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Negotiable Instruments Act 1881

CONTENTS

Sections

Contents

 

 

Preamble

 

 

CHAPTER I
Preliminary

 

1.

Short title
Local extent
Saving of usages relating to bundles, etc. Commencement

 

1-A.

Application of the Act

 

2.

 [Repeal]

 

3.

Interpretation-clause

 

 

 

CHAPTER II

Of Notes, Bills and Cheques

 

4.

Promissory note

 

5.

Bill of exchange

 

6.

Cheque

 

7.

Drawer Drawee Drawee in case of need Acceptor  Acceptor for honour Payee

 

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, in full Indorsee

 

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”.

 

21-A.

When note or bill payable on demand is over due

 

21-B.

A note or bill payable at a determinable future time

 

21-C.

Anti-dating and post-dating

 

22.

Maturity Days of grace

 

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. Minor

 

27.

Agency

 

27-A.

Authority of partners

 

28.

Liability of agent signing

 

28-A.

Transferor by delivery and transferee

 

29.

Liability of legal representative signing

 

29-A.

Signature essential to liability

 

29-B.

Forged or un-authorised signature.

 

29-C.

Stranger signing instrument presumed to be indorser

 

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 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

 

38-A

 Liability of accommodation party and position of accommodation party

 

39.

Suretyship

 

40.

Discharge of indorsers liability

 

41.

Acceptor bound although indorsement forged

 

42.

Acceptance of bill drawn in fictitious name

 

43.

Negotiable instrument made, etc., without consideration

 

44.

Partial absence or failure of money-consideration

 

45.

Partial failure of consideration not consisting of money

 

45-A.

Holders right to duplicate of lost bill

 

 

 

CHAPTER IV

Of Negotiation

 

46.

Delivery

 

47.

Negotiation by delivery

 

48.

Negotiation by indorsement

 

49.

Conversion of indorsement in blank into indorsement in full

 

50.

Effect of indorsement

 

51.

Who may negotiate

 

52.

Indorser who excludes his own ability or makes it conditional

 

53.

Holder claiming through holder in. due course

 

53-A.

Rights of holder in due course –

 

 

54. Instrument indorsed in blank

 

55.

Conversion of indorsement in blank into indorsement in full

 

56.

Requisites of indorsement

 

57.

Legal representative cannot by delivery only negotiate instrument indorsed by deceased

 

57-A.

Negotiation of instrument to party already liable thereon

 

57-B.

Rights of holder

 

58.

Defective title

 

59.

Instrument acquired after dishonour or when overdue Accommodation note or bill

 

60.

Instrument negotiable till payment or satisfaction

 

 

 

CHAPTER V

Of Presentment

 

61.

Presentment for acceptance

 

62.

Presentment of promissory note for sight

 

63.

Drawees time for deliberation

 

64.

Presentment for payment

 

65.

Hours for presentment

 

66.

Presentment for payment of instrument payable after date or sight

 

67.

Presentment for payment of promissory note payable by instalments.

 

68.

Presentment for payment of instrument payable at specified place and not elsewhere

 

69.

Instrument payable at specified place

 

70.

Presentment where no exclusive place specified

 

71.

Presentment when maker, etc., has not known place of business or residence

 

71-A.

What constitutes valid presentment and mode of presentment

 

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

 

75-A.

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 or not 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-
(a) by cancellation ;
(b) by release ;
(c) by payment.

 

83.

discharge by allowing drawee more than forty-eight hours to accept

 

84.

When cheque not duly presented and drawer damaged thereby

 

85.

Cheque payable to order

 

85-A.

Drafts drawn by one branch of a bank on another payable to order

 

86.

Parties not consenting discharged by qualified or limited acceptance…

 

87.

Effect of material alteration.
Alteration by indorsee

 

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 acceptors hands

 

 

 

CHAPTER VIII

Of Notices 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

Of Noting and Protest

 

99.

Noting

 

100.

Protest
Protest for better security

 

101.

Contents of Protest

 

102.

Notice of Protest

 

103.

Protest for non-payment after dishonour by non-acceptance

 

104.

Protest of foreign bills

 

104-A.

When nothing equivalent to protest

 

 

 

CHAPTER X

Of Reasonable Time

 

105.

Reasonable time

 

106.

Reasonable time of giving notice of dishonour

 

107.

Reasonable time for transmitting such notice

 

 

 

CHAPTER XI
Of Acceptance and Payment for Honour and Reference in case of need

 

108.

Acceptance for honour

 

109.

How acceptance for honour must be made

 

110.

Acceptance not specifying for whose honour it is made

 

111.

Liability of acceptor for honour

 

112.

When acceptor for honour may be charged

 

113.

Payment for honour

 

114.

Right of payer for honour

 

115.

Drawee in case of need

 

116.

Acceptance and payment without protest

 

 

 

CHAPTER XII

Of Compensation

 

117.

Rules as to compensation

 

 

 

CHAPTER XIII

Special Rules of Evidence

 

118.

