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THE NEGOTIABLE INSTRUMENTS (AMENDMENT AND
MISCELLANEOUS PROVISIONS) ACT, 2002
ACT NO. 55 OF 2002
[17th December,
2002.]
An Act further to amend the Negotiable Instruments Act, 1881,
the Bankers' Books Evidence Act, 1891 and the Information Technology Act,
2000.
BE it enacted by Parliament in the Fifty-third Year of the Republic of India as follows -
CHAPTER I
PRELIMINARY
1. Short
title and commencement.-
(1) This Act may be called the
Negotiable Instruments (Amendment and Miscellaneous Provisions) Act,
2002.
(2) It shall come into force on
such date as the Central Government may, by notification in the Official
Gazette, appoint and different dates may be appointed for different
provisions of this Act.
AMENDMENTS TO THE NEGOTIABLE INSTRUMENTS ACT, 1881
CHAPTER II
2.
Substitution of new section for section 6.-
For section 6 of the Negotiable Instruments Act, 1881 (26 of 1881)
(hereinafter in this Chapter referred to as the principal Act), the
following section shall be substituted, namely:-
6. "Cheque".- A
"cheque" is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than on demand and it
includes the electronic image of a truncated cheque and a
cheque in the electronic form. Explanation I.-For
the purposes of this section, the expressions -
(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.'.
Amendment of section 64.
3. Section 64
of the principal Act shall be re-numbered as sub-section (1)
thereof, and after sub-section (1) as so re-numbered, the following
sub-section shall be inserted, namely:-
"(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."
4. Amendment
of section 81.-
Section 81 of the principal Act shall be re-numbered as sub-section
(1) thereof, and after sub-section (1) as so re-numbered, the following
sub-sections shall be inserted, namely:-
"(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."
5. Amendment
of section 89. -
Section 89 of the principal Act shall be re-numbered as sub-section
(1) thereof, and after sub-section (1) as so re-numbered, the following
sub-sections shall be inserted, namely:-
(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 ay 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
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so transmitted to it and received by it, is exactly the
same."
6. Amendment
of section 131.
In section 131 of the principal Act, Explanation shall be re-numbered as
Explanation I thereof, and after Explanation I as so re-numbered, the
following Explanation shall be inserted, namely -
"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."
7. Amendment
of section 138.
In section 138 of the principal Act -
(a) for the words "a term
which may be extended to one year", the words
"a term which may be extended to two years" shall be
substituted;
(b) in the proviso, in
clause (b), for the words "within fifteen
days", the words "within thirty days" shall be
substituted. 2D0101
8. Amendment
of section 141.
In section 141 of the principal Act, in sub-section (1), after the
proviso, the following proviso shall be inserted, namely -
"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."
9. Amendment
of section 142.
In section 142 of the principal Act, after clause (b), the following
proviso shall be inserted, namely:-
"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."
10. Insertion of
new sections after section 142.
After section 142 of the principal Act, the following sections shall be
inserted, namely:-
"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 Magis rate 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 pass d 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 ca e 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 endeavor
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 b served at the place where such accused or witness
ordinarily resides or carries on business or personally
works for gain, by speed post or by such courier
services as are approved by a Court of Session.
(2) Where an acknowledgment
purporting to be signed by the accused or the witness
or an endorsement purported to be made by any
person authorised by the postal department or the courier services
that the accused or the witness refused to take
delivery f summons has been received, the Court issuing the summons
may declare that the summons has been duly served.
145. Evidence on affidavit.
(1) Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of 1974), the
evidence of the complainant may be given by him on affidavit and
may, subject to all just exceptions be read in evidence
in any enquiry, trial or other proceeding under the said
Code.
(2) The Court may, if it thinks
fit, and shall, on the application of the prosecution or the accused,
summon and examine any person giving evidence on affidavit as to the
facts contained therein.
146. Bank's slip prima facie
evidence of certain facts.
The Court shall, in respect of every proceeding under this Chapter, on
production of bank's slip or memo having thereon the
official mark denoting that the cheque has been
dishonoured, presume the fact of dishonour of such cheque, unless
and until such fact is disproved.
147. Offences to be
compoundable.
Notwithstanding anything contained in the Code of Criminal Procedure,
1973 (2 of 1974), every offence punishable under this Act shall be
compoundable.".
