17.
Ambiguous instruments.—Where an
instrument may be construed either as a promissory note or bill of exchange, the holder may at his
election treat it as either, and the instrument shall be thenceforward treated
accordingly.
18.
Where amount is stated differently in figures and words.—If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount
stated in words shall be the amount undertaken or ordered to be paid.
19.
Instruments payable on demand.—A
promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand.
20.
Inchoate stamped instruments.—Where one
person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then
in force in 1[India], and either wholly blank or having written thereon an incomplete
negotiable instrument, he thereby gives prima
facie authority to the holder thereof to make or complete, as the case may
be, upon it a negotiable instrument, for any amount specified therein and not
exceeding the amount covered by the stamp. The person so signing shall be
liable upon such instrument, in the capacity in which he signed the same, to
any holder in due course for such amount: provided that no person other than a
holder in due course shall recover from the person delivering the instrument
anything in excess of the amount intended by him to be paid thereunder.
21.
“At sight”.—“On presentment”.—In a
promissory note or bill of exchange the expressions “at sight” and “on presentment” mean on demand. The expression “After sight”—“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.
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 promissary note or
bill of exchange, made payable a stated number of months after date or after
sight, or after a certain event, is at maturity, the period stated shall be
held to terminate on the day of the month which corresponds with the day on
which the instrument is dated, or presented for acceptance or sight, or noted
for non-acceptance, or protested for non-acceptance, or the event happens, or,
where the instrument is a bill of exchange made payable a stated number of
months after sight and has been accepted for honour, with the day on which it
was so accepted. If the month in which the period would terminate has no
corresponding day, the period shall be held to terminate on the last day of
such month.
Illustrations
(a) A
negotiable instrument, dated 29th January, 1878, it made payable at one month
after date. The instrument is at maturity on the third day after the 28th
February, 1878.
(b) A negotiable instrument,
dated 30th August, 1878, it made payable three months after date. The
instrument is at maturity on the 3rd December, 1878.
(c) A promissory note or bill
of exchange, dated 31st August, 1878, is made payable three months after date.
The instrument is at maturity on the 3rd December, 1878.
24.
Calculating maturity of bill or note payable so many days after date or
sight.—In calculating the date at which a promissory note or
bill of exchange made payable a certain number of days after date or after
sight or after a certain event is at maturity, the day of the date, or of
presentment for acceptance or sight, or of protest for non-acceptance, or on
which the event happens, shall be excluded.
25.
When day of maturity is a holiday.—When the
day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed
to be due on the next preceding, business day.
1. Subs. by
Act 3 of 1951, s. 3 and the Sch., for “the States”.
Explanation.— The expression “public holiday”
includes Sundays: 1*** and any other day declared by
the 2[Central Government], by
notification in the Official Gazette, to be a public holiday.
CHAPTER
III
PARTIES TO NOTES, BILLS AND CHEQUES.
26.
Capacity to make, etc., promissory notes, etc.—Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by
the making, drawing, acceptance, indorsement, delivery and negotiation of a
promissory note, bill of exchange or cheque.
Minor.—A minor may draw, indorse, deliver and negotiate such instrument so as
to bind all parties except himself.
Nothing herein contained shall be deemed to empower
a corporation to make, indorse or accept such instruments except in cases in
which, under the law for the time being in force, they are so empowered.
27.
Agency.— Every person capable of binding
himself or of being bound, as mentioned in section 26, may so bind himself or be bound by a duly authorized agent acting
in his name.
A general authority to transact business and to
receive and discharge debts does not confer upon an agent the power of
accepting or indorsing bills of exchange so as to bind his principal.
An
authority to draw bills of exchange does not of itself import an authority to
indorse.
28.
Liability of agent signing.—An agent
who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that
he signs as agent, or that he does not intend thereby to incur personal
responsibility, is liable personally on the instrument, except to those who
induced him to sign upon the belief that the principal only would be held
liable.
29.
Liability of legal representative 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 assets received by him as such.
30.
Liability of drawer.—The
drawer of a bill of exchange or cheque is bound, in case of dishonour by the drawee or acceptor thereof, to
compensate the holder, provided due notice of dishonour has been given to, or
received by, the drawer as hereinafter provided.
31.
Liability of drawee of cheque.—The
drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the
payment of such cheque must pay the cheque when duly required so to do, and ,
in default of such payment, must compensate the drawer for any loss or damage
caused by such default.
32.
Liability of maker of note and acceptor of bill.—In the absence of a contract to the contrary, the maker of a promissory note and the acceptor
before maturity of a bill of exchange are bound to pay the amount thereof at
maturity according to the apparent tenor of the note or acceptance
respectively, and the acceptor of a bill of exchange at or after maturity is
bound to pay the amount thereof to the holder on demand.
