Negotiable Instruments Act, 1881 (Amended Version)

Published on Mon, Feb 13, 2006   |  Source : Legal Pundits.com
Negotiable Instruments Act, 1881
(Act No. 26 of 1881)
[9th December, 1881]
CHAPTER I
Preliminary
1. Short title:- This Act may be called the Negotiable Instruments Act, 1881.
Local extent, Saving of usage relating to hundis, etc., Commencement.-- It
extends2 to 3[the whole of India 4[* * *]; but nothing herein contained affects the
5Indian Paper Currency Act, 1871, (3 of 1871) section 21, or affects any local usage
relating to any instrument in an oriental language:
Provided that such usages may be excluded by any words in the body of the
instrument, which indicate an intention that the legal relations of the parties
thereto shall be governed by this Act; and it shall come into force on the first day
of March, 1882.
2. Repeal of enactments.-- [Rep. by the Amending Act, 1891 (12 of 1891), section 2
and Schedule I
, Pt. I.]
3. Interpretation-clause.-- In this Act--
6[* * *]
" Banker".-- 7[ "banker" includes any person acting as a Banker and any post
office savings bank].
8[* * *]
Footnotes:
1. For the Statement of Objects and Reasons, see Gazette of India, 1876, p. 1836;
for the Reports of the Select Committee, see Gazette of India, 1877, Pt. V,
p. 321; 1878, Pt. V, p. 145; 1879, pt. V, p. 75; 1881, Pt. V, p. 85; for discussions in
Council, see Gazette of India, 1876 Supplement, p. 1081; and Gazette of
India, 1881, Supplement, p. 1409.

2. The Act has been extended to Goa, Daman and Diu by Regulation 12 of 1962,
section 3 and Schedule and to Dadra and Nagar Haveli w.e.f. 1-7-1965 by
Regulation 6 of 1963, section 2 and Schedule I.
3. Substituted by the A.O. 1950, for "all the Provinces of India".
4. The words "except the State of Jammu and Kashmir" omitted by Act 62 of 1956,
section 2 and Schedule
5. See now the Reserve Bank of India Act, 1934 (2 of 1934).
6. Definition of "India" omitted by Act 62 of 1956, section 2 and Schedule
7. Substituted by Act 37 of 1955, section 2, for the definition of the word "banker"
w.e.f. 1-4-1956.
8. Definition of "notary public" omitted by Act 53 of 1952, section 16 w.e.f. 14-2-
1956.
CHAPTER II
OF NOTES, BILLS AND CHEQUES
4. Promissory note.-- A "promissory note " is an instrument in writing (not being
a bank-note or a currency-note) containing an unconditional undertaking, signed
by the maker, to pay a certain sum of money only to, or to the order of, a certain
person, or to the bearer of the instrument.
Illustrations
A signs instruments in the following terms:--
(a) "I promise to pay B or order Rs. 500."
(b) "I acknowledge myself to be indebted to B in Rs. 1,000, to be paid or demand,
for value received."
(c) "Mr. B.I.O.U. Rs. 1,000."
(d) "I promise to pay B Rs. 500 and all other sums which shall be due to him."
(e) "I promise to pay B Rs. 500 first deducting there out any money which he may
owe me."
(f) "I promise to pay B Rs. 500 seven days after my marriage with C."
(g) "I promise to pay B Rs. 500 on D's death, provided D leaves me enough to pay
that sum."
(h) "I promise to pay B Rs. 500 and to deliver to him my black horse on 1st
January next."

The instruments respectively marked (a) and (b) are promissory notes. The
instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory
notes.
5. "Bill of exchange".-- A " bill of exchange" is an instrument in writing
containing an unconditional order, signed by the maker, directing a certain
person to pay a certain sum of money only to, or to the order of, a certain person
or to the bearer of the instrument.
A promise or order to pay is not "conditional", within the meaning of this section
and section 4, by reason of the time for payment of the amount or any instalment
thereof being expressed to be on the lapse of a certain period after the occurrence
of a specified event which, according to the ordinary expectation of mankind, is
certain to happen, although the time of its happening may be uncertain.
The sum payable may be "certain", within the meaning of this section and section
4, although it includes future interest or is payable at an indicated rate of
exchange, or is according to the course of exchange, and although the instrument
provides that, on default of payment of an instalment, the balance unpaid shall
become due.
The person to whom it is clear that the direction is given or that payment is to be
made may be a "certain person", within the meaning of this section and section 4,
although he is mis-named or designated by description only.
10[6. "Cheque".-- A "cheque" is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand and it includes the
electronic image of a truncated cheque and a cheque in the electronic form.
Explanation 1.--For the purposes of this section, the expressions--
(a) "a cheque in the electronic form" means a cheque which contains the exact
mirror image of a paper cheque, and is generated, written and signed in a secure
system ensuring the minimum safety standards with the use of digital signature
(with or without biometrics signature) and asymmetric crypto system;
(b) "a truncated cheque" means a cheque which is truncated during the course of
a clearing cycle, either by the clearing house or by the bank whether paying or
receiving payment, immediately on generation of an electronic image for
transmission, substituting the further physical movement of the cheque in
writing.
Explanation II.--For the purposes of this section, the expression "clearing house"
means the clearing house managed by the Reserve Bank of India or a clearing
house recognised as such by the Reserve Bank of India.]
7. "Drawer" "drawee".-- The maker of a bill of exchange or cheque is called the
"drawer "; the person thereby directed to pay is called the "drawee".
"drawee in case of need".-- When in the bill or in any indorsement thereon the
name of any person is given in addition to the drawee to be resorted to in case of
need such person is called a "drawee in case of need ".
"acceptor".-- After the drawee of a bill has signed his assent upon the bill, or, if
there are more parts thereof than one, upon one of such parts, and delivered the

same, or given notice of such signing to the holder or to some person on his
behalf, he is called the "acceptor".
"acceptor for honour".-- 1[When a bill of exchange has been noted or protested
for non-acceptance or for better security], and any person accepts it supra protest
for honour of the drawer or of any one of the indorser, such person is called an
"acceptor for honour".
"Payee."-- The person named in the instrument, to whom or to whose order the
money is by the instrument directed to be paid, is called the "payee".
8. "Holder."-- The "holder" of a promissory note, bill of exchange or cheque
means any person entitled in his own name to the possession thereof and to
receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so
entitled at the time of such loss or destruction.
9. "Holder in due course".-- "Holder in due course" means any person who for
consideration became the possessor of a promissory note, bill of exchange or
cheque if payable to bearer, or the payee or indorse thereof, if 2[payable to order,]
before the amount mentioned in it became payable, and without having
sufficient cause to believe that any defect existed in the title of the person from
whom he derived his title.
10. "Payment in due course".-- "Payment in due course" means payment in
accordance with the apparent tenor of the instrument in good faith and without
negligence to any person in possession thereof under circumstances which do
not afford a reasonable ground for believing that he is not entitled to receive
payment of the amount therein mentioned.
11. "Inland instrument".-- A promissory note, bill of exchange or cheque drawn
or made in 3[India], and made payable in, or drawn upon any person resident in,
3[India] shall be deemed to be an inland instrument.
12. "Foreign instrument".-- Any such instrument not so drawn, made or made
payable shall be deemed to be a foreign instrument.
13. "Negotiable instrument".-- 4[(1) A "negotiable instrument" means a
promissory note, bill of exchange or cheque payable either to order or to bearer.
Explanation (i).-- A promissory note, bill of exchange or cheque is payable to
order which is expressed to be so payable or which is expressed to be payable to
a particular person, and does not contain words prohibiting transfer or
indicating an intention that it shall not be transferable.
Explanation (ii).-- A promissory note, bill of exchange or cheque is payable to
bearer which is expressed to be so payable or on which the only or last
indorsement is an indorsement in blank.
Explanation (iii).-- Where a promissory note, bill of exchange or cheque, either
originally or by indorsement, is expressed to be payable to the order of a
specified person, and not to him or his order, it is nevertheless payable to him or
his order at his option.]