CHAPTER III
AMENDMENT TO THE BANKERS' BOOKS
EVIDENCE ACT, 1891
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11. Amendment of
section 2.
In section 2 of the Bankers' Books Evidence Act, 1891 (18 of 1891) -
(a) for clause (3),
the following clause shall be substituted, namely
-
(3) "bankers' books" include
ledgers, day-books, cash-books, account-books and
all other records used in the ordinary business of the bank,
whether these records are kept in written form or stored in a
micro film, magnetic tape or in any other form of mechanical
or electronic data retrieval mechanism, either onsite or at
any offsite location including a back-up or disaster recovery site
of both;';
(b) in clause (8), after
sub-clause (b), the following sub-clause shall be inserted,
namely -
"(c) a printout of any entry in the books of a bank stored in a
micro film, magnetic tape or in any other form of mechanical or
electronic data retrieval mechanism obtained by a mechanical or other
process which in itself ensures the accuracy of such printout as a copy
of such entry and such printout contains the certificate in accordance
with the provisions of section 2A.".
CHAPTER IV
AMENDMENTS TO THE INFORMATION
TECHNOLOGY ACT, 2000
12. Amendment of
section 1.
In the Information Technology Act, 2000 (21 of 2000) (hereinafter in this
Chapter referred to as the principal Act), in section1, in sub-section
(4), for clause (a), the following clause shall be substituted, namely:-
"(a) a negotiable instrument (other than a cheque) as defined in
section 13 of the Negotiable Instruments Act, 1881 (26 of 1881);".
13. Insertion of
new section 81A.
After section 81 of the principal Act, the following section shall be
inserted, namely:-
'81A. Application of the Act to electronic cheque
and truncated cheque.-
(1) The provisions of this Act,
for the time being in force, shall apply to,
or in relation to, electronic cheques and
the truncated cheques subject to such modifications and amendments
as may be necessary for carrying out
the purposes of the Negotiable Instruments
Act, 1881 (26 of 1881) by the Central
Government, in consultation with the Reserve Bank of
India, by notification in the Official Gazette.
(2) Every
notification made by the Central
Government under sub-section (1) shall be laid,
as soon as may be after it is made, before each House
of Parliament, while it is in session, for a total period of thirty
days which may be comprised in one session or in two or more
successive sessions, and if, before the expiry of the session
immediately following the session or
the successive sessions aforesaid,
both Houses agree in making any
modification in the notification or both Houses agree
that the notification should not be made, the
notification shall thereafter have effect only in
such modified form or be of no effect, as the case may
be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previo
sly done under that notification.
Explanation.-For the purposes of this Act, the expressions
"electronic cheque" and "truncated cheque" shall have
the same meaning as assigned to them in section 6 of the
Negotiable Instruments Act, 1881 (26 of 1881).'.
SUBHASH C. JAIN,
Secy. to the Govt. of India.
*****************
NEGOTIABLE
INSTRUMENTS ACT 1881
CHAPTER I - PRELIMINARY
1. SHORT TITLE -LOCAL EXTENT, SAVING OF USAGE RELATING TO
HUNDIS, ETC., COMMENCEMENT
2. [REPEALED]
3. INTERPRETATION CLAUSE - "BANKER"
CHAPTER II - OF NOTES, BILLS AND
CHEQUES
4. "PROMISSORY NOTE"
5. "BILLS OF EXCHANGE"
6. "CHEQUE"
7. "DRAWER", "DRAWEE","DRAWEE IN
CASE OF NEED", "ACCEPTOR" ,
"ACCEPTER FOR HONOUR", "PAYEE"
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8. "HOLDER"
9. "HOLDER IN DUE COURSE"
10. "PAYMENT IN DUE COURSE"
11. "INLAND INSTRUMENT"
12. "FOREIGN INSTRUMENT"
13. "NEGOTIABLE INSTRUMENT"
14. NEGOTIATION
15. INDORSEMENT
16. INDORSEMENT "IN BLANK" AND "IN FULL"
- "INDORSE"
17. AMBIGUOUS INSTRUMENTS
18. WHERE AMOUNT IS STATED DIFFERENTLY IN FIGURES AND WORDS
19. INSTRUMENTS PAYABLE ON DEMAND
20. INCHOATE STAMPED INSTRUMENTS
21. "AT SIGHT", "ON PRESENTMENT",
"AFTER SIGHT"
22. "MATURITY"
