[AI] negociable instrument act in e-text

Vikas Kapoor dl.vikas at gmail.com
Thu Jul 19 13:24:52 EDT 2007


Shouldn't these types of very specific mails be addressed only to the 
concerned person instead of flooding the other people's mailboxes with 
unnecessary traffic with such bulky mails?
Vikas Kapoor,
MSN+Yahoo+Skype ID: dl_vikas,
Mobile: (+91) 9891098137.
----- Original Message ----- 
From: "Dr. Vipin Malhotra" <malhotravipin at yahoo.com>
To: "Chetan Sharma" <chetansharma at obc.co.in>; 
<accessindia at accessindia.org.in>
Sent: Thursday, July 19, 2007 8:10 PM
Subject: Re: [AI] negociable instrument act in e-text


Negotiable Instruments Act, 1881

Negotiable Instruments Act, 1881

[26 of 1881]

An Act to define and amend the law relating to
Promissory Notes, Bills of
Exchange and Cheques.

Whereas it is expedient to define and amend the law
relating to promissory
notes, bills of exchange and cheques;

It is hereby enacted as follows:-

Chapter I

Preliminary

Short title.

1. This Act may be called the Negotiable Instruments
Act, 1881.

Local extent, Saving of usages relating to hundies,
etc.

It extends to the whole of India but nothing herein
contained affects the
Indian Paper Currency Act, 1871 (3 of 1871), section
21, or affects any
local
usage relating to any instrument in an oriental
language :

Commencement

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.  **
                                             **
**

Inter
pretation clause.

3. In this Act-

"Banker".

"Banker" includes any person acting as a banker and
any post office saving
bank.

Chapter II

Of Notes, bills and cheques

"Promissory note".

4. A "promissory note" is an instrument in writing
(not being a bank-note or
a currency-note) containing an unconditional
undertaking, signed by the
maker,
to pay a certain sum of money only to, or to the order
of, a certain person,
or to the bearer of the instrument.

Illustrations

A signs instruments in the following terms:-

     (a)  "I promise to pay B or order Rs. 500."

     (b)  "I acknowledge myself to be indebted to B in
Rs. 1,000, to be paid
on demand, for value received."

     (c)  "Mr. B, I.O.U. Rs. 1,000."

     (d)  "I promise to pay B Rs. 500 and all other
sums which shall be due
to him."

     (e)  "I promise to pay B Rs. 500 first deducting
thereout any money
which he may owe me."

     (f)  "I promise to pay B Rs. 500 seven days after
my marriage with C."

     (g)  "I promise to pay B Rs. 500 on D's death,
provided D leaves me
enough to pay that sum."

     (h)  "I promise to pay B Rs. 500 and to deliver
to him my black horse
on 1st January next."

The instruments respectively marked (a) and (b) are
promissory notes. The
instruments respectively marked (c), (d), (e), (f),
(g) and (h) are not
promissory
notes.

"Bill of exchange".

5. 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.

1
["Cheque".

6. A "cheque" is a bill of exchange drawn on a
specified banker and not
expressed to be payable otherwise than on demand and
it includes the
electronic
image of a truncated cheque and a cheque in the
electronic form.

Explanation I.-For the purposes of this section, the
expressions-

     (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.]

"Drawer", "
Drawee".

7. 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".

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 indorsers, 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".

"Holder".

8. 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.

"Holder in d
ue course".

9. "Holder in due course" means any person who for
consideration became the
possessor of a promissory note, bill of exchange or
cheque if payable to
bearer,

or the payee or indorsee thereof, if 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.

"Payment in
 due course".

10. "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.

"Inland instr
ument".

11. A promissory note, bill of exchange or cheque
drawn or made in India and
made payable in, or drawn upon any person resident in
India shall be deemed
to be an inland instrument.

"Foreign ins
trument".

12. Any such instrument not so drawn, made or made
payable shall be deemed
to be a foreign instrument.

"Negotiable
instrument".

13. (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.

(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.

Negotiation.

14. 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.

Indorsemen
t

15. 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".

Indorsemen
t "in blank" and "in full".

16. (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.

"Indorsee"

(2) The provisions of this Act relating to a payee
shall apply with the
necessary modifications to an indorsee.

Ambiguous
instruments.