5[(2) A negotiable instrument may be made payable to two or more payees
jointly, or it may be made payable in the alternative to one of two, or one or some
of several payees.]
14. Negotiation.-- When a promissory note, bill of exchange or cheque is
transferred to any person, so as to constitute that person the holder thereof, the
instrument is said to be negotiated.
15. Indorsement.-- When the maker or holder of a negotiable instrument signs
the same, otherwise than as such maker, for the purpose of negotiation, on the
back or face thereof or on a slip of paper annexed thereto, or so signs for the
same purpose a stamped paper intended to be completed as a negotiable
instrument, he is said to indorse the same, and is called the "indorser".
16. Indorsement "in blank" and "in full"-"Indorsee".-- 6[(1)] If the indorser signs
his name only, the indorsement is said to be "in blank," and if he adds a direction
to pay the amount mentioned in the instrument to, or to the order of, a specified
person, the indorsement is said to be "in full", and the person so specified is
called the "indorsee" of the instrument.
7[(2) The provisions of this Act relating to a payee shall apply with the necessary
modifications to an indorsee.]
17. Ambiguous instruments.-- Where an instrument may be construed either as
a promissory note or bill of exchange, the holder may at his election treat it as
either and the instrument shall be thenceforward treated accordingly.
18. Where amount is stated differently in figures and words.-- If the amount
undertaken or ordered to be paid is stated differently in figures and in words,
the amount stated in words shall be the amount undertaken or ordered to be
paid.
19. Instruments payable on demand.-- A promissory note or bill of exchange, in
which no time for payment is specified, and a cheque, are payable on demand.
20. Inchoate stamped instruments.-- Where one person signs and delivers to
another a paper stamped in accordance with the law relating to negotiable
instruments then in force in 7[India], and either wholly blank or having written
thereon an incomplete negotiable instrument, he thereby gives prima facie
authority to the holder thereof to make or complete, as the case may be, upon it a
negotiable instrument, for any amount specified therein and not exceeding the
amount covered by the stamp. The person so signing shall be liable upon such
instrument, in the capacity in which he signed the same, to any holder in due
course for such amount; provided that no person other than a holder in due
course shall recover from the person delivering the instrument anything in
excess of the amount intended by him to be paid thereunder.
21. "At sight", "On presentment", "After sight".-- In a promissory note or bill of
exchange the expressions "at sight" and "on presentment" mean on demand. The
expression "after sight " means, in a promissory note, after presentment for sight,
and, in a bill of exchange, after acceptance, or noting for non-acceptance, or
protest for non-acceptance.

22. "Maturity".-- The maturity of a promissory note or bill of exchange is the date
at which it falls due.
Days of grace.-- Every promissory note or bill of exchange which is not
expressed to be payable on demand, at sight or on presentment is at maturity on
the third day after the day on which it is expressed to be payable.
23. Calculating maturity of bill or note payable so many months after date or
sight.--
In calculating the date at which a promissory note or bill of exchange,
made payable a stated number of months after date or after sight, or after a
certain event, is at maturity, the period stated shall be held to terminate on the
day of months which corresponds with the day on which the instrument is
dated, or presented for acceptance or sight, or noted for non-acceptance, or
protested for non-acceptance, or the event happens, or, where the instrument is a
bill of exchange made payable a stated number of months after sight and has
been accepted for honour, with the day on which it was so accepted. If the month
in which the period would terminate has no corresponding day, the period shall
be held to terminate on the last day of such month.
Illustrations
(a) A negotiable instrument dated 29th January, 1878, is made payable at one
month after date. The instrument is at maturity on the third day after the 28th
February, 1878.
(b) A negotiable instrument, dated 30th August, 1878, is made payable three
months after date. The instrument is at maturity on the 3rd December, 1878.
(c) A promissory note or bill of exchange, dated 31st August 1878, is made
payable three months after date. The instrument is at maturity on the 3rd
December 1878.
24. Calculating maturity of bill or note payable so many days after date or
sight.-- In calculating the date at which a promissory note or bill of exchange
made payable a certain number of days after date or after sight or after a certain
event is at maturity, the day of the date, or of presentment for acceptance or
sight, or of protest for non-acceptance, or on which the event happens, shall be
excluded.
25. When day of maturity is a holiday.-- When the day on which a promissory
note or bill of exchange is at maturity is a public holiday, the instrument shall be
deemed to be due on the next preceding business day.
Explanation.-- The expression "Public holiday" includes Sundays: 8[* * *] and any
other day declared by the 9[Central Government], by notification in the Official
Gazette, to be a public holiday.
Footnotes:
1. Substituted by Act 2 of 1885, section 2, for "When acceptance is refused and the
bill is protested for non-acceptance".
2. Substituted by Act 8 of 1919, section 2, for "payable to, or to the order of, a
payee".

3. Substituted by Act 36 of 1957, section 3 and Schedule II, for "a State".
4. Substituted by Act 8 of 1919, section 3, for sub-section (1).
5. Added by Act 5 of 1914, section 2.
6. Section 16 renumbered as sub-section (1) and sub-section (2) added by Act 5 of
1914, section 3.
7. Substituted by Act 3 of 1951, section 3 and Schedule, for "the States"
8. The words "New-Year''s day, Christmas day: if either of such days falls on a
Sunday, the next following Monday; Good-Friday;" omitted by Act 37 of 1955,
section 3 w.e.f. 1-4-1956.
9. Substituted by the A.O. 1937, for "L.G."
10. Substituted by The Negotiable Instruments (Amendment and Miscellaneous
Provisions) Act, 2002 (55 of 2002) w.e.f. 06.02.2003. Prior to Substitution it read as
under:
""Cheque".- A "cheque'' is a bill of exchange drawn on a specified banker and not
expressed to be payable
otherwise than on demand."
CHAPTER III:
PARTIES TO NOTES, BILLS AND CHEQUES
26. Capacity to make, etc., promissory notes, etc.-- Every person capable of
contracting, according to the law to which he is subject, may bind himself and be
bound by the making, drawing, acceptance, indorsement, delivery and
negotiation of a promissory note, bill of exchange or cheque.
Minor.-- A minor may draw, indorse, deliver and negotiate such instruments so
as to bind all parties except himself.
Nothing herein contained shall be deemed to empower a corporation to make,
indorse or accept such instruments except in cases in which, under the law for
the time being in force, they are so empowered.
27. Agency.-- Every person capable of binding himself or of being bound, as
mentioned in section 26, may so bind himself or be bound by a duly authorized
agent acting in his name.
A general authority to transact business and to receive and discharge debts does
not confer upon an agent the power of accepting or indorsing bills of exchange so
as to bind his principal.
An authority to draw bills of exchange does not of itself import an authority to
indorse.
28. Liability of agent signing.-- An agent who signs his name to a promissory
note, bill of exchange or cheque without indicating thereon that he signs as
agent, or that he does not intend thereby to incur personal responsibility, is liable
personally on the instrument, except to those who induced him to sign upon the
belief that the principal only would be held liable.
29. Liability of legal representative.-- A legal representative of a deceased
person who signs his name to a promissory note, bill of exchange or cheque is
liable personally thereon unless he expressly limits his liability to the extent of
the assets received by him as such.

30. Liability of drawer.-- The drawer of a bill of exchange or cheque is bound in
case of dishonour by the drawee or acceptor thereof, to compensate the holder,
provided due notice of dishonour has been given to, or received by, the drawer
as hereinafter provided.
31. Liability of drawee of cheque.-- The drawee of a cheque having sufficient
funds of the drawer in his hands properly applicable to the payment of such
cheque must pay the cheque when duly required so to do, and, in default of such
payment, must compensate the drawer for any loss or damage caused by such
default.
32. Liability of maker of note and acceptor of bill.-- In the absence of a contract
to the contrary, the maker of a promissory note and the acceptor before maturity
of a bill of exchange are bound to pay the amount thereof at maturity according
to the apparent tenor of the note or acceptance respectively, and the acceptor of a
bill of exchange at or after maturity is bound to pay the amount thereof to the
holder on demand.
In default of such payment as aforesaid, such maker or acceptor is bound to
compensate any party to the note or bill for any loss or damage sustained by him
and caused by such default.
33. Only drawee can be acceptor except in need or for honour.-- No person
except the drawee of a bill of exchange, or all or some of several drawees, or a
person named therein as a drawee in case of need, or an acceptor for honour, can
bind himself by an acceptance.
34. Acceptance by several drawees not partners.-- Where there are several
drawees of a bill of exchange who are not partners, each of them can accept it for
himself, but none of them can accept it for another without his authority.
35. Liability of indorser.-- In the absence of a contract to the contrary, whoever
indorses and delivers a negotiable instrument before maturity, without, in such
indorsement, expressly excluding or making conditional his own liability, is
bound thereby to every subsequent holder, in case of dishonour by the drawee,
acceptor or maker, to compensate such holder for any loss or damage caused to
him by such dishonour, provided due notice of dishonour has been given to, or
received by, such indorser as hereinafter provided.
Every indorser after dishonour is liable as upon an instrument payable on
demand.
36. Liability of prior parties to holder in due course.-- Every prior party to a
negotiable instrument is liable thereon to a holder in due course until the
instrument is duly satisfied.
37. Maker, drawer and acceptor principals.-- The maker of a promissory note or
cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in
the absence of a contract to the contrary, respectively liable thereon as principal
debtors, and the other parties thereto are liable thereon as sureties for the maker,
drawer or acceptor, as the case may be.
38. Prior party a principal in respect of each subsequent.-- As between the
parties so liable as sureties, each prior party is, in the absence of a contract to the