23. CALCULATING MATURITY OF BILL OR NOTE PAYABLE SO MANY
MONTHS AFTER DATE OR SIGHT
24. CALCULATING MATURITY OF BILL OR NOTE PAYABLE SO MANY DAYS
AFTER DATE OR SIGHT
25. WHEN DAY OF MATURITY IS A HOLIDAY
CHAPTER III - PARTIES TO NOTES, BILLS AND CHEQUES
26. CAPACITY TO MAKE, ETC., PROMISSORY NOTES, ETC.
27. AGENCY
28. LIABILITY OF AGENT SIGNING
29. LIABILITY OF LEGAL REPRESENTATIVE SIGNING
30. LIABILITY OF DRAWER
31. LIABILITY OF DRAWEE OF CHEQUE
32. LIABILITY OF MAKER OF NOTE AND ACCEPTOR OF BILL
33. ONLY DRAWEE CAN BE ACCEPTOR EXCEPT IN NEED OR FOR HONOUR
34. ACCEPTANCE BY SEVERAL DRAWEES NOT PARTNERS
35. LIABILITY OF INDORSER
36. LIABILITY OF PRIOR PARTIES TO HOLDER IN DUE COURSE
37. MAKER, DRAWER AND ACCEPTOR PRINCIPALS
38. PRIOR PARTY A PRINCIPAL IN RESPECT OF EACH SUBSEQUENT
PARTY
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39. SURETYSHIP
40. DISCHARGE OF INDORSER'S LIABILITY
41. ACCEPTOR BOUND, ALTHOUGH INDORSEMENT FORGED
42. ACCEPTANCE OF BILL DRAWN IN FICTITIOUS NAME
43. NEGOTIABLE INSTRUMENT MADE, ETC., WITHOUT CONSIDERATION
44. PARTIAL ABSENCE OR FAILURE OF MONEY-CONSIDERATION
45. PARTIAL FAILURE OF CONSIDERATION NOT CONSISTING OF MONEY
45A. HOLDER'S RIGHT TO DUPLICATE OF LOST BILL
CHAPTER IV - OF NEGOTIATION
46. DELIVERY
47. NEGOTIATION BY DELIVERY
48. NEGOTIATION BY INDORSEMENTS
49. CONVERSION OF INDORSEMENT IN BLANK INTO INDORSEMENT IN
FULL
50. EFFECT OF INDORSEMENT
51. WHO MAY NEGOTIATE
52. INDORSER WHO EXCLUDES HIS OWN LIABILITY OR MAKE IT
CONDITIONAL
53. HOLDER DERIVING TITLE FROM HOLDER IN DUE COURSE
54. INSTRUMENT INDORSED IN BLANK
55. CONVERSION OF INDORSEMENT IN BLANK INTO INDORSEMENT IN
FULL
56. INDORSEMENT FOR PART OF SUM DUE
57. LEGAL REPRESENTATIVE CANNOT BY DELIVERY ONLY NEGOTIATE
INSTRUMENT INDORSED BY DECEASED
58. INSTRUMENT OBTAINED BY UNLAWFUL MEANS OR UNLAWFUL
CONSIDERATION
59. INSTRUMENT ACQUIRED AFTER DISHONOUR OR WHEN OVERDUE
60. INSTRUMENT NEGOTIABLE TILL PAYMENT OR SATISFACTION
CHAPTER V - OF PRESENTMENT
61. PRESENTMENT FOR ACCEPTANCE
62. PRESENTMENT OF PROMISSORY NOTE FOR SIGHT
63. DRAWEE'S TIME FOR DELIBERATION
64. PRESENTMENT FOR PAYMENT
65. HONOURS FOR PRESENTMENT
66. PRESENTMENT FOR PAYMENT OF INSTRUMENT PAYABLE AFTER DATE
OR SIGHT
67. PRESENTMENT FOR PAYMENT OF PROMISSORY NOTE PAYABLE BY
INSTALLMENTS
68. PRESENTMENT FOR PAYMENT OF INSTRUMENT PAYABLE AT
SPECIFIED PLACE AND NOT ELSEWHERE
69. INSTRUMENT PAYABLE AT SPECIFIED PLACE
70. PRESENTMENT WHERE NO EXCLUSIVE PLACE SPECIFIED
71. PRESENTMENT WHEN MAKER, ETC., HAS NO KNOWN PLACE OF BUSINESS OR
RESIDENCE
72. PRESENTMENT OF CHEQUE TO CHARGE DRAWER
73. PRESENTMENT OF CHEQUE TO CHARGE ANY OTHER PERSON
74. PRESENTMENT OF INSTRUMENT PAYABLE ON DEMAND
75. PRESENTMENT BY OR TO AGENT, REPRESENTATIVE OF DECEASED,
OR ASSIGNEE OF INSOLVENT
75A. EXCUSE FOR DELAY IN PRESENTMENT FOR ACCEPTANCE OR
PAYMENT
76. WHEN PRESENTMENT UNNECESSARY
77. LIABILITY OF BANKER FOR NEGLIGENTLY DEALING WITH BILL
PRESENTED FOR PAYMENT
CHAPTER VI - OF PAYMENT AND INTEREST
78. TO WHOM PAYMENT SHOULD BE MADE
79. INTEREST WHEN RATE SPECIFIED
80. INTEREST WHEN NO RATE SPECIFIED