17. Where an instrument may be construed either as a
promissory note or bill
of exchange, the holder may at his election treat is
as either and the
instrument
shall be thence forward treated accordingly.

Where amo
unt is stated differently in figures and words.

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.

Instrument
s payable on demand.

19. A promissory note or bill of exchange, in which no
time for payment is
specified, and a cheque, are payable on demand.

Inchoate st
amped instruments.

20. Where one person signs and delivers to another a
paper stamped in
accordance with the law relating to negotiable
instruments then in force in
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.

"At sight",
 "On presentment", "After sight".

21. 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.

"Maturity"
.

22. 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.

Calculating
 maturity of bill or note payable so many months after
date or sight.

23. In calculating the date at which a promissory note
or bill of exchange,
made payable a stated number of months after date or
after sight, or after a
certain event, is at maturity, the period stated shall
be held to terminate
on the day of the month which corresponds with the day
on which the
instrument
is dated, or presented for acceptance or sight, or
noted for non-acceptance,
or protested for non-acceptance, or the event happens,
or, where the
instrument
is a bill of exchange made payable a stated number of
months after sight and
has been accepted for honour, with the day on which it
was so accepted. If
the month in which the period would terminate has no
corresponding day, the
period shall be held to terminate on the last day of
such month.

Illustrations

     (a)  A negotiable instrument, dated 29th January,
1878, is made payable
at one month after date. The instrument is at maturity
on the 3rd 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.

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

24. 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.

When day
of maturity is a holiday.

25. 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 and any other
day declared by the Central  Government, by
notification in the Official
Gazette,
to be a public holiday.

Chapter III

parties to Notes, Bills and Cheques

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

26. 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.

Agency.

27. 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.

Liabilit
y of agent signing.

28. 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.

Liabilit
y of legal representative signing.

29. 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.

Liabilit
y of drawer.

30. 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.

Liabilit
y of drawee of cheque.

31. 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.

Liabilit
y of maker of note and acceptor of bill.

32. 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.

Onl
y drawee can be acceptor except in need or for honour.

33.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.

Acc
eptance by several drawees not partners.

34. 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.

Lia
bility of indorser.

35. 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.

Lia
bility of prior parties to holder in due course.

36. Every prior party to a negotiable instrument is
liable thereon to a
holder in due course until the instrument is duly
satisfied.

Ma
ker, drawer and acceptor principals.

37. 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.

Prio
r party a principal in respect of each subsequent
party.

38. 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.

Sur
etyship.

39. 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.

Dis
charge of indorser's liability.

40. 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 indorsement by Peter Williams
and Wright & Co. A is
not
entitled to recover anything from John Rozario.

Acce
ptor bound although indorsement forged.

41. 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.

Acce
ptance of bill drawn in fictitious name.

42. 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.

Nego
tiable instrument made, etc., without consideration.

43. 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 has
paid the amount
thereof,
recover thereon such amount from any person who became
a party to such
instrument for his accommodation.

Exception II : No party to the instrument who has
induced any other party to
make, draw, accept, indorse or transfer the same to
him for a consideration
which he has failed to pay or perform in full shall
recover thereon an
amount exceeding the value of the consideration (if
any) which he has
actually paid
or performed.

Parti
al absence or failure of money-consideration.

44. 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.

Parti
al failure of consideration not consisting of money.

45. 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
uncertainable
in money without collateral enquiry, and there has
been a failure of that
part, the sum which a holder standing in immediate
relation with such signer
is entitled to receive from him is proportionally
reduced.

Hold
er's right to duplicate of lost bill.

45A. Where a bill of exchange has been lost before it
is overdue, the person
who was the holder of it may apply to the drawer to
give him another bill of
the same tenor, giving security to the drawer, if
required, to indemnify him
against all persons whatever in case the bill alleged
to have been lost
shall
be found again.

If the drawer on request as aforesaid refuses to give
such duplicate bill,
he may be compelled to do so.

Chapter IV

Of Negotiation

Delivery

46. 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.

Neg
otiation by delivery.

47. 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.

Neg
otiation by indorsement.

48. Subject to the provisions of section 58, a
promissory note, bill of
exchange or cheque payable to order, is negotiable by
the holder by
indorsement
and delivery thereof.