contrary, also liable thereon as a principal debtor in respect of each subsequent
party.
Illustration
A draws a bill payable to his own order on B, who accepts, A afterwards indorses
the bill to C, C to D, and D to E. As between E and B, B is the principal debtor,
and A, C and D are his sureties. As between E and A, A is the principal debtor,
and C and D are his sureties. As between E and C, C is the principal debtor and
D is his surety.
39. Suretyship.-- When the holder of an accepted bill of exchange enters into any
contract with the acceptor which, under section 134 or 135 of the Indian Contract
Act, 1872 (9 of 1872), would discharge the other parties, the holder may expressly
reserve his right to charge the other parties, and in such case they are not
discharged.
40. Discharge of indorser''s liability.-- Where the holder of a negotiable
instrument, without the consent of the indorser, destroys or impairs the
indorser's remedy against a prior party, the indorser is discharged from liability
to the holder to the same extent as if the instrument had been paid at maturity.
Illustration
A is the holder of a bill of exchange made payable to the order of B, which
contains the following indorsements in blank--
First indorsement, "B".
Second indorsement, "Peter Williams."
Third indorsement, "Wright & Co.''
Fourth indorsement, "John Rozario."
This bill A puts in suit against John Rozario and strikes out, without John
Rozario's consent, the indorsements by Peter Williams and Wright & Co. A is not
entitled to recover anything from John Rozario.
41. Acceptor bound, although, indorsement forged.-- An acceptor of a bill of
exchange already indorsed is not relieved from liability by reason that such
indorsement is forged, if he knew or had reason to believe the indorsement to be
forged when he accepted the bill.
42. Acceptance of bill drawn in fictitious name.-- An acceptor of a bill of
exchange drawn in a fictitious name and payable to the drawer's order is not, by
reason that such name is fictitious, relieved from liability to any holder in due
course claiming under an indorsement by the same hand as the drawer's
signature, and purporting to be made by the drawer.
43. Negotiable instrument made, etc., without consideration.-- A negotiable
instrument made, drawn, accepted, indorsed, or transferred without
consideration, or for a consideration which fails, creates no obligation of
payment between the parties to the transaction. But if any such party has

transferred the instrument with or without indorsement to a holder for
consideration, such holder, and every subsequent holder deriving title from him,
may recover the amount due on such instrument from the transferor for
consideration or any prior party thereto.
Exception I.-- No party for whose accommodation a negotiable instrument has
been made, drawn, accepted or indorsed can, if he have paid the amount thereof,
recover thereon such amount from any person who became a party to such
instrument for his accommodation.
Exception II.-- No party to the instrument who has induced any other party to
make, draw, accept, indorse or transfer the same to him for a consideration
which he has failed to pay or perform in full shall recover thereon an amount
exceeding the value of the consideration (if any) which he has actually paid or
performed.
44. Partial absence or failure of money-consideration.-- When the consideration
for which a person signed a promissory note, bill of exchange or cheque
consisted of money, and was originally absent in part or has subsequently failed
in part, the sum which a holder standing in immediate relation with such signer
is entitled to receive from him is proportionally reduced.
Explanation.-- The drawer of a bill of exchange stands in immediate relation with
the acceptor. The maker of a promissory note, bill of exchange or cheque stands
in immediate relation with the payee, and the indorser with his indorsee. Other
signers may by agreement stand in immediate relation with a holder.
Illustration
A draws a bill on B for Rs. 500 payable to the order of A. B accepts the bill, but
subsequently dishonours it by non-payment. A sues B on the bill, B proves that it
was accepted for value as to Rs. 400, and as an accommodation to the plaintiff as
to the residue. A can only recover Rs. 400.
45. Partial failure of consideration not consisting of money.-- Where a part of
the consideration for which a person signed a promissory note, bill of exchange
or cheque, though not consisting of money, is ascertainable in money without
collateral enquiry, and there has been a failure of that party, the sum which a
holder standing in immediate relation with such signer is entitled to receive from
him is proportionally reduced.
1[45A. Holder''s right to duplicate of lost bill.-- Where a bill of exchange has
been lost before it is over-due, the person who was the holder of it may apply to
the drawer to give him another bill of the same tenor, giving security to the
drawer, if required, to indemnify him against all persons whatever in case the
bill alleged to have been lost shall be found again.
If the drawer on request as aforesaid refuses to give such duplicate bill, he may
be compelled to do so.
Footnotes:
1. Inserted by Act 2 of 1885, section 3.

CHAPTER IV:
OF NEGOTIATION
46. Delivery.-- The making, acceptance or indorsement of a promissory note, bill
of exchange or cheque is completed by delivery, actual or constructive.
As between parties standing in immediate relation; delivery to be effectual must
be made by the party making, accepting or indorsing the instrument, or by a
person authorized by him in that behalf.
As between such parties and any holder of the instrument other than a holder in
due course, it may be shown that the instrument was delivered conditionally or
for a special purpose only, and not for the purpose of transferring absolutely the
property therein.
A promissory note, bill of exchange or cheque payable to bearer is negotiable by
the delivery thereof.
A promissory note, bill of exchange or cheque payable to order is negotiable by
the holder by indorsement and delivery thereof.
47. Negotiation by delivery.-- Subject to the provisions of section 58, a
promissory note, bill of exchange or cheque payable to bearer is negotiable by
delivery thereof.
Exception.-- A promissory note, bill of exchange or cheque delivered on
condition that it is not to take effect except in a certain event is not negotiable
(except in the hands of a holder for value without notice of the condition) unless
such event happens.
Illustrations
(a) A, the holder of a negotiable instrument payable to bearer, delivers it to B's
agent to keep for B. The instrument has been negotiated.
(b) A, the holder of a negotiable instrument payable to bearer, which is in the
hands of A's banker, who is at the time the banker of B, directs the banker to
transfer the instrument to B's credit in the banker's account with B. The banker
does so, and accordingly now possesses the instrument as B's agent. The
instrument has been negotiated, and B has become the holder of it.
48. Negotiation by indorsement.-- Subject to the provisions of section 58, a
promissory note, bill of exchange or cheque 1[payable to order], is negotiable by
the holder by indorsement and delivery thereof.
49. Conversion of indorsement in blank into indorsement in full.-- The holder
of a negotiable instrument indorsed in blank may, without signing his own
name, by writing above the indorser's signature a direction to pay to any other
person as indorsee, convert the indorsement in blank into an indorsement in full;
and the holder does not thereby incur the responsibility of an indorser.
50. Effect of indorsement.-- The indorsement of a negotiable instrument
followed by delivery transfers to the indorsee the property therein with the right
of further negotiation; but the indorsement may, by express words, restrict or
exclude such right, or may merely constitute the indorsee an agent to indorse the

instrument, or to receive its contents for the indorser, or for some other specified
person.
Illustrations
B signs the following indorsements on different negotiable instruments payable
to bearer--
(a) "Pay the contents to C only."
(b) "Pay C for my use."
(c) "Pay C or order for the account of B."
(d) "The within must be credited to C."
These indorsements exclude the right of further negotiation by C.
(e) "Pay C."
(f) "Pay C value in account with the Oriental Bank."
(g) "Pay the contents to C, being part of the consideration in a certain deed of
assignment executed by C to indorser and others."
These indorsements do not exclude the right of further negotiation by C.
51. Who may negotiate.-- Every sole maker, drawer, payee or indorsee, or all of
several joint makers, drawers, payees or indorsees, of a negotiable instrument
may, if the negotiability of such instrument has not been restricted or excluded as
mentioned in section 50, indorse and negotiate the same.
Explanation.-- Nothing in this section enables a maker or drawer to indorse or
negotiate an instrument, unless he is in lawful possession or is holder thereof; or
enables a payee or indorsee to indorse or negotiate an instrument, unless he is
holder thereof.
Illustration
A bill is drawn payable to A or order. A indorses it to B, the indorsement not
containing the words "or order" or any equivalent words. B may negotiate the
instrument.
52. Indorser who excludes his own liability or makes it conditional.-- The
indorser of a negotiable instrument may, by express words in the indorsement,
exclude his own liability thereon, or make such liability or the right of the
indorsee to receive the amount due thereon depend upon the happening of a
specified event, although such event may never happen.
Where an indorser so excludes his liability and afterwards becomes the holder of
the instrument all intermediate indorsers are liable to him.
Illustrations
(a) The indorser of a negotiable instrument signs his name, adding the words
"Without recourse."
Upon this indorsement he incurs no liability.