81. DELIVERY OF INSTRUMENT ON PAYMENT OR INDEMNITY IN CASE OF
LOSS
CHAPTER VII - OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND
CHEQUES
82. DISCHARGE FROM LIABILITY
83. DISCHARGE BY ALLOWING DRAWEE MORE THAN FORTY-EIGHT HOURS
TO ACCEPT
84. WHEN CHEQUE NOT DULY PRESENTED AND DRAWER DAMAGED THEREBY
85. CHEQUE PAYABLE TO ORDER
85A. DRAFTS DRAWN BY ONE BRANCH OF A BANK ON ANOTHER PAYABLE
TO ORDER
86. PARTIES NOT CONSENTING DISCHARGED BY QUALIFIED OR LIMITED
ACCEPTANCE
87. EFFECT OF MATERIAL ALTERATION
88. ACCEPTOR OR INDORSER BOUND NOTWITHSTANDING PREVIOUS
ALTERATION
89. PAYMENT OF INSTRUMENT ON WHICH ALTERATION IS NOT APPARENT
90. EXTINGUISHMENT OF RIGHTS OF ACTION ON BILL IN ACCEPTOR'S
HANDS
CHAPTER VIII - OF NOTICE OF DISHONOUR
91. DISHONOUR BY NON-ACCEPTANCE
92. DISHONOUR BY NON-PAYMENT
93. BY AND TO WHOM NOTICE SHOULD BE GIVEN
94. MODE IN WHICH NOTICE MAY BE GIVEN
95. PARTY RECEIVING MUST TRANSMIT NOTICE OF DISHONOUR
96. AGENT FOR PRESENTMENT
97. WHEN PARTY TO WHOM NOTICE GIVEN IS DEAD
98. WHEN NOTICE OF DISHONOUR IS UNNECESSARY
CHAPTER IX - NO NOTING AND PROTEST
99. NOTING
100. PROTEST
101. CONTENTS OF PROTEST
102. NOTICE OF PROTEST
103. PROTEST FOR NON-PAYMENT AFTER DISHONOUR BY
NON-ACCEPTANCE
104. PROTEST OF FOREIGN BILLS
104A. WHEN NOTING EQUIVALENT TO PROTEST
CHAPTER X - OF REASONABLE TIME
105. REASONABLE TIME
106. REASONABLE TIME OF GIVING NOTICE OF DISHONOR
107. REASONABLE TIME FOR TRANSMITTING SUCH NOTICE
CHAPTER XI - OF ACCEPTANCE AND PAYMENT FOR HONOUR AND
REFERENCE IN CASE OF NEED
108. ACCEPTANCE FOR HONOUR
109. HOW ACCEPTANCE FOR HONOUR MUST BE MADE
110. ACCEPTANCE NOT SPECIFYING FOR WHOSE HONOUR IT IS MADE
111. LIABILITY OF ACCEPTANCE FOR HONOUR
112. WHEN ACCEPTOR FOR HONOUR MAY BE CHARGED
113. PAYMENT FOR HONOUR
114. RIGHT OF PAYER FOR HONOUR
115. DRAWEE IN CASE OF NEED
116. ACCEPTANCE AND PAYMENT WITHOUT PROTEST
CHAPTER XII - OF COMPENSATION
117. RULES AS TO COMPENSATION
CHAPTER XIII - SPECIAL RULES OF
EVIDENCE
118. PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENTS OF
CONSIDERATION
119. PRESUMPTION ON PROOF OF PROTEST
120. ESTOPPEL AGAINST DENYING ORIGINAL VALIDITY OF INSTRUMENT
121. ESTOPPEL AGAINST DENYING CAPACITY OF PAYEE OF INDORSE
122. ESTOPPEL AGAINST DENYING SIGNATURE OR CAPACITY OF PRIOR
PARTY
CHAPTER XIV - OF CROSSED CHEQUES
123. CHEQUE CROSSED GENERALLY
124. CHEQUE CROSSED SPECIALLY
125. CROSSING AFTER ISSUE
126. PAYMENT OF CHEQUE CROSSED GENERALLY PAYMENT OF CHEQUE
CROSSED SPECIALLY
127. PAYMENT OF CHEQUE CROSSED SPECIALLY MORE THAN ONCE
128. PAYMENT IN DUE COURSE OF CROSSED CHEQUE
129. PAYMENT OF CROSSED CHEQUE OUT OF DUE COURSE
130. CHEQUE BEARING "NOT NEGOTIABLE"
131. NON-LIABILITY OF BANKER RECEIVING PAYMENT OF CHEQUE
131A. APPLICATION OF CHAPTER TO DRAFTS
CHAPTER XV - OF BILLS IN SETS
132. SET OF BILLS
133. HOLDER OF FIRST ACQUIRED PART ENTITLED TO ALL
CHAPTER XVI - OF INTERNATIONAL LAW
134. LAW GOVERNING LIABILITY OF MAKER, ACCEPTOR OR INDORSER
OF FOREIGN INSTRUMENTS
135. LAW OF PLACE OF PAYMENT GOVERNS DISHONOUR
136. INSTRUMENT MADE, ETC., OUT OF INDIA,
BUT IN ACCORDANCE WITH THE LAW OF INDIA
137. PRESUMPTION AS TO FOREIGN LAW