In default of such payment as aforesaid, such maker
or acceptor is bound to compensate any party to the note or bill for any loss
or damage sustained by him and caused by such default.
33.
Only drawee can be acceptor except in need or for honour.—No person except the drawee of a bill exchange, or all or some of several drawees, or a person named therein
as a drawee in case of need, or an acceptor for honour, can bind himself by an
acceptance.
34.
Acceptance by several drawees not partners.—Where there are several drawees of a bill of exchange who are not partners, each of them can accept it for
himself, but none of them can accept it for another without his authority.
35.
Liability of indorser.—In the
absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity
without, in such it 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.
1. The words “New Year's day, Christmas day: if either of such days falls
on a Sunday, the next following Monday: Good-Friday:” omitted by Act 37 of
1955, s. 3 (w.e.f. 1-4-1956).
2. Subs by the A.O. 1937, for “L.G”.
Every indorser after dishonour is liable as upon an
instrument payable on demand.
36.
Liability of prior parties to holder in due course.—Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is
duly satisfied.
37.
Maker, drawer and acceptor principals.—The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and
the acceptor are, in the absence of a contract to the contrary, respectively
liable thereon as principal debtors, and the other parties thereto are liable
thereon as sureties for the maker, drawer or acceptor, as the case may be.
38.
Prior party a principal in respect of each subsequent 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.
Illustration
A draws a bill payable to his own
order on B, who accepts. A afterwards indorses the bill to C, C to D, and D to
E. As between E and B, B is the principal debtor, and A, C and D are his
sureties. As between E and A, A is the principal debtor, and C and D are his
sureties. As between E and C, C is the principal debtor and D is his surety.
39.
Suretyship.—When the holder of an accepted
bill of exchange enters into any contract with the acceptor which, under section 134 or 135 of the Indian Contract
Act, 1872 (9 of 1872), would discharge the other parties, the holder may
expressly reserve his right to charge the other parties, and in such case they
are not discharged.
40.
Discharge of indorser's liability.—Where the
holder of a negotiable instrument, without the consent of the indorser, destroys or impairs the indorser's remedy against
a prior party, the indorser is discharged from liability to the holder to the
same extent as if the instrument had been paid at maturity.
Illustration
A is the
holder of a bill of exchange made payable to the order of B, which contains the
following indorsements in blank:—
First
indorsement, “B”.
Second indorsement,
“Peter Williams”.
Third
indorsement, “Wright & Co.”
Fourth
indorsement. “John Rozario”.
This bill A puts in suit against John Rozario and
strikes out, without John Rozario's consent, the indorsements by Peter Williams
and Wright & Co. A is not entitled to recover anything from John Rozario.
41.
Acceptor bound, although, indorsement forged.—An acceptor of a bill of exchange already indorsed is not relieved from liability by reason that such
indorsement is forged, if he knew or had reason to believe the indorsement to
be forged when he accepted the bill.
42.
Acceptance of bill drawn in fictitious name.—An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer's order
is not, by reason that such name is fictitious, relieved from liability to any
holder in due course claiming under an indorsement by the same hand as the
drawer's signature, and purporting to be made by the drawer.
43.
Negotiable instrument made, etc., without consideration.—A negotiable instrument made, drawn,
accepted, indorsed or transferred without consideration, or for a
consideration which fails, creates no obligation of payment between the parties
to the transaction. But if any such party has transferred the instrument with
or without indorsement to a holder for consideration, such holder, and every
subsequent holder deriving title from him, may recover the amount due on such
instrument from the transferor for consideration or any prior party thereto.
Exception I.—No party for whose accommodation a negotiable instrument has been
made, drawn, accepted or indorsed
can, if he have paid the amount thereof, recover thereon such amount from any
person who became a party to such instrument for his accommodation.
Exception
II.—No
party to the instrument who has induced any other party to make, draw, accept,
indorse or transfer the same to him
for a consideration which he has failed to pay or perform in full shall recover
thereon an amount exceeding the value of the consideration (if any) which he
has actually paid or performed.
44.
Partial absence or failure of money-consideration.—When the consideration for which a person signed a promissory note, bill of exchange or cheque consisted of
money, and was originally absent in part or has subsequently failed in part,
the sum which a holder standing in immediate relation with such signer is
entitled to receive from him is proportionally reduced.
Explanation.—The drawer of a bill of exchange stands in immediate relation with the
acceptor. The maker of a promissory
note, bill of exchange or cheque stands in immediate relation with the payee,
and the indorser with his indorsee. Other signers may by agreement stand in
immediate relation with a holder.