(b) A is the payee and holder of a negotiable instrument. Excluding personal
liability by an indorsement "without recourse", he transfers the instrument to B,
and B indorses it to C, who indorses it to A. A is not only reinstated in his former
rights, but has the rights of an indorsee against B and C.
53. Holder deriving title from holder in due course.-- A holder of a negotiable
instrument who derives title from a holder in due course has the rights thereon
of that holder in due course.
54. Instrument indorsed in blank.-- Subject to the provisions hereinafter
contained as to crossed cheques, a negotiable instrument indorsed in blank is
payable to the bearer thereof even although originally payable to order.
55. Conversion of indorsement in blank into indorsement in full.-- If a
negotiable instrument, after having been indorsed in blank, is indorsed in full,
the amount of it cannot be claimed from the indorser in full, except by the person
to whom it has been indorsed in full, or by one who derives title through such
person.
56. Indorsement for part of sum due.-- No writing on a negotiable instrument is
valid for the purpose of negotiation if such writing purports to transfer only a
part of the amount appearing to be due on the instrument; but where such
amount has been partly paid a note to that effect may be indorsed on the
instrument, which may then be negotiated for the balance.
57. Legal representative cannot by delivery only negotiate instrument indorsed
by deceased.--
The legal representative of a deceased person cannot negotiate by
delivery only a promissory note, bill of exchange or cheque payable to order and
indorsed by the deceased but not delivered.
58. Instrument obtained by unlawful means or for unlawful consideration.--
When a negotiable instrument has been lost, or has been obtained from any
maker, acceptor or holder thereof by means of an offence or fraud, or for an
unlawful consideration, no possessor or indorsee who claims through the person
who found or so obtained the instrument is entitled to receive the amount due
thereon from such maker, acceptor or holder, or from any party prior to such
holder, unless such possessor or indorsee is, or some person through whom he
claims was, a holder thereof in due course.
59. Instrument acquired after dishonour or when overdue.-- The holder of a
negotiable instrument, who has acquired it after dishonour, whether by non-
acceptance or non-payment, with notice thereof, or after maturity, has only, as
against the other parties, the rights thereon of his transferor:
Accommodation note or bill.-- Provided that any person who, in good faith and
for consideration, becomes the holder, after maturity, of a promissory note or bill
of exchange made, drawn or accepted without consideration, for the purpose of
enabling some party thereto to raise money thereon, may recover the amount of
the note or bill from any prior party.
Illustration

The acceptor of a bill of exchange, when he accepted it, deposited with the
drawer certain goods as a collateral security for the payment of the bill, with
power to the drawer to sell the goods and apply the proceeds in discharge of the
bill if it were not paid at maturity. The bill not having been paid at maturity, the
drawer sold the goods and retained the proceeds, but indorsed the bill to A. A's
title is subject to the same objection as the drawer's title.
60. Instrument negotiable till payment or satisfaction.-- A negotiable
instrument may be negotiated (except by the maker, drawee or acceptor after
maturity) until payment or satisfaction thereof by the maker, drawee or acceptor
at or after maturity, but not after such payment or satisfaction.
Footnotes:
1. Substituted by Act 8 of 1919, section 4, for "payable to the order of a specified
person, or to a specified person or order".
CHAPTER V:
OF PRESENTMENT
61. Presentment for acceptance.-- A bill of exchange payable after sight must, if
no time or place is specified therein for presentment, be presented to the drawee
thereof for acceptance, if he can, after reasonable search, be found, by a person
entitled to demand acceptance, within a reasonable time after it is drawn, and in
business hours on a business day, in default of such presentment, no party
thereto is liable thereon to the person making such default.
If the drawee cannot, after reasonable search, be found, the bill is dishonoured.
If the bill is directed to the drawee at a particular place, it must be presented at
that place; and if at the due date for presentment he cannot, after reasonable
search, be found thereon, the bill is dishonoured.
1[Where authorized by agreement or usage, a presentment through the post
office by means of a registered letter is sufficient.]
62. Presentment of promissory note for sight.-- A promissory note, payable at a
certain period after sight must be presented to the maker thereof for Sight (if he
can after reasonable search be found) by a person entitled to demand payment,
within a reasonable time after it is made and in business hours on a business day.
In default of such presentment, no party thereto is liable thereon to the person
making such default.
63. Drawee''s time for deliberation.-- The holder must, if so required by the
drawee of a bill of exchange presented to him for acceptance, allow the drawee
2[forty-eight] hours (exclusive of public holidays) to consider whether he will
accept it.
64. Presentment for payment.-- 7[(1)]Promissory notes, bills of exchange and
cheques must be presented for payment to the maker, acceptor or drawee thereof
respectively, by or on behalf of the holder as hereinafter provided. In default of
such presentment, the other parties thereto are not liable thereon to such holder.
3[Where authorized by agreement or usage, a presentment through the post
office by means of a registered letter is sufficient.]

Exception.-- Where a promissory note is payable on demand and is not payable
at a specified place, no presentment is necessary in order to charge the maker
thereof.
7[(2) Notwithstanding anything contained in section 6, where an electronic image
of a truncated cheque is presented for payment, the drawee bank is entitled to
demand any further information regarding the truncated cheque from the bank
holding the truncated cheque in case of any reasonable suspicion about the
genuineness of the apparent tenor of instrument, and if the suspicion is that of
any fraud, forgery, tampering or destruction of the instrument, it is entitled to
further demand the presentment of the truncated cheque itself for verification:
Provided that the truncated cheque so demanded by the drawee bank shall be
retained by it, if the payment is made accordingly.]
65. Honours for presentment.-- Presentment for payment must be made during
the usual hours of business and, if at a banker's, within banking hours.
66. Presentment for payment of instrument payable after date or sight.-- A
promissory note or bill of exchange, made payable at a specified period after date
or sight thereof, must be presented for payment at maturity.
67. Presentment for payment of promissory note payable by instalments.-- A
promissory note payable by instalments must be presented for payment on the
third day after the date fixed for payment of each instalment; and non-payment
on such presentment has the same effect as non-payment of a note at maturity.
68. Presentment for payment of instrument payable at specified place and not
elsewhere.--
A promissory note, bill of exchange or cheque made, drawn or
accepted payable at a specified place and not elsewhere must, in order to charge
any party thereto, be presented for payment at that place.
69. Instrument payable at specified place.-- A promissory note or bill of
exchange made, drawn or accepted payable at a specified place must, in order to
charge the maker or drawer thereof, be presented for payment at that place.
70. Presentment where no exclusive place specified.-- A promissory note or bill
of exchange, not made payable as mentioned in sections 68 and 69, must be
presented for payment at the place of business (if any), or at the usual residence,
of the maker, drawee or acceptor thereof, as the case may be.
71. Presentment when maker, etc., has no known place of business or
residence.--
If the maker, drawee or acceptor of a negotiable instrument has no
known place of business or fixed residence, and no place is specified in the
instrument for presentment for acceptance or payment such presentment may be
made to him in person wherever he can be found.
72. Presentment of cheque to charge drawer.-- 4[Subject to the provisions of
section 84] a cheque must, in order to charge the drawer, be presented at the
bank upon which it is drawn before the relation between the drawer and his
banker has been altered to the prejudice of the drawer.
73. Presentment of cheque to charge any other person.-- A cheque must, in
order to charge any person except the drawer, be presented within a reasonable
time after delivery thereof by such person.

74. Presentment of instrument payable on demand.-- Subject to the provisions
of section 31, a negotiable instrument payable on demand must be presented for
payment within a reasonable time after it is received by the holder.
75. Presentment by or to agent, representative of deceased, or assignee of
insolvent.--
Presentment for acceptance or payment may be made to the duly
authorized agent of the drawee, maker or acceptor, as the case may be, or, where
the drawee, maker or acceptor has died, to his legal representative, or, where he
has been declared an insolvent, to his assignee.
5[75A. Excuse for delay in presentment for acceptance or payment.-- Delay in
presentment 6[for acceptance or payment] is excused if the delay is caused by
circumstances beyond the control of the holder, and not imputable to his default,
misconduct or negligence. When the cause of delay ceases to operate,
presentment must be made within a reasonable time.]
76. When presentment unnecessary.-- No presentment for payment is necessary,
and the instrument is dishonoured at the due date for presentment, in any of the
following cases:--
(a) if the maker, drawee or acceptor intentionally 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;
(b) as against any party sought to be charged therewith, if he has engaged to pay
notwithstanding non-presentment;
(c) as against any party if, after maturity, with knowledge that the instrument
has not been presented--
he makes a part payment on account of the amount due on the instrument,
or promises to pay the amount due thereon in whole or in part,
or otherwise waives his right to take advantage of any default in presentment for
payment;
(d) as against the drawer, if the drawer could not suffer damage from the want of
such presentment.
77. Liability of banker for negligently dealing with bill presented for
payment.-- When a bill of exchange, accepted payable at a specified bank, has
been duly presented there for payment and dishonoured, if the banker so
negligently or improperly keeps, deals with or delivers back such bill as to cause
loss to the holder, he must compensate the holder for such loss.
Footnotes:
1. Added by Act 2 of 1885, section 4
2. Substituted by Act 12 of 1921, section 2 for "twenty-four".
3. Inserted by Act 6 of 1897, section 2.