CHAPTER XVII - OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN
CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS
138. DISHONOR OF CHEQUE FOR INSUFFICIENCY, ETC., OF FUNDS IN
THE ACCOUNT
139. PRESUMPTION IN FAVOR OF FOLDER
140. DEFENCE WHICH MAY NOT BE ALLOWED IN ANY PROSECUTION
UNDER SECTION 138
141. OFFENCES BY COMPANIES
142. COGNIZANCE OF OFFENCES
SCHEDULE [REPEALED)
This Act may be called the Negotiable Instruments Act, 1881.
Local extent, Saving of usage relating to hundis, etc.,
Commencement.
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:
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.
Rep. by the Amending Act, 1891 (12 of 1891), sec. 2 and Sch.
I, Pt. I.
In this Act "Banker"
"banker"
includes any person acting as a Banker and any post office saving bank.
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.
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 occurence 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.
A "cheque"
is a bill of exchange drawn on a specified banker and not expressed to be
payable or otherwise than on demand.
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 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".
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.
CHAPTER II - OF NOTES, BILLS AND CHEQUES
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
[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.
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 island instrument.
Any such instrument not so drawn, made or made payable shall
be deemed to be a foreign instrument.
(1) A "negotiable
instrument" means 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.
When a promissory note, bill of exchange or cheque is
transferred to any person, so as to constitute the person the holder
thereof, the instrument is said to be negotiated.
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".
(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.
(2) The provisions of this Act relating to a payee shall
apply with the necessary modifications to an indorsee.
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.
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.
A promissory note or bill of exchange, in which no time for
payment is specified, and a cheque, are payable on demand.
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.
In a promissory note or bill of exchange the expressions
"at sight"
and "on
presentment" means 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.
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 at 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.
In calculating the date at which a promissory note or bill of
exchange made payable a certain number of days after date of after sight
or after a certain event is at maturity, the day of the date, or of
presentment for acceptance or of protest for non-acceptance, or on which
the event happens, shall be excluded.
When the day on which a promissory note or bill of exchange
is at maturity is a public holiday, the instrument shall be deemed to be
due on the next preceding business day.