Presumptions as to Negotiable instrument-
(a) of consideration ;
(b) as to date ;
(c) as to time of acceptance ;
(d) as to time of transfer ;
(e) as to order of indorsement;
(f) as to stamp ;
(g) that holder is a holder in due course

 

119.

Presumption on proof of protest  

 

120.

Estoppel against denying original validity of instrument

 

121.

Estoppel against denying capacity of payee to indorse

 

122.

Estoppel against denying signature or capacity of prior party

 

 

 

CHAPTER XIV
Special Provisions Relating to Cheques

 

122A

Revocation of banker s authority

 

123.

Cheque crossed generally

 

123A

Cheque crossed account payee.

 

124.

Cheque crossed specially

 

125.

Crossing after issue

 

125A

Crossing a material part of a cheque

 

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

 

131B

Protection to banker crediting cheque crossed account payee”.

 

131C

Cheque not operating as assignment of funds

 

 

 

CHAPTER XIV

Special Provisions Relating to Bills of Exchange

 

131D.

Several drawees

 

131E.

In whose favour a bill may be drawn

 

131F.

When presentment for acceptance is necessary

 

131G.

When presentment excused

 

131H

Holders right of recourse against drawer and indorsers

 

131-I.

Holder may refuse qualified acceptance

 

132.

Set off Bills

 

133.

Holder of first acquired par entitled to all

 

 

 

CHAPTER XVI

Of International Law

 

134.

Law governing liability of parties to a foreign instrument

 

135.

 [Omitted]

 

136.

Instrument made, etc., outside Pakistan, etc., but in accordance with their law

 

137.

Presumption as to foreign law

 

 

 

CHAPTER XVII
Notaries Public

 

138.

Power to appoint notaries public

 

139.

Power to make rules for notaries public

 

 

Schedule – [Repealed]

 

PRELIMINARY

 

The

Negotiable Instruments Act 1881
(XXVI 26 of 1881)

19th December, 1881

 

An Act to define and amend the

law relating to Promissory Notes, Bills of Exchange and Cheques

 

Preamble

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

 

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

Local extent; Saving of usages relating to hundis, etc.; Commencement. It extends to the whole of Pakistan; but nothing herein contained affects the provisions of sections 24 and 35 of the State Bank of Pakistan Act, 1956 (33 of 1956): and it shall come into force on the first day of March, 1882.

 

1-A.     Application of the Act. Every negotiable instrument shall be governed by -the provisions of this Act, and no usage or custom at variance with any such provision shall apply to any such instrument.

 

2.         [Repeal of enactments]. Rep. by the Amending Act, 1891 (XII of 1891).

 

3.         Interpretation-clause. In this Act, unless there is anything repugnant in the subject or context.

(a)        ‘accommodation party’ means a person who has signed a negotiable instrument as a maker, drawer, acceptor or indorser without receiving the value thereof and for the purpose of lending his name to some other persons;

(b)        ‘banker’ means a person transacting the business of accepting, for the purpose of lending or investment, of deposits of money from the public repayable on demand or otherwise and withdrawable by the cheque, draft, order or otherwise, and includes any Post Office Savings Bank.

(c)        ‘bearer’ means a person who by negotiation comes into possession of a negotiable instrument, which is payable to bearer;

(d)        ‘delivery‘ means transfer of possession, actual or constructive, from one person to another;

(e)        ‘issue means the first delivery of a promissory note, bill of exchange or cheque complete in form to a person who takes it as a holder;

(f)         ‘material alteration’ in relation to a promissory note, bill of exchange or cheque includes any alteration of the date, the sum payable, the time of payment, the place of payment, and, where any such instrument has been accepted generally the addition of a place of payment without the acceptor’s assent; and

(g)        ‘notary public’ includes any person appointed by the Central Government to perform the functions of notary public under this Act and a notary appointed under the Notaries Ordinance, 1961 (XIX of 1961). 


CHAPTER II

    OF NOTES BILLS AND CHEQUES

                4.     Promissory note. A ‘promissory note’ is a instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time 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, IOU 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 0’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 instrument respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.

5.         Bill of exchange. A ‘bill of exchange’ is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time 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 payable at the current rate of exchange and although it is to be paid in stated instalments and contains a provision that on default of payment of one or more instalments or interest, the whole or the unpaid balance shall become due.

Where the person intended can reasonably be ascertained from the promissory note or the bill of exchange, he is a ‘certain person’ within the meaning of this section and section 4, although he is misnamed or designated by description only.

An order to pay out of a particular fund is not unconditional within the meaning of this section but an unqualified order to pay, coupled with-

(a)        an indication of a particular fund out of which the drawee is to reimburse himself or a particular account to be debited to the amount, or

(b)        a statement of the transaction which gives rise to the note or bill, is unconditional.

Where the payee is a fictitious or non-existing person the bill of exchange may be treated as payable to bearer.

6.         Cheque. A ‘cheque’ is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

7.         Drawer, Drawee. The maker of a bill of exchange or cheque is called the ‘drawer’; the person thereby directed to pay is called the ‘drawee’

Drawee in case of need. When in the bill or in any indorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a ‘drawee’ in case of need.