4. Inserted by Act 6 of 1897, section 2.
5. Inserted By Act 25 of 1920, section 2.
6. Substituted. by Act 12 of 1921, section 3, for "for payment".
7. Section 64 renumbered as Sub-Section(1) and Sub-Section(2) inserted by The
Negotiable Instruments (Amendment And Miscellaneous Provisions) Act, 2002
(55 of 2002) w.e.f. 06.02.2003
CHAPTER VI:
OF PAYMENT AND INTEREST
78. To whom payment should be made.-- Subject to the provisions of section 82,
clause (c), payment of the amount due on a promissory note, bill of exchange or
cheque must, in order to discharge the maker or acceptor, be made to the holder
of the instrument.
79. Interest when rate specified.-- When interest at a specified rate is expressly
made payable on a promissory note or bill of exchange, interest shall be
calculated at the rate specified, on the amount of the principal money due
thereon, from the date of the instrument, until tender or realization of such
amount, or until such date after the institution of a suit to recover such amount
as the Court directs.
80. Interest when no rate specified.-- When no rate of interest is specified in the
instrument, interest on the amount due thereon shall, 1[notwithstanding any
agreement relating to interest between any parties to the instrument], be
calculated at the rate of 2[eighteen per centum] per annum, from the date at
which the same ought to have been paid by the party charged, until tender or
realization of the amount due thereon, or until such date after the institution of a
suit to recover such amount as the Court directs.
Explanation.-- When the party charged is the indorser of an instrument
dishonoured by non-payment, he is liable to pay interest only from the time that
he receives notice of the dishonour.
81. Delivery of instrument on payment or indemnity in case of loss.-- 3[(1)]Any
person liable to pay, and called upon by the holder thereof to pay, the amount
due on a promissory note, bill of exchange or cheque is before payment entitled
to have it shown, and is on payment entitled to have it delivered up, to him, or, if
the instrument is lost or cannot be produced, to be indemnified against any
further claim thereon against him.
3[(2) Where the cheque is an electronic image of a truncated cheque, even after
the payment the banker who received the payment shall be entitled to retain the
truncated cheque.
(3) A certificate issued on the foot of the printout of the electronic image of a
truncated cheque by the banker who paid the instrument, shall be prima facie
proof of such payment.]
Footnotes:
1. Substituted By Act 30 of 1926, section 2, for "except in cases provided for by
the Code of Civil Procedure, section 532".

2. Substituted by the Banking, Public Financial Institutions and Negotiable
Instruments Laws (Amendment) Act, 1988 (66 of 1988), section 2 for `six per
centum'' w.e.f. 30-12-1988.
3. Section 81 renumbered as sub-section(1) and sub-sections(2) and (3) inserted
by The Negotiable Instruments (Amendment And Miscellaneous Provisions)
Act, 2002 (55 of 2002) w.e.f. 06.02.2003
CHAPTER VII:
OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
82. Discharge from liability.-- The maker, acceptor or indorser respectively of a
negotiable instrument is discharged from liability thereon--
(a) By cancellation-- to a holder thereof who cancels such acceptor's or indorser's
name with intent to discharge him, and to all parties claiming under such holder;
(b) By release-- to a holder thereof who otherwise discharges such maker,
acceptor or indorser, and to all parties deriving title under such holder after
notice of such discharge;
(c) By payment-- to all parties thereto, if the instrument is payable to bearer, or
has been indorsed in blank, and such maker, acceptor or indorser makes
payment in due course of the amount due thereon.
83. Discharge by allowing drawee more than forty-eight hours to accept.-- If the
holder of a bill of exchange allows the drawee more than 1[forty-eight] hours,
exclusive of public holidays, to consider whether he will accept the same, all
previous parties not consenting to such allowance are thereby discharged from
liability to such holder.
84. When cheque not duly presented and drawer damaged thereby.-- 2[(1)
Where a cheque is not presented for payment within a reasonable time of its
issue, and the drawer or person on whose account it is drawn had the right, at
the time when presentment ought to have been made, as between himself and
the banker, to have the cheque paid and suffers actual damage through the
delay, he is discharged to the extent of such damage, that is to say, to the extent
to which such drawer or person is a creditor of the banker to a large amount than
he would have been if such cheque had been paid.
(2) In determining what is a reasonable time, regard shall be had to the nature of
the instrument, the usage of trade and of bankers, and the facts of the particular
case.
(3) The holder of the cheque as to which such drawer or person is so discharged
shall be a creditor, in lieu of such drawer or person, of such banker to the extent
of such discharge and entitled to recover the amount from him.
Illustrations
(a) A draws a cheque for Rs. 1,000, and, when the cheque ought to be presented,
has funds at the bank to meet it. The bank fails before the cheque presented. The
drawer is discharged, but the holder can prove against the bank for the amount
of the cheque.

(b) A draws a cheque at Umballa on a bank in Calcutta. The bank fails before the
cheque could be presented in ordinary course. A is not discharged, for he has not
suffered actual damage through any delay in presenting the cheque.
85. Cheque payable to order.-- 3[( 1)] 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.
3[(2) Where a cheque is originally expressed to be payable to bearer, the drawee
is discharged by payment in due course to the bearer thereof, notwithstanding
any endorsement whether in full or in blank appearing thereon, and
notwithstanding that any such endorsement purports to restrict or exclude
further negotiation.]
4[85A. Drafts drawn by one branch of a bank on another payable to order.--
Where any draft, that is, an order to pay money, drawn by one office of a bank
upon another office of the same bank for a sum of money payable to order on
demand, purports to be indorsed by or on behalf of the payee, the bank is
discharged by payment in due course.]
86. Parties not consenting discharged by qualified or limited acceptance.-- If
the holder of a bill of exchange acquiesces in a qualified acceptance, or one
limited to part of the sum mentioned in the bill, or which substitutes a different
place or time for payment, or which, where the drawees are not partners, is not
signed by all the drawees, all previous parties whose consent is not obtained to
such acceptance are discharged as against the holder and those claiming under
him, unless on notice given by the holder they assent to such acceptance.
Explanation.-- An acceptance is qualified--
(a) where it is conditional, declaring the payment to be dependent or the
happening of an event therein stated;
(b) where it undertakes the payment of part only of the sum ordered to be paid;
(c) where, no place of payment being specified on the order, it undertakes the
payment at a specified place, and not otherwise or elsewhere; or where, a place
of payment being specified in the order, it undertakes the payment at some other
place and not otherwise or elsewhere;
(d) where it undertakes the payment at a time other than that at which under the
order it would be legally due.
87. Effects of material alteration.-- Any material alteration of a negotiable
instrument renders the same void as against any one who is a party thereto at the
time of making such alteration and does not consent thereto, unless it was made
in order to carry out the common intention of the original parties;
Alteration by indorsee.-- And any such alteration, if made by an indorsee,
discharges his indorser from all liability to him in respect of the consideration
thereof.
The provisions of this section are subject to those of sections 20, 49, 86 and 125.
88. Acceptor or indorser bound notwithstanding previous alteration.-- An
acceptor or indorser of a negotiable instrument is bound by his acceptance or
indorsement notwithstanding any previous alteration of the instrument.

89. Payment of instrument on which alteration is not apparent.-- 5[(1)]Where a
promissory note, bill of exchange or cheque has been materially altered but does
not appear to have been so altered, or where a cheque is presented for payment
which does not at the time of presentation appear to be crossed or to have had a
crossing which has been obliterated, payment thereof by a person or banker
liable to pay and paying the same according to the apparent tenor thereof at the
time of payment and otherwise in due course, shall discharge such person or
banker from all liability thereon; and such payment shall not be questioned by
reason of the instrument having been altered or the cheque crossed.
5[(2) Where the cheque is an electronic image of a truncated cheque, any
difference in apparent tenor of such electronic image and the truncated cheque
shall be a material alteration and it shall be the duty of the bank or the clearing
house, as the case may be, to ensure the exactness of the apparent tenor of
electronic image of the truncated cheque while truncating and transmitting the
image.
(3) Any bank or a clearing house which receives a transmitted electronic image of
a truncated cheque, shall verify from the party who transmitted the image to it,
that the image so transmitted to it and received by it, is exactly the same.]
90. Extinguishment of rights of action on bill in acceptor''s hands.-- If a bill of
exchange which has been negotiated is, at or after maturity, held by the acceptor
in his own right, all rights of action thereon are extinguished.
Footnotes:
1. Substituted by Act 12 of 1921, section 2, for "twenty-four"
2. Substituted by Act 6 of 1987, section 3, for section 84.
3. Section 85 re-numbered as sub-section (1) and sub-section (2) added by Act 17
of 1934, section 2.
4. Inserted. by Act 25 of 1930, section. 2.
5. Section 89 renumbered as Sub-section(1) and Sub-section(2) and (3) inserted by
The Negotiable Instruments (Amendment And Miscellaneous Provisions) Act,
2002 (55 of 2002) w.e.f. 06.02.2003
CHAPTER VIII:
OF NOTICE OF DISHONOUR
91. Dishonour by non-acceptance.-- A bill of exchange is said to be dishonoured
by non-acceptance when the drawee, or one of several drawees not being
partners, makes default in acceptance upon being duly required to accept the
bill, or where presentment is excused and the bill is not accepted.
Where the drawee is incompetent to contract, or the acceptance is qualified the
bill may be treated as dishonoured.
92. Dishonour by non-payment.-- A promissory note, bill of exchange or cheque
is said to be dishonoured by non-payment when the maker of the note, acceptor
of the bill or drawee of the cheque makes default in payment upon being duly
required to pay the same.
93. By and to whom notice should be given.-- When a promissory note, bill of
exchange or cheque is dishonoured by non-acceptance or non-payment, the