Con
version of indorsement in blank into indorsement in
full.

49. 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.

Effe
ct of indorsement.

50. 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 the
indorser and others."

           These indorsements do not exclude the right
of further
negotiation by C.

Who
 may negotiate.

51. 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.

Indorser who excludes his own liability or makes it c
onditional.

52. 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.

Holder deriving title from holder in due course.

53. 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.

Instrument indorsed in blank.

54. 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.

Conversion of indorsement in blank into indors
ement in full.

55. 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.

Indorsement for part of sum due.

56. 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.

Legal representative cannot by d
elivery only negotiate instrument indorsed by
deceased.

57. 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.

Instrument obtained by unlawful
means or for unlawful consideration.

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 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.

Instrument acquired after dishon
our or when overdue.

59. 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.

Instrument negotiable till payme
nt or satisfaction.

60. A negotiable instrument may be negotiated (except
by the maker, drawee
or acceptor after maturity) until payment or
satisfaction thereof by the
maker,
drawee or acceptor at or after maturity, but not after
such payment or
satisfaction.

Chapter V

Of presentment

Presentment for acceptance.

61.   A bill of exchange payable after sight must, if
no time or place is
specified therein for presentment, be presented to the
drawee thereof for
acceptance,
if he can, after reasonable search, be found, by a
person entitled to demand
acceptance, within a reasonable time after it is
drawn, and in business
hours
on a business day. In default of such presentment, no
party thereto is
liable thereon to the person making such default. If
the drawee cannot,
after reasonable
search, be found, the bill is dishonoured.

If the bill is directed to the drawee at a particular
place, it must be
presented at that place; and if at the due date for
presentment he cannot,
after
reasonable search, be found there, the bill is
dishonoured.

Where authorized by agreement or usage, a presentment
through the post
office by means of a registered letter is sufficient.

Presentment of promissory note for sight.

62. 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.

Drawee's time for deliberation.

63. The holder must, if so required by the drawee of a
bill of exchange
presented to him for acceptance, allow the drawee
forty-eight hours
(exclusive of
public holidays) to consider whether he will accept
it.

Presentment for payment.

64.
1
[(1)] Promissory notes, bills of exchange and cheques
must be presented for
payment to the maker, acceptor or drawee thereof
respectively, by or on
behalf
of the holder as hereinafter provided. In default of
such presentment, the
other parties thereto are not liable thereon to such
holder.

Where 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.

2
[(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.]

Hours for presentment.

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

Presentment for payme
nt of instrument payable after date or sight.

66. 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.

Presentment for payme
nt of promissory note payable by instalments.

67. 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.

Presentment for payme
nt of instrument payable at specified place and not
elsewhere.

68. 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.

Instrument payable at s
pecified place.

69. 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.

Presentment where no
exclusive place specified.

70. 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.

Presentment when mak
er, etc., has no known place of business or residence.

71. If the maker, drawee or accpetor 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.

Presentment of cheque
to charge drawer.

72. 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.

Presentment of cheque
to charge any other person.

73. A cheque must, in order to charge any person
except the drawer, be
presented within a reasonable time after delivery
thereof by such person.

Presentment of instrum
ent payable on demand.

74. 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.

Presentment by or to a
gent, representative of deceased, or assignee of
insolvent.

75. Presentment for acceptance or payment may be made
to the duly authorised
agent of the drawee, maker or acceptor, as the case
may be, or, where the
drawee,
maker or acceptor has died, to his legal
representative, or, where he has
been declared an insolvent, to his assignee.

Excuse for delay in pre
sentment for acceptance or payment.

75A. Delay in presentment 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.

When presentment unnecessar
y.

76. 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 therein
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.

Liability of banker for negligen
tly dealing with bill presented for payment.

77. When a bill of exchange, accepted payable at a
specified bank, has been
duly presented there for payment and dishonoured, if
the banker so
negligently
or improperly keeps, deals with or delivers back such
bill as to cause loss
to the holder, he must compensate the holder for such
loss.

Chapter VI

Of payment and interest

To whom payment should be made.

78. 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.

Interest when rate specified.

79. 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.

Interest when no rate specifi
ed.