Illustration
A draws a bill on B for Rs. 500 payable to the
order of A, B accepts the bill, but subsequently dishonours , it by
non-payment. A sues B on the bill, B proves that it was accepted for value as
to Rs. 400, and as an accommodation to the plaintiff as to the residue. A can
only recover Rs. 400.
45.
Partial failure of consideration not consisting of money.—Where a part of the consideration for which a person signed a promissory note, bill of exchange or
cheque, though not consisting of money, is ascertainable in money without
collateral enquiry, and there has been a failure of that part, the sum which a
holder standing in immediate relation with such signer is entitled to receive
from him is proportionally reduced.
1[45A. Holder's right to duplicate
of lost bill.—Where a bill of exchange has been
lost before it is over-due, the
person who was the holder of it may apply to the drawer to give him another
bill of the same tenor, giving security to the drawer, if required, to
indemnify him against all persons whatever in case the bill alleged to have
been lost shall be found again.
If the drawer on request as
aforesaid refuses to give such duplicate bill, he may be compelled to do so.]
CHAPTER IV
OF NEGOTIATION
46.
Delivery.—The making, acceptance or
indorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or
constructive.
As between parties standing in immediate relation,
delivery to be effectual must be made by the party making, accepting or
indorsing the instrument, or by a person authorized by him in that behalf.
As between such parties and any holder of the
instrument other than a holder in due course, it may be shown that the
instrument was delivered conditionally or for a special purpose only, and not
for the purpose of transferring absolutely the property therein.
A
promissory note, bill of exchange or cheque payable to bearer is negotiable by
the delivery thereof.
A promissory note, bill of exchange or cheque
payable to order is negotiable by the holder by indorsement and delivery thereof.
47.
Negotiation by delivery.—Subject
to the provisions of section 58, a promissory note, bill of exchange or cheque payable to bearer is
negotiable by delivery thereof.
Exception.—A promissory note, bill of exchange or cheque delivered on condition that
it is not to take effect except in a
certain event is not negotiable (except in the hands of a holder for value
without notice of the condition) unless such event happens.
Illustrations
(a) A,
the holder of a negotiable instrument payable to bearer, delivers it to B's
agent to keep for B. The instrument has been negotiated.
(b) A,
the holder of a negotiable instrument payable to bearer, which is in the hands
of A's banker, who is at the time the banker of B, directs the banker to
transfer the instrument to B's credit in the banker's account with B. The
banker does so, and accordingly now possesses the instrument as B's agent. The
instrument has been negotiated, and B has become the holder of it.
1. Ins. by Act
2 of 1885, s. 3.
48.
Negotiation by indorsement.—Subject
to the provisions of section 58, a promissory note, bill of exchange or cheque 1[payable to order], is negotiable by the holder by indorsement and
delivery thereof.
49.
Conversion of indorsement in blank into indorsement in full.—The holder of a negotiable instrument
indorsed in blank may, without signing his own name, by writing above the
indorser's signature a direction to pay to any other person as indorsee,
convert the indorsement in blank into an indorsement in full; and the holder
does not thereby incur the responsibility of an indorser.
50.
Effect of indorsement.—The
indorsement of a negotiable instrument followed by delivery transfers to the indorsee the property therein
with the right of further negotiation; but the indorsement may, by express
words, restrict or exclude such right, or may merely constitute the indorsee an
agent to indorse the instrument, or to receive its contents for the indorser,
or for some other specified person.
Illustrations
B signs the following indorsements on different
negotiable instruments payable to bearer. — (a) “Pay the contents to C only”.
(b) “Pay C for my use.”
(c) “Pay C or
order for the account of B.”
(d) “the within must be credited to C.”
These
indorsements exclude the right of further negotiation by C.
( e ) “P a y C . ”
(f) “Pay C value in account with the
Oriental Bank.”
(g) “Pay the contents to C,
being part of the consideration in a certain deed of assignment executed by C
to the indorser and others.”
These
indorsements do not exclude the right of further negotiation by C.
51.
Who may negotiate.—Every sole maker, drawer, payee
or indorsee, or all of several joint makers, drawers, payees or indorsees, of a negotiable instrument may, if
the negotiability of such instrument has not been restricted or excluded as
mentioned in section 50, indorse and negotiate the same.
Explanation.—Nothing in this section enables a maker or drawer to indorse or
negotiate an instrument, unless he is
in lawful possession or is holder thereof; or enables a payee or indorsee to
indorse or negotiate an instrument, unless he is holder thereof.
Illustration
A bill is drawn payable to A or order. A indorses
it to B, the indorsement not containing the words “or order” or any equivalent
words. B may negotiate the instrument.
52.