Acceptor. After the drawee of a bill has signed his assent upon the bill, or if there are more parts thereof than one, upon one of such parties, and delivered the same, or give 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’.

8.         Holder. The ‘holder’ of a promissory note, bill of exchange or-cheque means the payee or indorsee who is in possession of it or the bearer thereof but does not include a beneficial owner claiming though a benamidar.
Explanation. When the note, bill or cheque is lost and not found again, or is destroyed, the person in possession of it or the bearer thereof at the time of such loss or destruction shall be deemed to continue to be its holder.

              9.       Holder in due course. ‘Holder in due course’ means any person who for consideration becomes 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 it became overdue, without notice that the title of the person from whom he derived his own title was defective.
Explanation. For the purposes of this section the title of a person to a promissory note, bill of exchange or cheque is defective when he is not entitled to receive the amount due thereon by reason of the provisions of section 58.

10.       Payment in due course. ‘Payment in due course’ means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.

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

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

13.       Negotiable instrument. 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 endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.

(2)        A negotiable instrument may be 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.

S. 13 – Payment on the basis of promissory note – Proof – Making of payment in connection with a promissory note does not require to be proved and it is sufficient if the execution of promissory note is either proved or admitted. PLD 2002 Pesh. 1

14.       Negotiation. When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.

15.       Indorsement. When the maker or holder of a negotiable instrument signs the made, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or a slip of paper annexed thereto or so signs for the same purpose stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the ‘indorse’. 

16.       Indorsement ‘in blank’ and in ‘full’; ‘Indorsee’. (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 order of, a specified person, the indorsement is said to be ‘in full’, and the person so specified is called the ‘indorse’ of the instrument.

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

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

18.       Where amount is stated differently in figures and words. If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid:

Provided that if the words are ambiguous or uncertain, the amount may be ascertained by referring to the figures.

19.       Instruments payable on demand. A promissory note or bill of exchange is payable on demand:-

(a)        where it is expressed to be so, or to be payable at sight or on presentment; or

(b)        where no time for payment is specified in it; or

(c)        where the note or bill accepted or indorsed after it is overdue, as regards the person accepting or indorsing it.

20.       Inchoate stamped instruments. (1) Where one person signs and delivers to another a paper stamped in accordance with the law relating to stamp duty chargeable on negotiable instrument, either wholly blank or having written thereon an incomplete negotiable instrument, in order that it may be made, or completed into a negotiable instrument he thereby gives prima facie authority to the person who receives that paper to make or complete it, as the case may be, into a negotiable instrument for the amount, if any, specified therein, or, where no amount is specified for any amount, not exceeding, in either case, the amount covered by the stamp.

(2)        The person so signing shall, subject to the provisions of sub-section (3), be liable upon such instrument, on the capacity in which he signed the same, to any holder in due course, for the amount specified in the instrument or filled up therein:

Provided that no person other than a holder in due course shall receive from the person so signing the paper anything in excess of the amount intended by him to be paid thereunder.

(3)        In order that any such instrument may on completion be enforceable against any person who became a party thereto before such completion, it must be filed up within a reasonable time and strictly in accordance with the authority given:

Provided that if any such instrument after completion is negotiated to a holder in due course, it shall be valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up within a reasonable time and strictly in accordance with the authority given.

21.       ‘At sight’, ‘On presentment’, ‘After sight’. The expression ‘after sight’ means, in a promissory note, after presentment for sight, and, in a bill of exchange, after acceptance, or nothing for non-acceptance, or protest for non-acceptance.

21-A.   When note or bill payable on demand is overdue. A promissory note or bill of exchange payable on demand shall be deemed to be overdue when it appears on the face of it to have been in circulation for an unreasonable length of time.

21-B.   A note or bill payable at a determinable future time.- A promissory note or bill of exchange is payable at a determinable future time within the meaning of third Act if it is expressed to be payable:-

(a)        at a fixed time after sate or sight or;

(b)        on or at a fixed time after the occurrence of a specified event which is certain to happen, though the time of its happening may be uncertain.

 

21-C    Anti-dating and post-dating. A promissory note, bill of exchange or cheque is not invalid by reason only that it is anti-dated or postdated:

Provided that the anti-dating or post-dating does not involve any illegal or fraudulent purpose or transaction.

22.       Maturity. The maturity of a promissory note or bill of exchange is the date at which it falls due.

Days of grace. Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable.

23.       Calculating maturity of bill or note payable so many months after date or sight. In calculating the date at which a promissory note or bill of exchange, made payable a stated number of months after date or after sight, or after a certain event, is at maturity, the period stated shall be held to terminate on the day of the month which corresponds with the day on which the instrument i, 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;
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 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 i1 at maturity un the third day after the 23rd 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, made payable three months after date. The instrument is at maturity on the 3rd December 1878.

24.       Calculating maturity of bill or note payable so many days after date or sight. In calculating the date at which a promissory note or bill of exchange made payable a certain number of days after date or after sight or after a certain event is at maturity, the day of the date, or of presentment for acceptance or sight, or of protest for non-acceptance, or on which the event happens, shall be excluded.