Explanation - The expression "Public
holiday" includes Sunday: and any other day declared
by the [Central Government], by notification in the Official Gazette, to
be a public holiday.
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 to 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.
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 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.
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.
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.
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.
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.
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.
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.
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.
Every prior party to a negotiable instrument is liable
thereon to a holder in due course until the instrument is duly satisfied.
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.
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.
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.
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.
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.
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.
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
therein an amount exceeding the value of the consideration (if any) which
he has actually paid or performed.
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.
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.
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.
The making, acceptance of 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.
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 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.
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.
The holder of a negotiable instrument indorsed in blanks 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.
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.
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.
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.
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.
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.
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.
No writing on a negotiable instrument is valid for the
purpose of negotiation of 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.
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.
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.
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.
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.
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, on 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.
Where authorized by agreement or usage, a presentment through
the post office by means of a registered letter is sufficient.
A promissory note, payable at a certain period after sight
must be presented to the maker the 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.
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.
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.
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.
A promissory note payable by installments 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.
A promissory note, bill of exchange or cheque 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.
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 the place.
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.
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
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.
A cheque must, in order to charge any person except the
drawer, be presented within a reasonable time after delivery thereof by
such person.
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 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.
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.
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.
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.
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.
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 of realization of such
amount, or until such date after the institution of a suit to recover
such amount as the Court directs.
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 [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
Any person liable to pay, and called
upon by the holder thereof to pay, the amount due on a promissory note,
but 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.
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 thereon.
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.
(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.
(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 withstanding any indorsement whether in full
or in blank appearing thereon, and notwithstanding that any such
indorsement purports to restrict or exclude further negotiation.
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.
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 or would be legally due.
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.
An acceptor or indorser of a negotiable instrument is bound
by the acceptance or indorsement notwithstanding any previous alteration
of the instrument.
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.
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.
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.
When a promissory note, bill of exchange or cheque is
dishonoured by non-acceptance of 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.
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.
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.
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 the party to whom notice of dishonour is despatched is
dead, but the party despatching the notice is ignorant of his death, the
notice is sufficient.
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.
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.
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.
A protest under section 100 must contain-
(a) either the instrument itself, or a literal transcript of
the instrument and of everything written or printed thereupon;
(b) the name of the person for whom and against whom the
instrument has been protested;
(c) a statement that payment or acceptance, or better
security, as the case may be, has been demanded of such person by the
notary public; the terms of his answer; if any, or a statement that he
gave no answer, or that he could not be found;
(d) when the note or bill has been dishonoured , the place
and time of dishonour; and, when better security has been refused, the
place and time of refusal;
(e) the subscription of the notary public making the protest;
(f) in the event of an acceptance for honour or of a payment
for honour, the name of the person by whom, of the person for whom, and
the manner in which, such acceptance or payment was offered and effected.
A notary public may make the demand mentioned in clause (c) of this
section either in person or by his clerk or, were authorized by agreement
or usage, by registered letter.
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.
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.
Foreign bills of exchange must be protested for dishonour
when such protest is required by the law of the place where they are
drawn.
For the purposes of this Act, where a bill of note is
required to be protested within a specified time or before some further
proceeding is taken is it 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.
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.
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.
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 had been the holder.
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.
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.
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.
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.
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.
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.
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.
A drawee in case of need may accept and pay the bill of
exchange without previous protest.
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 eighteen per
centum per annum from the date of payment until tender or realisation
thereof, together with all expenses caused by the dishonour and payment;
(d) when the person charged and such indorser 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.
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.
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.
No maker of a promissory note, and no drawer 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
The provisions of this Chapter shall apply to any draft, as
defined in section 85A, as if the draft were a cheque.
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 separate bill.
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.
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 of 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.
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.
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.
137. Presumption as to foreign law
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.
Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to another person
from out of that account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid, either because
of the amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the amount arranged
to be paid from that account by an agreement made with that bank, such
person shall be deemed to have committed an offence and shall, without
prejudice to any other provision of this Act, be punished with
imprisonment for a term which may extend to one year, 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
fifteen 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 purpose of this section, "debt or other liability"
means a legally enforceable debt or other liability.
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 in any debt or
other liability.
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.
(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.
(2) Notwithstanding anything contained in sub-section (1)
where any offence under this Act has been committed by a company and it
is provided that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part, 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.
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;
(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.
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