80. When no rate of interest is specified in the
instrument, interest on the
amount due thereon shall, notwithstanding any
agreement relating to interest
between any parties to the instrument, be calculated
at the rate of
1
[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.

Delivery of instrument on pa
yment or indemnity in case of loss.

81.
2
[(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.]

Chapter VII

Of discharge from liability on notes, bills and
cheques

Discharge from liability.

82. The maker, acceptor or indorser respectively of a
negotiable instrument
is discharged from liability thereon-

by cancellation

(a) 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 ;

by release.

(b) 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 ;

by payment.

(c) 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.

Discharge by allowing drawee more than forty-eig
ht hours to accept.

83. If the holder of a bill of exchange allows the
drawee more than
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.

When cheque not duly presented and drawer dam
aged thereby.

84. (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
larger amount than he would have been if such cheque
had been paid.

(2) In determining what is a reasonable time, regard
shall be had to the
nature of the instrument, the usage of trade and of
bankers, and the facts
of the
particular case.

(3) The holder of the cheque as to which such drawer
or person is so
discharged shall be a creditor, in lieu of such drawer
or person, of such
banker to
the extent of such discharge and entitled to recover
the amount from him.

Illustrations

     (a)  A draws a cheque for Rs. 1,000, and, when
the cheque ought to be
presented, has funds at the bank to meet it. The bank
fails before the
cheque
is presented. The drawer is discharged, but the holder
can prove against the
bank for the amount of the cheque.

(b)  A draws a cheque at 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.

Cheque payable to order.

85. (1) Where a cheque payable to order purports to be
indorsed by or on
behalf of the payee, the drawee is discharged by
payment in due course.

(2) Where a cheque is originally expressed to be
payable to bearer, the
drawee is discharged by payment in due course to the
bearer thereof,
notwithstanding
any indorsement whether in full or in blank appearing
thereon, and
notwithstanding that any such indorsement purports to
restrict or exclude
further negotiation.

Drafts drawn by one bran
ch of a bank on another payable to order.

85A. 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.

Parties not consenting dis
charged by qualified or limited acceptance.

86. If the holder of a bill of exchange acquiesces in
a qualified
acceptance, or one limited to part of the sum
mentioned in the bill, or
which substitutes
a different place or time for payment, or which, where
the drawees are not
partners, is not signed by all the drawees, all
previous parties whose
consent
is not obtained to such acceptance are discharged as
against the holder and
those claiming under him, unless on notice given by
the holder they assent
to such acceptance.

Explanation : An acceptance is qualified-

     (a)  where it is conditional, declaring the
payment to be dependent on
the happening of an event therein stated;

     (b)  where it undertakes the payment of part only
of the sum order 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.

Effect of material alterati
on.

87.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;

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.

Acceptor or indorser bou
nd notwithstanding previous alteration.

88. An acceptor or indorser of a negotiable instrument
is bound by his
acceptance or indorsement notwithstanding any previous
alteration of the
instrument.

Payment of instrument o
n which alteration is not apparent.

89.
1
[(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.

2
[(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.]

Extinguishment of rights of action on bill
in acceptor's hands.

90. If a bill of exchange which has been negotiated
is, at or after
maturity, held by the acceptor in his own right, all
rights of action
thereon are extinguished.

Chapter VIII

Of notice of dishonour

Dishonour by non-acceptance.

91. 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.

Dishonour by non-payment.

92. 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.

By and to whom notice shou
ld be given.

93. 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.

Mode in which notice may b
e given.

94. 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.

Party receiving must transm
it notice of dishonour.

95. 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.

Agent for presentment.

96. 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.

When party to whom no
tice given is dead.

97. 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.

When notice of dishono
ur is unnecessary.

98. 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

Noting.

99. 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.

Protest.

100. 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, with a
reasonable time, cause
such facts to be noted and certified as aforesaid.
Such certificate is
called a protest for better security.

Content
s of protest.

101. 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 could
not be found;

     (d)  when the note or bill has been dishonoured,
the place and time of
dishonour, and, when better security has been refused,
the place and time of
refusal;

     (e)  the subscription of the notary public making
the protest;

     (f)  in the event of an acceptance for honour or
of a payment for
honour, the name of the person by whom, of the person
for whom, and the
manner in
which, such acceptance or payment was offered and
effected.