25.       When day of maturity is a holiday. When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day.
            Explanation. The expression ‘public holiday’ includes Sundays and the defended by the Central Government, by notification in the official Gazette to be public holidays.

CHAPTER III

    PARTIES TO NOTES, BILLS AND CHEQUES

 26.       Capacity to make, etc., promissory notes, etc. Every person capable of contracting according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.

Minor. Where such an instrument is made, drawn or negotiated by a minor, the making, drawing or negotiation entitles the holder to receive payment of such instrument and to enforce it against any party thereto other than the minor.

Nothing herein contained shall be deemed to empower a corporation to make, indorse or

accept such instruments excepts in cases in which, under the law for the time being in force, they are so empowered.

27.       Agency. Every person capable of binding himself or of being bound by the making. drawing, acceptance or negotiation of a negotiable instrument, may so bind himself or be bound by a duly authorised agent acting in his name.

A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal.
An authority to draw bills of exchange does not of itself import an authority to indorse.

27-A.   Authority of partners. A partner acting in the firm name may bind the firm by the making, drawing acceptance or negotiation of a negotiable instrument to the extent authorised by law relating to partnership for the time being in force.

28.       Liability of agent signing. (1) Where a person signs, a promissory note, bill of exchange of cheque without adding to his signature words indicating that he signs it as an agent for and on behalf of a principal or in a representative character, he is personally, liable thereon but the mere addition to his signature of words describing him as an agent or as filling a representative character does not exempt him from personal liability.

(2)        Notwithstanding anything contained in sub-section (1), any person signing a promissory note, bill of even change or cheque for and on behalf of the principal is not liable to a person who induces him to sign upon the belief that the principal alone would be held liable.

28-A.   Transferor by delivery and transferee. (1) Where the holder of a negotiable instrument payable to bearer negotiates it by delivery without indorsing it, he is called a ‘transferor by delivery’.

(2)        A transferor by delivery is not liable on the instrument.

(3)        A transferor by delivery who negotiable instrument thereby warrants to his immediate .transferee, being a holder for consideration, that the instrument is what it purports to be that he has right to transfer it, and that at the time of transfer he is not aware of any defect which renders it valueless.

29.       Liability of legal representative signing. A legal representative of a deceased person who signs his name to a promissory note, bill of exchange or cheque is liable personally thereon unless he expressly limits his liability to the extent of the asserts received by him as such.

29-A.   Signature essential to liability. No person is liable as maker, drawer, indorse or acceptor of a promissory note, bill of exchange or cheque who has not signed it as such:

Provided that where a person signs any such instrument in a trade or assumed name he is liable thereon as if he had signed it in his own name.

29-B.   Forged unauthorised signature. Subject to the provisions of this Act, where a signature on a promissory note, bill of exchange or cheque is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorised signature is wholly inoperative, and no right to retain the instrument or to give a discharge therefore or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the instrument is precluded from setting up the forgery or want of authority:
Provided that nothing in this section shall affect the ratification of an unauthorised signature not amounting to a forgery.

29-C.   Stranger signing instrument presumed to be indorser. A person placing his signature, upon a negotiable instrument otherwise than as maker, drawer or acceptor is presumed to be an indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

30.       Liability of drawer.

(1) (a)  The drawer of a bill of exchange by drawing .it, engages that on due presentment it shall be accepted and paid according to its tenor, and that if it be dishonoured, he will compensate the holder or any indorser who is compelled to pay it; and

(b)        the drawer of a cheque by drawing it, engages that in the-case of dishonour by the drawer he will compensate the holder:

Provided that due notice of dishonour of the bill or cheque has been given to or received by the drawer as hereinafter provided.

(2)        The drawer of a bill of exchange is not liable thereon until acceptance in the manner provided by this Act.

31.       Liability of drawer of cheque. The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default.

32.       Liability of maker of note and acceptor of bill. (1) In the absence of a contract to the contrary, the maker of a promissory note, by making it, and the acceptor before maturity of all of exchange by accepting it, engaged that he will pay it according to the tenor of the note or his acceptance respectively, and in default of such payment 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.

(2)        The acceptor of a bill of exchange at or after maturity, by accepting it, engages to pay the amount thereof to the holder on demand.

33.       Only drawee can be acceptor except in need or for honour. No person except the drawee of a bill of exchange, or all or some of several drawees, or a person named therein as a drawee in case of need, or an acceptor for honour, can bind himself by an acceptance.

34.       Acceptance by several drawees not partners. Where there are several drawees of a bill of exchange who are not partners each of them can accept it for himself, but none of them can accept it for another without his authority.

35.       Liability of indorser. In the absence of a contract to the contrary the indorser of a negotiable instrument, by indorsing it engages that on due presentment it shall be accepted and paid according to its tenor and that if it be dishonoured he will compensate the holder or subsequent indorser who is compelled to pay it for any loss or damage caused to him by such dishonour.

Every indorser after dishonour is liable as upon an instrument payable on demand.

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

37.       Maker, drawer and acceptor principals. The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principals debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be.