holder thereof, or some party thereto who remains liable thereon, must give
notice that the instrument has been so dishonoured to all other parties whom the
holder seeks to make severally liable thereon, and to some one of several parties
whom he seeks to make jointly liable thereon.
Nothing in this section renders it necessary to give notice to the maker of the
dishonoured promissory note, or the drawee or acceptor of the dishonoured bill
of exchange or cheque.
94. Mode in which notice may be given.-- Notice of dishonour may be given to a
duly authorized agent of the person to whom it is required to be given, or, where
he has died, to his legal representative, or, where he has been declared an
insolvent, to his assignee; may be oral or written; may, if written, be sent by post;
and may be in any form; but it must inform the party to whom it is given, either
in express terms or by reasonable intendment, that the instrument has been
dishonoured, and in what way, and that he will be held liable thereon; and it
must be given within a reasonable time after dishonour, at the place of business
or (in case such party has no place of business) at the residence of the party for
whom it is intended.
If the notice is duly directed and sent by post and miscarries, such miscarriage
does not render the notice invalid.
95. Party receiving must transmit notice of dishonour.-- Any party receiving
notice of dishonour must, in order to render any prior party liable to himself,
give notice of dishonour to such party within a reasonable time, unless such
party otherwise receives due notice as provided by section 93.
96. Agent for presentment.-- When the instrument is deposited with an agent for
presentment, the agent is entitled to the same time to give notice to his principal
as if he were the holder giving notice of dishonour, and the principal is entitled
to a further like period to give notice of dishonour.
97. When party to whom notice given is dead.-- When the party to whom notice
of dishonour is despatched is dead, but the party dispatching the notice is
ignorant of his death, the notice is sufficient.
98. When notice of dishonour is unnecessary.-- No notice of dishonour is
necessary--
(a) when it is dispensed with by the party entitled thereto;
(b) in order to charge the drawer, when he has countermanded payment;
(c) when the party charged could not suffer damage for want of notice;
(d) when the party entitled to notice cannot after due search be found; or the
party bound to give notice is, for any other reason, unable without any fault of
his own to give it;
(e) to charge the drawers, when the acceptor is also a drawer;
(f) in the case of a promissory note which is not negotiable;
(g) when the party entitled to notice, knowing the facts, promises
unconditionally to pay the amount due on the instrument.
CHAPTER IX:
OF NOTING AND PROTEST

99. Noting.-- When a promissory note or bill of exchange has been dishonoured
by non-acceptance or non-payment, the holder may cause such dishonour to be
noted by a notary public upon the instrument, or upon a paper attached thereto,
or partly upon each.
Such note must be made within a reasonable time after dishonour, and must
specify the date of dishonour, the reason.if any, assigned for such dishonour, or,
if the instrument has not been expressly dishonoured, the reason why the holder
treats it as dishonoured, and the notary's charges.
100. Protest.-- When a promissory note or bill of exchange has been dishonoured
by non-acceptance or non-payment, the holder may, within a reasonable time,
cause such dishonour to be noted and certified by a notary public.Such certificate
is called a protest.
Protest for better security.-- When the acceptor of a bill of exchange has become
insolvent, or his credit has been publicly impeached, before the maturity of the
bill, the holder may, within a reasonable time, cause a notary public to demand
better security of the acceptor, and on its being refused may, within a reasonable
time, cause such facts to be noted and certified as aforesaid.Such certificate is
called a protest for better security.
101. Contents of protest.-- A protest under section 100 must contain--
(a) either the instrument itself, or a literal transcript of the instrument and of
everything written or printed thereupon;
(b) the name of the person for whom and against whom the instrument has been
protested;
(c) a statement that payment or acceptance, or better security, as the case may be,
has been demanded of such person by the notary public; the terms of his answer,
if any, or a statement that he gave no answer or that he could not be found;
(d) when the note or bill has been dishonoured, the place and time of dishonour,
and, when better security has been refused, the place and time of refusal;
(e) the subscription of the notary public making the protest,
(f) in the event of an acceptance for honour or of a payment for honour, the name
of the person by whom, of the person for whom, and the manner in which, such
acceptance or payment was offered and effected.
1[A notary public may make the demand mentioned in clause (c) of this section
either in person or by his clerk or, where authorized by agreement or usage, by
registered letter.]
102. Notice of protest.-- When a promissory note or bill of exchange is required
by law to be protested, notice of such protest must be given instead of notice of
dishonour, in the same manner and subject to the same conditions; but the notice
may be given by the notary public who makes the protest.
103. Protest for non-payment after dishonour by non-acceptance.-- All bills of
exchange drawn payable at some other place than the place mentioned as the
residence of the drawee, and which are dishonoured by non-acceptance, may,
without further presentment to the drawee, be protested for non-payment in the
place specified for payment, unless paid before or at maturity.

104. Protest of foreign bills.-- Foreign bills of exchange must be protested for
dishonour when such protest is required by the law of the place where they are
drawn.
2[104A.When noting equivalent to protest.- For the purposes of this Act.where a
bill or note is required to be protested within a specified time or before some
further proceeding is taken, it is sufficient that the bill has been noted for protest
before the expiration of the specified time or the taking of the proceeding; and
the formal protest may be extended at any time thereafter as of the date of the
noting.]
Footnotes:
1. Added by Act 2 of 1885, section 5.
2. Inserted by Act 2 of 1885, section 6.
CHAPTER X:
OF REASONABLE TIME
105. Reasonable time.-- In determining what is a reasonable time for
presentment for acceptance or payment, for giving notice of dishonour and for
noting, regard shall be had to the nature of the instrument and the usual course
of dealing with respect to similar instruments; and, in calculating such time,
public holidays shall be excluded.
106. Reasonable time of giving notice of dishonour.-- If the holder and the
party to whom notice of dishonour is given carry on business or live (as the case
may be) in different places, such notice is given within a reasonable time if it is
despatched by the next post or on the day next after the day of dishonour.
If the said parties carry on business or live in the same place, such notice is given
within a reasonable time if it is despatched in time to reach its destination on the
day next after the day of dishonour.
107. Reasonable time for transmitting such notice.-- A party receiving notice of
dishonour, who seeks to enforce his right against a prior party, transmits the
notice within a reason able time if he transmits it within the same time after its
receipt as he would have had to give notice if he had been the holder.
CHAPTER XI:
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN
CASE OF NEED
108. Acceptance for honour.-- When a bill of exchange has been noted or
protested for non-acceptance or for better security, any person not being a party
already liable thereon may, with the consent of the holder, by writing on the bill,
accept the same for the honour of any party thereto1[ * * *].
109. How acceptance for honour must be made.-- A person desiring to accept for
honour must, 2[by writing on the bill under his hand], declare that he accepts
under protest the protested bill for the honour of the drawer or of a particular
indorser whom he names, or generally for honour 3[* * *].
110. Acceptance not specifying for whose honour it is made.-- Where the
acceptance does not express for whose honour it is made it shall be deemed to be
made for the honour of the drawer.

111. Liability of acceptor for honour.-- An acceptor for honour binds himself to
all parties subsequent to the party for whose honour he accepts to pay the
amount of the bill if the drawee do not; and such party and all prior parties are
liable in their respective capacities to compensate the acceptor for honour for all
loss or damage sustained by him in consequence of such acceptance.
But an acceptor for honour is not liable to the holder of the bill unless it is
presented, or (in case the address given by such acceptor on the bill is a place
other than the place where the bill is made payable) forwarded for presentment,
not later than the day next after the day of its maturity.
112. When acceptor for honour may be charged.-- An acceptor for honour
cannot be charged unless the bill has at its maturity been presented to the drawee
for payment, and has been dishonoured by him, and noted or protested for such
dishonour.
113. Payment for honour.-- When a bill of exchange has been noted or protested
for non-payment, any person may pay the same for the honour of any party
liable to pay the same: provided that the person so paying 4[or his agent in that
behalf] has previously declared before a notary public the party for whose
honour he pays, and that such declaration has been recorded by such notary
public.
114. Right of payer for honour.-- Any person so paying is entitled to all the
rights in respect of the bill, of the holder at the time of such payment, and may
recover from the party for whose honour he pays all sums so paid, with interest
thereon and with all expenses properly incurred in making such payment.
115. Drawee in case of need-- Where a drawee in case of need is named in a bill
of exchange, or in any indorsement thereon, the bill is not dishonoured until it
has been dishonoured by such drawee.
116. Acceptance and payment without protest.-- A drawee in case of need may
accept and pay the bill of exchange without previous protest.
Footnotes:
1. Second sentence omitted by Act 2 of 1985, section 7.
2. Substituted by Act 2 of 1885, section 8, for "in the presence of a notary public,
subscribe the bill with his own hand, and".
3. The words "and such declaration must be recorded by the notary in his
register" omitted by Act 2 of 1885, section 8.
4. Inserted by Act 2 of 1885, section 9.
CHAPTER XII:
OF COMPENSATION
117. Rules as to compensation.-- The compensation payable in case of dishonour
of a promissory note, bill of exchange or cheque, by any party liable to the holder
or any indorsee, shall 1[* * *] be determined by the following rules:--
(a) the holder is entitled to the amount due upon the instrument, together with
the expenses properly incurred in presenting, noting and protesting it;