A notary public may make the demand mentioned in
clause (c) of this section
either in person or by his clerk or, where authorized
by agreement or usage,
by registered letter.

Notice o
f protest.

102. 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.

Protest
for non-payment after dishonour by non-acceptance.

103. 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.

Protest
of foreign bills.

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

When noting equivalent to protest.

104A. For the purposes of this Act, where a bill or
note is required to be
protested within a specified time or before some
further proceeding is
taken,
it is sufficient that the bill has been noted for
protest before the
expiration of the specified time or the taking of the
proceeding; and the
formal protest
may be extended at any time thereafter as of the date
of the noting.

Chapter X

Of Reasonable Time

Reasonable time.

105. 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.

Reasonable time of giving notice o
f dishonour.

106. 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.

Reasonable time for transmitting such notice.

107.A party receiving notice of dishonour, who seeks
to enforce his right
against a prior party, transmits the notice within a
reasonable time if he
transmits
it within the same time after its receipt as he would
have had to give
notice if he had been the holder.

Chapter XI

Of Acceptance and Payment for Honour and  Reference in
Case of Need

Acceptance for honour.

108. 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 thereto.

How acceptance for honour must be made.

109. A person desiring to accept for honour must, 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.

Acceptance not specifying for whose hono
ur it is made.

110. 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.

Liability of acceptor for honour.

111. 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.

When acceptor for honour may
be charged.

112. 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.

Payment for honour.

113. 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 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.

Right of payer for h
onour.

114. 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.

Drawee in case of n
eed.

115. 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.

Acceptance and pay
ment without protest.

116. A drawee in case of need may accept and pay the
bill of exchange
without previous protest.

Chapter XII

Of Compensation

Rules as to compensation.

117. 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 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
1
[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.

Chapter XIII

Special Rules of Evidence

Presumptions as to negotiable instruments.

118.   Until the contrary is proved, the following
presumptions shall be
made :-

       of consideration.

     (a)  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;

           as to date.

     (b)  that every negotiable instrument bearing a
date was made or drawn
on such date;

           as to time of acceptance.

     (c)  that every accepted bill of exchange was
accepted within a
reasonable time after its date and before its
maturity;

           as to time of transfer.

     (d)  that every transfer of a negotiable
instrument was made before its
maturity;

           as to order of indorsements.

     (e)  that the indorsements appearing upon a
negotiable instrument were
made in the order in which they appear thereon;

           as to stamps.

     (f)  that a lost promissory note, bill of
exchange or cheque was duly
stamped;

           that holder is a holder in due course.

     (g)  that the holder of a negotiable instrument
is a holder in due
course : provided  that, where the instrument has been
obtained from its
lawful
owner, or from any person in lawful custody thereof,
by means of an offence
or fraud, or has been obtained from the maker or
acceptor thereof by means
of an offence or fraud, or for unlawful consideration,
the burden of proving
that the holder is a holder in due course lies upon
him.

Presumption on proof of protest.

119.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.

Estoppel against denying origina
l validity of instrument.

120. No maker of a promissory note, and no drawer of a
bill of exchange or
cheque, and no acceptor of a bill of exchange for the
honour of the drawer
shall,
in a suit thereon by a holder in due course, be
permitted to deny the
validity of the instrument as originally made or
drawn.

Estoppel against denying capacit
y of payee to indorse.

121. No maker of a promissory note and no acceptor of
a bill of exchange
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.

Estoppel against denying signatu
re or capacity of prior party.

122.No indorser of a negotiable instrument shall, in a
suit thereon by a
subsequent holder, be permitted to deny the signature
or capacity to
contract of
any prior party to the instrument.

Chapter XIV

Of Crossed Cheques

Cheque crossed generally.

123. 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.

Cheque crossed specially.

124. 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.

Crossing after issue.

125. 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.

Payment of cheque c
rossed generally.

126. 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.

Payment of cheque c
rossed specially more than once.

127. 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.

Payment in due cour
se of crossed cheque.

128. 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 c
heque out of due course.

129. 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.

Cheque bearing "not
negotiable".

130. 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.

Non-liability of banke
r receiving payment of cheque.

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.

Explanation
1
[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.

1
[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.]

Application of Chapte
r to drafts.