38.       Prior party a principal in respect of each subsequent party. As between the parties, so liable as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a principal debtor in respect of each subsequent party.

 

Illustrations

 

A draws a bill payable to his own order on B who accepts is 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 is sureties. As between E and C, C is the principal debtor and D is his surety.

38-A.   Liability of accommodation party and position of accommodation party. (1) An accommodation party is liable on a negotiable instrument to a holder in due course, notwithstanding that when such holder took the instrument he knew such party to be an accommodation party.

(2)        An accommodation party to a negotiable instrument, if he was paid the amount thereof, is entitled to recover such amount from the party accommodated.

39.       Suretyship. When the holder of an accepted bill of exchange enters into any contract with the acceptor which, under section 134 or 135 of the Contract Act, 1872, would discharge the other parties, the holder may expressly reserve his right 10 charge the other parties, and in such case they are not discharged.

40.       Discharge of indorser’s liability. When 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 blanks-First indorsement, ‘B’. Second endorsement, ‘Peter Williams’. Third indorsement, ‘Wright & Co’.

Fourth indorsement, ‘John rozario’.

This bill A puts in suit against John Razario and strikes out, without John Raozario’s consent, the indorsements by Peter Wiliams, and Wright & Co. A as not entitled to recover anything from John Rozario.

41.       Acceptor bound although indorsement forged. An acceptor of bill of exchange already indorsed is not relieved from liability by reason that such indorsement is forged, if he knew or had reason to believe the indorsement to be forged when he accepted the bill.

42.       Acceptance of bill drawn in fictitious name. An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an indorsement by the same hand as the drawer’s signature, and purporting to be made by the drawer.

43.       Negotiable instrument made etc., without consideration. A negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from time, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

Exception I. No party for whose accommodation a negotiable instrument has been made, drawn, accepted or indorsed can, if he has paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation.

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

44.       Partial absence or failure of money consideration. When the consideration for which a person signed a promissory note, bill of exchange or cheque consisted of money, and was originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

Explanation. The drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of 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.

 

Illustrations

A draws a bill on B for Rs. 500 payable to the order of A, B accepts the bill, but subsequently dishonour it by non-payment. A sues B on the bill. B proves that it was accepted for value as to Rs. 400, and as an accommodation to the plaintiff as to the residue. A can only recover Rs. 400.

45.       Partial failure of consideration not consisting of money. Where a part of the consideration for which a person signed a promissory note, bail of exchange or cheque, through not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that part, the sum which a holder, standing in immediate relation with such signers entitled to receive from him is proportionally reduced.

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

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

As between parties standing in immediate relation, delivery to be effectual must be made by the party making, accepting or indorsing the instrument or by a person authorised by him in that behalf.

As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein.

Exception. A promissory note, bill of exchange or cheque payable to bearer is negotiable by the delivery thereof.

A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof.

47.       Negotiation by delivery. Subject to the provisions of section 58, a promissory note, bill or exchange or cheque payable to bearer is negotiable by delivering thereof.

Exception. A promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in certain event is not negotiable (except in the hands of a holder for value without notice of the condition) unless such event happens.


Illustrations

(a)        A, the holder of a negotiable instrument: payable to bearer, delivers it to B’s agent to keep for B. The instrument has been negotiated.

(b)        A, the holder of a negotiable instrument payable to bearer, which is in the hands of A’s banker, who is at the time the banker of B, directs the banker to transfer the instrument to B’s credit in the banker’s account with B. The banker does so, and accordingly now possesses the instrument as B’s agent. The instrument has been negotiated and B has become the holder of it.

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

49.       Conversion of indorsement in blank into indorsement in full. When a negotiable instrument has been indorsed in blank, any holder may, without signing his own name, convert the blank indorsement into an indorsement in full by writing above the indorser’s signature a direction to pay the amount to or to the order of himself or some other person; and holder does not thereby incur the responsibility of an indorser.

50.       Effect of indorsement. (1) Subject to the provisions of the Act relating to restrictive, conditional and qualified indorsement, the indorsement of negotiable instrument followed by delivery transfers to the indorsee the property therein with the right of further negotiation.

(2)        An indorsement is restrictive which either:-

(a)        restricts or excludes the right to further negotiate the instrument; or

(b)        constitutes the indorse an agent of the indorser to indorse the instrument or to receive its contents for the indorser or for some other specified person:

Provided that the mere absence of words implying right to negotiate does not make the indorsement restrictive.

 

Illustrations

 

B signs the following indorsement on different negotiable instruments payable to bearer:

(a)        Pay the contents to 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 Cto the indorser and others.

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

51.       Who may negotiate. Every sole maker, drawer, payee or indorsee, or all of several joint makers, drawers, payees. or indorses, 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 of drawer to indorse or negotiate an .instrument, unless he is lawful possessions or is holder thereof; or enable to payee or indorsee to indorse or negotiate an instrument, unless he is holder thereof.


Illustrations

A bill is drawn payable to A or order. A indorses it to B, the indorsement not containing the words ‘or order’ or any equivalent words. B may negotiate the instrument.