(b) when the person charged resides at a place different from that at which the
instrument was payable, the holder is entitled to receive such sum at the current
rate of exchange between the two places;
(c) an indorser who, being liable, has paid the amount due on the same is entitled
to the amount so paid with interest at 2[eighteen per centum] per annum from
the date of payment until tender or realization thereof, together with all expenses
caused by the dishonour and payment;
(d) when the person charged and such indorser reside at different places, the
indorser is entitled to receive such sum at the current rate of exchange between
the two places;
(e) the party entitled to compensation may draw a bill upon the party liable to
compensate him, payable at sight or on demand, for the amount due to him,
together with all expenses properly incurred by him. Such bill must be
accompanied by the instrument dishonoured and the protest thereof (if any). If
such bill is dishonoured, the party dishonouring the same is liable to make
compensation thereof in the same manner as in the case of the original bill.
Footnotes:
1. The words, figures and brackets "(except in cases provided for by the Code of
Civil Procedure, Section 532,)" omitted by Act 30 of 1926, section 3.
2. Substituted by the Banking, Public Financial Institutions and Negotiable
Instruments Laws (Amendment) Act, 1988 (66 of 1988), section 3, for ''six per
centum'' w.e.f. 30-12-1988.
CHAPTER XIII:
SPECIAL RULES OF EVIDENCE
118. Presumptions as to negotiable instruments of consideration.-- Until the
contrary is proved, the following presumptions shall be made:--
(a) of consideration-- that every negotiable instrument was made or drawn for
consideration, and that every such instrument, when it has been accepted,
indorsed, negotiated or transferred, was accepted, indorsed, negotiated or
transferred for consideration;
(b) as to date-- that every negotiable instrument bearing a date was made or
drawn on such date;
(c) as to time of acceptance-- that every accepted bill of exchange was accepted
within a reasonable time after its date and before its maturity;
(d) as to time of transfer-- that every transfer of a negotiable instrument was
made before its maturity;
(e) as to order of indorsements-- that the indorsements appearing upon a
negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps-- that a lost promissory note, bill of exchange or cheque was duly
stamped;
(g) that holder is a holder in due course-- that the holder of a negotiable
instrument is a holder in due course; provided that, where the instrument has
been contained from its lawful owner, or from any person in lawful custody
thereof, by means of an offence or fraud, or has been obtained from the maker or

acceptor thereof by means of an offence or fraud, or for unlawful consideration,
the burden of proving that the holder is a holder in due course lies upon him.
119. Presumption on proof of protest.-- In a suit upon an instrument which has
been dishonoured, the Court shall, on proof of the protest, presume the fact of
dishonour, unless and until such fact is disproved.
120. Estoppel against denying original validity of instrument.-- No maker of a
promissory note, and no drawer of a bill of exchange or cheque, and no acceptor
of a bill of exchange for the honour of the drawer shall,on proof of the protest,
presume the fact of dishonour, unless and until validity of the instrument as
originally made or drawn.
121. Estoppel against denying capacity of payee to indorse.-- No maker of a
promissory note and no acceptor of a bill of exchange 1[payable to order] shall, in
a suit thereon by a holder in due course, be permitted to deny the payee's
capacity, at the rate of the note or bill, to indorse the same.
122. Estoppel against denying signature or capacity of prior party.-- No
indorser of a negotiable instrument shall, in a suit thereon by a subsequent
holder, be permitted to deny the signature or capacity to contract of any prior
party to the instrument.
Footnotes:
CHAPTER XIV: OF CROSSED CHEQUES
123. Cheque crossed generally.-- Where a cheque bears across its face an
addition of the words "and company" or any abbreviation thereof, between two
parallel transverse lines, or of two parallel transverse lines simply, either with or
without the words "not negotiable," that addition shall be deemed a crossing,
and the cheque shall be deemed to be crossed generally.
124. Cheque crossed specially.-- Where a cheque bears across its face an addition
of the name of a banker, either with or without the words "not negotiable," that
addition shall be deemed a crossing, and the cheque shall be deemed to be
crossed specially, and to be crossed to that banker.
125. Crossing after issue.-- Where a cheque is uncrossed, the holder may cross it
generally or specially.
Where a cheque is crossed generally, the holder may cross it specially.
Where a cheque is crossed generally or specially, the holder may add the words
"not negotiable".
Where a cheque is crossed specially, the banker to whom it is crossed may again
cross it specially to another banker, his agent, for collection.
126. Payment of cheque crossed generally.-- Where a cheque is crossed
generally, the banker on whom it is drawn shall not pay it otherwise than to a
banker.
Payment of cheque crossed specially.-- Where a cheque is crossed specially, the
banker on whom it is drawn shall not pay it otherwise than to the banker to
whom it is crossed, or his agent for collection.
127. Payment in due course of crossed cheque.-- Where a cheque is crossed
specially to more than one banker, except when crossed to an agent for the

purpose of collection, the banker on whom it is drawn shall refuse payment
thereof.
128. Payment in due course of crossed cheque.-- Where the banker on whom a
crossed cheque is drawn has paid the same in due course, the banker paying the
cheque, and (in case such cheque has come to the hands of the payee) the drawer
thereof, shall respectively be entitled to the same rights, and be placed in the
same position in all respects, as they would respectively be entitled to and placed
in if the amount of the cheque had been paid to and received by the true owner
thereof.
129. Payment of crossed cheque out of due course.-- Any banker paying a
cheque crossed generally otherwise than to a banker, or a cheque crossed
specially otherwise than to the banker to whom the same is crossed, or his agent
for collection, being a banker, shall be liable to the true owner of the cheque for
any loss he may sustain owing to the cheque having been so paid.
130. Cheque bearing "not negotiable".-- A person taking a cheque crossed
generally or specially, bearing in either case the words "not negotiable," shall not
have and shall not be capable of giving, a better title to the cheque than that
which the person from whom he took it had.
131. Non-liability of banker receiving payment of cheque.-- A banker who has
in good faith and without negligence received payment for a customer of a
cheque crossed generally or specially to himself shall not, in case the title to the
cheque proves defective, incur any liability to the true owner of the cheque by
reason only of having received such payment.
1[Explanation 3[I].-- A banker receives payment of a crossed cheque for a
customer within the meaning of this section notwithstanding that he credits his
customer's account with the amount of the cheque before receiving payment
thereof.]
3[Explanation II.--It shall be the duty of the banker who receives payment based
on an electronic image of a truncated cheque held with him, to verify the prima
facie genuineness of the cheque to be truncated and any fraud, forgery or
tampering apparent on the face of the instrument that can be verified with due
diligence and ordinary care.]
2[131A. Application of Chapter to drafts.-- The provisions of this Chapter shall
apply to any draft, as defined in section 85A, as if the draft were a cheque.
Footnotes:
1. Added by Act 18 of 1922, section 2.
2. Added by Act 33 of 1947, section 2.
3. Explanation renumbered as Explanation I and Explanation II inserted by The
Negotiable Instruments (Amendment And Miscellaneous Provisions) Act, 2002
(55 of 2002) w.e.f. 06.02.2003
CHAPTER XV:
OF BILLS IN SETS