131A. The provisions of this Chapter shall apply to
any draft, as defined in
section 85A, as if the draft were a cheque.

Chapter XV

Of Bills in Sets

Set of bills

132. 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.

Holder of first acquired part entitled to all.

133. 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

Law governing liability of maker, acceptor or indorser
of foreign
instrument.

134. 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 indorsed in India,
and is dishonoured.
An action on the bill is brought against B in 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.

Law of place of payment governs dishonour.

135. 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 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.

Instrument made, etc., out of India, but in ac
cordance with the law of India.

136. If a negotiable instrument is made, drawn,
accepted or indorsed outside
India, but in accordance with the 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 within India.

Presumption as to foreign law.

137. The law of any foreign country regarding
promissory notes, bills of
exchange and cheques shall be presumed to be the same
as that of India,
unless
and until the contrary is proved.

1
[Chapter xvii

Of Penalties in case of dishonour of certain cheques
for Insufficiency of
funds in the Accounts

Dishonour of cheque for insufficiency, etc., of funds
in the account.

138. 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
provisions of this Act, be
punished
with imprisonment for a term which may extend to
1
[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,
within
2
[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.

Presumption in favour of holder.

139. It shall be presumed, unless the contrary is
proved, that the holder of
a cheque received the cheque of the nature referred to
in section 138 for
the
discharge, in whole or in part, of any debt or other
liability.

Defence which may not be allow
ed in any prosecution under section 138.

140. 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.

Offences by companies.

141. (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 :

1
[Provided further that where a person is nominated as
a Director of a
company by virtue of his holding any office or
employment in the Central
Government
or State Government or a financial corporation owned
or controlled by the
Central Government or the State Government, as the
case may be, he shall not
be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section
(1), where any offence
under this Act has been committed by a company and it
is proved that the
offence
has been committed with the consent or connivance of,
or is attributable to,
any neglect on the part of, any director, manager,
secretary or other
officer
of the company, such director, manager, secretary or
other officer shall
also be deemed to be guilty of that offence and shall
be liable to be
proceeded
against and punished accordingly.

Explanation : For the purposes of this section,-

     (a)  "company" means any body corporate and
includes a firm or other
association of individuals; and

     (b)  "director", in relation to a firm, means a
partner in the firm.

Cognizance of offences.

142. 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:

1
[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.]

1
[Power of Court to try
cases summarily.

143. (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.

Mode of service of su
mmons.

144. (1) Notwithstanding anything contained in the
Code of Criminal
Procedure, 1973 (2 of 1974), and for the purposes of
this Chapter, a
Magistrate issuing
a summons to an accused or a witness may direct a copy
of summons to be
served at the place where such accused or witness
ordinarily resides or
carries
on business or personally works for gain, by speed
post or by such courier
services as are approved by a Court of Session.

(2) Where an acknowledgement purporting to be signed
by the accused or the
witness or an indorsement purported to be made by any
person authorised by
the
postal department or the courier services that the
accused or the witness
refused to take delivery of summons has been received,
the Court issuing the
summons may declare that the summons has been duly
served.

Evidence on affidavit.

145  (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
pro-secution or the accused, summon and examine any
person giving evidence
on
affidavit as to the facts contained therein.

Bank's slip prima faci
e evidence of certain facts.

146.   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.

Offences to be compo
undable.

147. Notwithstanding anything contained in the Code of
Criminal Procedure,
1973 (2 of 1974), every offence punishable under this
Act shall be
compoundable.]

----- Original Message ----- 
From: "Chetan Sharma" <chetansharma at obc.co.in>
To: <accessindia at accessindia.org.in>
Sent: Thursday, July 19, 2007 5:18 PM
Subject: [AI] negociable instrument act in e-text


> Hello Access Indians!
> I am in need of e-text of negociable instrument act,
1881 if somebody can
> suggest a source for the same, it would be a favour
to me.
>
> Thanks,
>
> Chetan Sharma
> Manager
> Regional Office
> Oriental Bank of commerce
> Second floor
> Anand Bhawan
> Sansar Chandra Road
> Jaipur
> 302001
> Rajasthan
> India
> Ph: 91-141-2314662
> Fx: 91-141-2365315
> Hand Phone: (0)9414323675
> To unsubscribe send a message to
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>
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