52.       Indorser who excludes his own liability or makes it conditional. The indorser of a negotiable instrument may, by express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen.

Where an indorser so excludes his liability and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to him.
Where the right of an indorsee to receive’ the amount due on the negotiable instrument is made dependant in the aforesaid manner the condition is valid only as between the indorser and the indorse.

Where the indorsement of a negotiable instrument purports to be conditional, the payer may disregard the condition, and payment to the indorsee is valid whether the condition has been fulfilled or not.

 

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 indorse against B and C.

53.       Holder claiming through holder in due course. (1) A holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the negotiable instrument, has all the rights therein of that holder in due course as regards the acceptor and all parties to the instrument prior to that holder.

(2)        Where the title of the holder is defective,-

(a)        if he negotiates the instrument to a holder in due course, that holder obtains a good and complete title to the instrument; and

(b)        if he obtains payment of the instrument, the person who pays him in due course gets valid discharge for the instrument.

53-A.   Rights of holder in due course. A holder in due course holds the negotiable instrument free from any defect of title of prior parties, and free from defences available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.

54.       Instrument indorsed in blank. Subject to the provisions hereinafter contained as to crossed cheque, a negotiable instrument indorsed in blank is payable to the bearer thereof even although originally payable to order.

55.       Conversion of indorsement in blank into. indorsement If a negotiable instrument, after having been indorsed in blank, is indorsed in full, the amount of it cannot be claimed from the indorser in full, except by the person to whom it has been indorsed in full, or by one who derives title through such person.

56.       Requisites of indorsement. (1) Negotiation by indorsement must be of the entire instrument.

(2)        An indorsement which purports to transfer to the indorsee only a part of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, is not valid as a negotiation of the instrument; but where such amount has been paid in part, a note to that effect may be indorsed on the instrument, which may then be indorsed for the balance.

57.       Legal representative cannot by delivery only negotiate instrument indorsed by deceased. The legal representative of a deceased person cannot negotiate by delivery only a promissory note, bill of exchange or cheque payable to order and indorsed by the deceased but not delivered.

57-A.   Negotiation of instrument to party already liable thereon. Where a negotiable instrument is negotiated back before maturity to the maker or drawer or prior indorser or to the acceptor, such party may, subject to the provisions of this Act, re-issue and further negotiate the instrument but he is not entitled to enforce payment of the instrument against any intervening patty to whom he was previously liable.

57-B.   Rights of holder. A holder may receive payment in due course under a negotiable instrument and further negotiate it in the manner provided by this Act; he may also sue on such instrument in his own name.

58.       Defective title. When a promissory note, bill of exchange or cheque has been lost or has been obtained from any maker, drawer, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, neither the person who finds or so obtains the instrument nor any possessor or indorsee who claims through such person is entitled to receive the amount due thereon from such maker, drawer, acceptor or holder, unless such possessor or indorsee is, or some person through whom he claims was, a holder thereof in due course.

            59. Instrument acquired after dishonour or when overdue. The holder of a negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor, and is subject to the equities to which the transfer was subject at the time of acquisition by such holder.

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.


Illustrations

The acceptor of a bill of exchange, when the 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’s title is subject to the same objection as the drawer’s title.

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


 

CHAPTER V

    OF PRESENTMENT

61.       Presentment for acceptance. A bill of exchange payable after sight must, if no time or place is specified therein for presentment, be presented to the drawee thereof for acceptance, if he can, after reasonable search, be found by a person entitled to demand acceptance, within a reasonable time after it is drawn, and in business hours on a business day.

In default of such presentment, no party thereto is liable thereon to the person making such default.

If the drawee cannot, after reasonable search be found the bill is dishonoured.

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

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

62.       Presentment of promissory note for sight. A promissory note, payable at a certain period after sight must be presented to the maker thereof for sight, (if he can, after reasonable search, be found) by a person entitled to demand payment, within a reasonable time after it is made and in business hours on a business day. In default of such presentment no party thereto is liable thereon to the person making such default.

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

64.       Presentment for payment. Subject to the provisions of section 76, promissory notes bill, of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder.

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 nor is presentment necessary to charge the acceptor of a bill of exchange.

The provisions of this section are without prejudice to the provisions relating to presentment for acceptance in the case of a bill of exchange.

Explanation. Where there are several persons, not being partners liable on the negotiable instrument, as makers, acceptors or drawees, as the case may be, and no place of payment is specified, presentment must be made to them all.

Court Decisions

            Summary suit for recovery of money – Dishonoured cheques – Plea raised by the defendants was that after return of cheques by the Bank with refusal memo., the plaintiff should have again presented the cheques for encashment or should have immediately served notice on the defendant instead of serving such notice after more than eight months – Validity-When intention of defendants for non-payment of the sum mentioned in the cheques was visible to the plaintiffs from their conduct, the plaintiffs were under no legal obligation to present the dishonoured cheques to the drawee Bank again or to have immediately served notice to the defendants. 2002 CLC 107

65.       Hours for presentment. Presentment for payment must be made during the usual hours of business, and, if at a bankers, within banking hours.