132. Set of bills.-- Bills of exchange may be drawn in parts, each part being
numbered and containing a provision that it shall continue payable only so long
as the others remain unpaid. All the parts together make a set; but the whole set
constitutes only one bill, and is extinguished when one of the parts, if a separate
bill, would be extinguished.
Exception.-- When a person accepts or indorses different parts of the bill in
favour of different persons, he and the subsequent indorsers of each part are
liable on such part as if it were a separate bill.
133. Holder of first acquired part entitled to all.-- As between holders in due
course of different parts of the same set, he who first acquired title to his part is
entitled to the other parts and the money represented by the bill.
CHAPTER XVI:
OF INTERNATIONAL LAW
134. Law governing liability of maker, acceptor or indorser of foreign
instrument.-- In the absence of a contract to the contrary, the liability of the
maker or drawer of a foreign promissory note, bill of exchange or cheque is
regulated in all essential matters by the law of the place where he made the
instrument, and the respective liabilities of the acceptor and indorser by the law
of the place where the instrument is made payable.
Illustration
A bill of exchange was drawn by A in California where the rate of interest is 25
per cent, and accepted by B, payable in Washington where the rate of interest is 6
per cent. The bill is endorsed in 2[India], and is dishonoured. An action on the
bill is brought against B in 1[India]. He is liable to pay interest at the rate of 6 per
cent., only; but if A is charged as drawer, A is liable to pay interest at the rate of
25 per cent.
135. Law of place of payment governs dishonour.-- Where a promissory note,
bill of exchange or cheque is made payable in a different place from that in which
it is made or indorsed, the law of the place where it is made payable determines
what constitutes dishonour and what notice of dishonour is sufficient.
Illustration
A bill of exchange drawn and indorsed in 1[India], but accepted payable in
France, is dishonoured. The indorsee causes it to be protested for such
dishonour, and gives notice thereof in accordance with the law of France though
not in accordance with the rules herein contained in respect of bills which are not
foreign. The notice is sufficient.
136. Instrument made, etc., out of India, but in accordance with the law of
India.--
If a negotiable instrument is made, drawn, accepted or indorsed
2[outside India], but in accordance with the 3[law of India], the circumstance that
any agreement evidenced by such instrument is invalid according to the law of

the country wherein it was entered into does not invalidate any subsequent
acceptance or indorsement made thereon 4[within India].
137. Presumption as to foreign law.-- The law of any foreign country 5[* * *]
regarding promissory notes, bills of exchange and cheques shall be presumed to
be the same as that of 6[India], unless and until the contrary is proved.
Footnotes:
1. Substituted by Act 3 of 1951, section 3 and Schedule, for "the States".
2. The words "out of British India" were successively amended by the A.O. 1948,
the A.O. 1950 and Act 3 of 1951, section 3 and Schedule to read as above.
3. The words "law of British India" were successively amended by A.O. 1948, the
A.O. 1950 and Act 3 of 1951, section 3 and Schedule to read as above.
4. The words "in British India" were successively amended, by A.O. 1948, the
A.O. 1950 and Act 3 of 1951, section 3 and Schedule to read as above.
5. The words "or the State of Jammu and Kashmir" omitted by Act 62 of 1956,
section 2 and Schedule
6. The words "British India" has been successively substituted by the A.O. 1948,
A.O. 1950 and Act 3 of 1951, section 3 and Schedule to read as above.
1[CHAPTER XVII:
OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES
FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS
138. Dishonour of cheque for insufficiency, etc., of funds in the account.--
Where any cheque drawn by a person on an account maintained by him with a
banker for payment of any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of money standing to
the credit of that account is insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that account by an agreement made with
that bank, such person shall be deemed to have committed an offence and shall,
without prejudice to any other provision of this Act, be punished with
imprisonment for 2[a term which may be extended to two years], or with fine
which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless--
(a) the cheque has been presented to the bank within a period of six months from
the date on which it is drawn or within the period of its validity, whichever is
earlier.
(b) the payee or the holder in due course of the cheque, as the case may be,
makes a demand for the payment of the said amount of money by giving a
notice, in writing, to the drawer of the cheque, 3[with in thirty days] of the receipt
of information by him from the bank regarding the return of the cheque as
unpaid, and

( c) the drawer of such cheque fails to make the payment of the said amount of
money to the payee or, as the case may be, to the holder in due course of the
cheque, within fifteen days of the receipt of the said notice.
Explanation.-- For the purposes of this section, "debt or other liability" means a
legally enforceable debt or other liability.
139. Presumption in favour of holder.-- It shall be presumed, unless the contrary
is proved, that the holder of a cheque received the cheque of the nature referred
to in section 138 for the discharge, in whole or in part, or any debt or other
liability.
140. Defence which may not be allowed in any prosecution under section 138.--
It shall not be a defence in a prosecution for an offence under section 138 that the
drawer had no reason to believe when he issued the cheque that the cheque may
be dishonoured on presentment for the reasons stated in that section.
141. Offences by companies.-- (1) If the person committing an offence under
section 138 is a company, every person who, at the time the offence was
committed, was in charge of, and was responsible to, the company for the
conduct of the business of the company, as well as the company, shall be deemed
to be guilty of the offence and shall be liable to be proceeded against and
punished accordingly:
Provided that nothing contained in this sub-section shall render any person
liable to punishment if he proves that the offence was committed without his
knowledge, or that he had exercised all due diligence to prevent the commission
of such offence.
4[Provided further that where a person is nominated as a Director of a company
by virtue of his holding any office or employment in the Central Government or
State Government or a financial corporation owned or controlled by the Central
Government or the State Government, as the case may be, he shall not be liable
for-prosecution under this Chapter.]
(2) Notwithstanding anything contained in sub-section (1), where any offence
under this Act has been committed by a company and it is proved that the
offence has been committed with the consent or connivance of, or is attributable
to, any neglect on the part of, any director, manager, secretary other officer of the
company, such director, manager, secretary or other officer shall also be deemed
to be guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
Explanation.-- for the purposes of this section,--
(a) "company" means any body corporate and includes a firm or other association
of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.
142. Cognizance of offences.-- Notwithstanding anything contained in the Code
of Criminal Procedure, 1973 (2 of 1974)--
(a) no court shall take cognizance of any offence punishable under section 138
except upon a complaint, in writing, made by the payee or, as the case may be,
the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause-of-
action arises under clause (c) of the proviso to section 138;
4[Provided that the cognizance of a complaint may be taken by the Court after
the prescribed period, if the complainant satisfies the Court that he had sufficient
cause for not making a complaint within such period.]
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate
of the first class shall try any offence punishable under section 138.
4[143. Power of Court to try cases summarily.--
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), all offences under this Chapter shall be tried by a Judicial Magistrate
of the first class or by a Metropolitan Magistrate and the provisions of sections
262 to 265 (both inclusive) of the said Code shall, as far as may be, apply to such
trials:
Provided that in the case of any conviction in a summary trial under this section,
it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term
not exceeding one year and an amount of fine exceeding five thousand rupees:
Provided further that when at the commencement of, or in the course of, a
summary trial under this section, it appears to the Magistrate that the nature of
the case is such that a sentence of imprisonment for a term exceeding one year
may have to be passed or that it is, for any other reason, undesirable to try the
case summarily, the Magistrate shall after hearing the parties, record an order to
that effect and thereafter recall any witness who may have been examined and
proceed to hear or rehear the case in the manner provided by the said Code.
(2) The trial of a case under this section shall, so far as practicable, consistently
with the interests of justice, be continued from day to day until its conclusion,
unless the Court finds the adjournment of the trial beyond the following day to
be necessary for reasons to be recorded in writing.
(3) Every trial under this section shall be conducted as expeditiously as possible
and an endeavour shall be made to conclude the trial within six months from the
date of filing of the complaint.
144. Mode of service of summons.--
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), and for the purposes of this Chapter, a Magistrate issuing a summons
to an accused or a witness may direct a copy of summons to be served at the
place where such accused or witness ordinarily resides or carries on business or
personally works for gain, by speed post or by such courier services as are
approved by 8 Court of Session.
(2) Where an acknowledgment purporting to be signed by the accused or the
witness or an endorsement purported to be made by any person authorised by
the postal department or the courier services that the accused or the witness
refused to take delivery of summons has been received, the Court issuing the
summons may declare that the summons has been duly sewed.
145. Evidence on affidavit.--

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), the evidence of the complainant may be given by him on affidavit
and may, subject to all just exceptions be read in evidence in any enquiry, trial or
other proceeding under the said Code.
(2) The Court may, if it thinks fit, and shall, on the application of the prosecution
or the accused, summon and examine any person giving evidence on affidavit as
to the facts contained therein.
146. Bank's slip prima facie evidence for certain facts.--
The Court shall, in respect of every proceeding under this Chapter, on
production of bank's slip or memo having thereon the official mark denoting that
the cheque has been dishonoured, presume the fact of dishonour of such cheque,
unless and until such fact is disproved.
147. Offences to be compoundable.--
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2
of 1974), every offence punishable under this Act shall be compoundable.]
SCHEDULE.-- Enactment repealed.-- [Rep. by the Amending Act, 1981 (12 of
1981), section 2 and Schedule I, Pt. I].
Footnotes:
1. Act, 1988 (66 of 1988), section 4 w.e.f. 1-4-1989. Earlier Chapter XVII relating to
"Notaries Public", Inserted by Act 2 of 1985, section 10, was replaced by the
Notaries Act, 1952 (53 of 1952), section 16 w.e.f. 14-2-1956.
2. Substituted for "a term which may be extended to one year" by The Negotiable
Instruments (Amendment And Miscellaneous Provisions) Act, 2002 (55 of 2002)
w.e.f. 06.02.2003
3. Substituted for "with fifteen days" by The Negotiable Instruments
(Amendment And Miscellaneous Provisions) Act, 2002 (55 of 2002) w.e.f.
06.02.2003
4. Inserted by The Negotiable Instruments (Amendment And Miscellaneous
Provisions) Act, 2002 (55 of 2002) w.e.f. 06.02.2003
5. Substituted by Act 8 of 1919, section 5, for "payable to, or to the order of, a
specified person".


 

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