Injunctions:

• A perpetual injunction may be granted to the plaintiff to prevent the breach of an

obligation existing in their favour, whether expressly or implied.
• In cases where the obligation arises from a contract, the court follows the rules and
provisions contained in Chapter II of the Specific Relief Act.
• When the defendant invades or threatens to invade the plaintiff's property rights or
enjoyment, a perpetual injunction may be granted in certain situations:
• If the defendant is a trustee of the property for the plaintiff.
• When there is no standard for determining the actual or potential damages caused by
the invasion.
• When monetary compensation would not provide adequate relief.
• When the injunction is necessary to prevent multiple legal proceedings.

39. Mandatory Injunctions: When necessary to prevent a breach of an obligation, the court
may grant an injunction that compels the performance of specific acts enforceable by the court.

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40. Damages in Addition to or in lieu of Injunction: In a suit for perpetual or mandatory

injunction, the plaintiff can claim damages in addition to or instead of an injunction. The court
has the discretion to award such damages, provided that the relief has been claimed in the
plaint.

41. Grounds for Refusing an Injunction: The court cannot grant an injunction in certain
circumstances, including when:

• It restrains a person from pursuing a judicial proceeding already pending, except to

prevent multiple proceedings.
• It restrains a person from initiating or continuing proceedings in a court not subordinate
to the court where the injunction is sought.
• It restrains a person from applying to any legislative body.
• It restrains a person from initiating or continuing proceedings in a criminal matter.
• It aims to prevent the breach of a contract that cannot be specifically enforced.
• It is based on the allegation of nuisance without clarity that the act will be a nuisance.
• The plaintiff has acquiesced in a continuing breach.
• There are other equally effective modes of obtaining relief, except in cases of breach of
trust.
• It would impede or delay an infrastructure project or interfere with the provision of
related facilities or services.
• The conduct of the plaintiff or their agents disqualifies them from receiving assistance
from the court.
• The plaintiff has no personal interest in the matter.

42. Injunction to Perform Negative Agreement: Even if specific performance of an

affirmative agreement in a contract is not possible, the court can grant an injunction to enforce
a negative agreement associated with the contract, provided that the plaintiff has not failed to
perform their obligations.

These provisions outline the framework for granting injunctions, both temporary and perpetual,
as preventive relief in civil suits. The court has discretionary powers to determine whether to
grant an injunction based on the circumstances of each case.

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NOTES BY AJITABH MISHRA