66.       Presentment for payment of instrument payable after date or sight. A promissory note or bill of exchange, made payable at a specified period after date or sight thereof must be presented for payment at maturity.

67.       Presentment for payment of promissory note payable by instruments. 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 nonpayment of a note at maturity.

68.       Presentment for payment of instrument payable at specified place and not elsewhere. A promissory note, bill of exchange or cheque made, drawn or accepted payable at. a specified place and not elsewhere must, in order to charge any party thereto, be presented for payment at that place.

69.       Instrument payable at specified place. A promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the maker or drawer thereof, be presented for payment at that place.

70.       Presentment where no exclusive place specified. A promissory note or bill of exchange, not made payable as mentioned in sections 68 and 79, must be presented for payment at the address of the maker, acceptor of drawee given in the instrument and if no such address is given at the place of business (if known), or at the ordinary, residence (if known) of the maker, drawee or acceptor thereof, as the case may be.

71.       Presentment when make, etc., has no known place of business or residence.

 If the maker, drawee or acceptor of a negotiable instrument has no known place of business or 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.
Explanation. In this section and sections 68 and 69, ‘specified place’ means a place sufficiently described so as to enable the person presenting the instrument to locate it.

71-A.   What constitutes valid presentment and mode of presentment. (1) To constitute a valid presentment it shall be sufficient if instead of the original negotiable instrument a copy thereof certified to be true by the holder is delivered to the person liable thereon, either personally or by registered post or by other effective means.

(2)        If, after such delivery, the person liable to pay so demands, the holder shall allow him to inspect the original negotiable instrument during the hours of business of the holder, and if the holder fails to do so within a reasonable time the presentment shall be deemed to be invalid.

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.

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

74.       Presentment of instrument payable on demand. Subject to the provision of Section 81, a negotiable instrument payable on demand must be presented for payment within a reasonable time after it is received by the holder.

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

75-A.   Excuse for delay in presentment for acceptance or payment. 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.

76.       When presentment unnecessary. No presentment for payment is necessary, and the instrument shall be deemed to be 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 hour; 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 make a part payment on account of the amount due on the instrument, or promises to pay the amount due thereon in whole or in part,

or otherwise waives his right to take advantage of any default in presentment for payment;

(d)        as against the drawer, if the drawer could not suffer damage from the want of such presentment;

(e)        where the drawee is a fictitious person;

(f)         as regards an indorser, where the negotiable instrument was made, drawn or accepted for the accommodation of that indorser and he had reason to except that the instrument would not be paid if presented; and

(g)        where, after the exercise of reasonable diligence of, presentment as required by the Act cannot effected.

Explanation. The fact that the holder has reason to believe that the negotiable instrument will on presentment, be dishonoured does not dispense with the necessity for presentment.

Ss. 64, 76 & 92 – Summary suit for recovery of money – Dishonoured cheques – Plea raised by the defendants was that after return of cheques by the Bank with refusal memo., the plaintiff should have again presented the cheques for encashment or should have immediately served notice on the defendant instead of serving such notice after more than eight months – Validity-When intention of defendants for non-payment of the sum mentioned in the cheques was visible to the plaintiffs from their conduct, the plaintiffs were under no legal obligation to present the dishonoured cheques to the drawee Bank again or to have immediately served notice to the defendants. 2002 CLC 107

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

CHAPTER VI

    OF PAYMENT AND INTEREST

 78.       To when payment should be made. Subject to the provisions of section 85, clause (c), payment of the amount due on a promissory note, bill of exchange or cheque, must in order to discharge the maker or acceptor, be made to the holder of the instrument.

79.       Interest when rate specified or not specified. Subject to the provision of any law for the time being in force relating to the relief of debtors, and without prejudice to the provisions of section 34 of the Code of Civil Procedure (Act V of 1908)-

(a)        when interest at a specified rate is expressly made payable on a promissory note or bill of exchange and no date is fixed from which interest is to be paid, interest shall be calculated at the rates specified, on the amount of the principal money due thereon, from the date of the note, or, in the cause of a bill, from the date on which the amount becomes payable, until tender or realization of such amount, or until the date of the institution of a suit to recover such amount;

(b)        when a promissory note or bill of exchange is silent as regards interest or does not specify the rate of interest, interest on the amount of the principal money due thereon shall, notwithstanding any collateral agreement relating to interest between any parties to the instrument be allowed and calculated at the rate of six per centum per annum from the date of the note, or, in the case of a bill, from the date on which the amount becomes payable, until tender or realization, of the amount due thereon, or until the date of the institution of a suit to recover such amount.

80.       Interest when no rate specified. 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 six 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 nonpayment, 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, 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.

CHAPTER VII

    OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES

 

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

(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;

(b)        By release to a holder thereof who otherwise discharges such maker, acceptor or indorser, and to all parties deriving title under such holder after notice of such discharge;

(c)        By payment to all parties thereto, if the instrument is payable to bearer, or has been indorsed in blank, and such maker, acceptor or indorser makes payment in due course of the amount due thereon.

83.       Discharge by allowing drawee more than forty-eight hours to accept. If the holder of a bill of exchange allows the drawee more then forty-eight hours, exclusive of public holidays, to consider whether he will accept the same all previous parties not consenting to such allowance are thereby discharged from liability to such holder.

84.       When cheque not duly presented and drawer damaged thereby. (1) Where a cheque is not presented fro payment within a reasonable time of its issue, and the drawer or person of 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 hand 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 😮 recover the amount from him.

 

Illustrations

(a)        A draws a cheque for Rs. 1,000, and, when 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 mount of the cheque.

(b)        A draws a cheque at Sialkot on a Bank in Chittagong. The bank fails before the cheque could be presented in ordinary course. A is not discharged, for he has not suffered actual damage through any delay in presenting the cheque.

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

(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.

85-A.   Drafts drawn by one branch of a bank on another payable to order. Where any draft, that is, an order to pay money, drawn, by one office of a bank upon another office of the same bank for a sum of money payable to order on demand, purports to be endorsed by or on behalf of the payee, the bank is discharged by payment in due course.

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

Explanation.   An acceptance is qualified-

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

(b)        where it undertakes the payment of part only of the sum ordered to be paid;

(c)        where, no place of payment being specified in 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, tit undertakes the payment at some other place and not otherwise or elsewhere;

(d)        where it undertakes the payment at a time other then that at which under the order it would be legally due.

87.       Effect of material alteration. Any material alteration of a negotiable instrument renders the same void as against’ any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties.

Alteration by indorsee: and any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.

The provisions of this section are subject to those of sections V’, 49, 86 and 125.

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

89.       Payment of instrument on which alteration is not apparent. 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 tender 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.

90.       Extinguishment of rights of action on bill in acceptor’s hands. (1) The maker, acceptor or indorser of negotiable instrument is discharged from liability thereon hen the person liable thereon as principal debtor becomes the holder thereof at or after its maturity.

(2)        When the holder of an accepted bill of exchange entries into any contract with the acceptor of the nature referred to in section 38, the other parties are discharged, unless the holder has expressly reserved his right to charge them.

CHAPTER VIII

OF NOTICE OF DISHONOUR

                91.   Dishonour by non-acceptance. A bill of exchange is said to be dishonoured by non-acceptance when the drawee, or one of several drawees not being partner’s makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted.

Where the drawee is incompetent to contract, or the acceptance is qualified, the bill may be treated as dishonoured.

92.       Dishonour by non-payment. A promissory note, bill of exchange or cheque is said to be dishonoured by non-payment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same.

Court Decisions

          Dishonoured cheques – Plea raised by the defendants was that after return of cheques by the Bank with refusal memo., the plaintiff should have again presented the cheques for encashment or should have immediately served notice on the defendant instead of serving such notice after more than eight months – Validity-When intention of defendants for non-payment of the sum mentioned in the cheques was visible to the plaintiffs from their conduct, the plaintiffs were under no legal obligation to present the dishonoured cheques to the drawee Bank again or to have immediately served notice to the defendants. 2002 CLC 107

93.       By and to whom notice should be given. When a promissory note, bill of exchange or cheque is dishonoured by non-acceptance or not payment the holder thereof, of 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.

When a bill of exchange is dishonoured by non-acceptance the drawer or any indorser to whom such notice is not given is discharged; but the rights of a holder in due course subsequent to the omission to give notice shall not be prejudice by that omission.

When a bill of exchange is dishonoured by non-acceptance and due notice of dishonour is given, it shall not be necessary to give notice of a subsequent dishonour by non-payment, unless the bill shall, in the main time, have been accepted.

Nothing in this section renders it necessary to give notice to the maker of the dishonoured promissory note or the drawee or acceptor of the dishonoured bill of exchange or cheque.

94.       Mode in which notice may be given. Notice of dishonour may be given, to a duly authorized agent of the person to whom it is required to be given, or, where he had died, to his legal representative, or, where he has been declared an insolvent, to his assignee; may be oral or written;

may, if written, be sent by post; and may be in any form; but it must inform the party to whom it is given, either in express terms or by reasonable intendment, that the instrument has been dishonoured, and, in what way, and that he will be held liable thereon; and it must be given within a reasonable time after dishonour, at the place of business or (in case such party has no place of business) at the residence of the party for whom it is intended.

If the notice is duly directed and sent by post and miscarries, such miscarriage does not render the notice invalid.

95.       Party receiving must transmit notice of dishonour. Any party receiving notice of dishonour must, in order to render any prior party liable to himself, give notice dishonour to such party within a reasonable time unless such party otherwise receives due notice as provided by section 93. 

96.       Agent for presentment. When the instrument is deposited with an agent for presentment, the agent is entitled to the same time to give notice to his principal as if he were the holder giving notice of dishonour, and the principal is entitled to a further like period to give notice of dishonour.

97.       When party to whom notice given is dead. When the party to whom notice of dishonour is despatched is dead, but the party despatching the notice is ignorant of his death, the notice is sufficient.

98.       When notice of dishonour is unnecessary. No notice of dishonour is necessary-

(a)        when it is depended 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.

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