Indorser who excludes his own liability or makes it conditional.—The indorser of a negotiable instrument may, by express words in
the indorsement, exclude his own liability thereon, or make such liability or
the right of the indorsee to receive the amount due thereon depend upon the
happening of a specified event, although such event may never happen.
Where an indorser so excludes his liability and afterwards becomes the
holder of the instrument, all intermediate indorsers are liable to him.
Illustrations
(a) The indorser of a negotiable
instrument sign; his name adding the words— “Without recourse.”
Upon this
indorsement he incurs no liability.
(b) A is the payee and holder of a negotiable instrument. Excluding
personal liability by an indorsement “without recourse” he transfers the
instrument to B, and B indorses it to C, who indorses it to A. A is not only
reinstated in his former rights, but has the rights of an indorsee against B
and C.
53.53.
Holder deriving title from holder in due course.—A holder of a negotiable instrument who derives title from a holder in due course has the rights thereon of that
holder in due course.
54.
Instrument indorsed in blank.—Subject
to the provisions hereinafter contained as to crossed cheques, a negotiable instrument indorsed in blank is payable to
the bearer thereof even although originally payable to order.
55.
Conversion of indorsement in blank into indorsement in full.—If a negotiable instrument, after
having been indorsed in blank, is indorsed in full, the amount of it cannot
be claimed from the indorser in full, except by the person to whom it has been
indorsed in full, or by one who derives title through such person.
56. Indorsement for part of
sum due.—No writing on a negotiable
instrument is valid for the purpose of negotiation
if such writing purports to transfer only a part of the amount appearing to be
due on the instrument; but where such amount has been partly paid, a note to
that effect may be indorsed on the instrument, which may then be negotiated for
the balance.
57.
Legal representative cannot by delivery only negotiate instrument
indorsed by deceased.—The legal representative of a deceased person cannot negotiate by
delivery only a promissory note, bill of exchange or cheque payable to order
and indorsed by the deceased but not delivered.
58.
Instrument obtained by unlawful means or for unlawful consideration.—When a negotiable instrument
has been lost, or has been obtained from any maker, acceptor or holder thereof
by means of an offence or fraud, or for an unlawful consideration, no possessor
or indorsee who claims through the person who found or so obtained the
instrument is entitled to receive the amount due thereon from such maker,
acceptor or holder, or from any party prior to such holder, unless such
possessor or indorsee is, or some person through whom he claims was, a holder
thereof in due course.
59.
Instrument acquired after dishonour or when overdue.—The holder of a negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or
non-payment, with notice thereof, or after maturity, has only, as against the
other parties, the rights thereon of his transferor:
Accommodation note or bill.—Provided
that any person who, in good faith and for consideration, becomes the holder, after maturity, of a promissory note or bill
of exchange made, drawn or accepted without consideration, for the purpose of
enabling some party thereto to raise money thereon, may recover the amount of
the note or bill from any prior party.
Illustration
The acceptor of a bill of exchange, when he
accepted it, deposited with the drawer certain goods as a collateral security
for the payment of the bill, with power to the drawer to sell the goods and
apply the proceeds in discharge of the bill if it were not paid at maturity.
The bill not having been paid at maturity, the drawer sold the goods and
retained the proceeds, but indorsed the bill to A. A's title is subject to the
same objection as the drawer's title.
60.
Instrument negotiable till payment or satisfaction.—A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after maturity) until
payment or satisfaction thereof by the maker, drawee or acceptor at or after
maturity, but not after such payment or satisfaction.
C HA P TE R V
O F P RESE N TM EN T
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 till is
dishonoured
1[Where authorized by agreement or
usage, a presentment through the post office by means of a registered letter is
sufficient.]
62.
Presentment of promissory note for sight.—A promissory note, payable at a certain period after sight, must be presented to the maker thereof
for sight (if he can after reasonable search be found) by a person entitled to
demand payment, within a reasonable time after it is made and in business hours
on a business day. In default of such presentment, no party thereto is liable
thereon to the person making such default.
63.
Drawee’s time for deliberation.—The
holder must, if so required by the drawee of a bill of exchange presented to him for acceptance, allow
the drawee 2 [forty-eight] hours (exclusive of public holidays) to consider whether
he will accept it.
64.
Presentment for payment.— 3 [(1)] Promissory notes, bills
of exchange and cheques must be presented
for payment to the maker, acceptor or drawee thereof respectively, by or on
behalf of the holder as hereinafter provided. In default of such presentment,
the other parties there to are not liable thereon to such holder.
1[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.
4[(2) Notwithstanding anything
contained in section 6, where an electronic image of a truncated cheque is
presented for payment, the drawee bank is entitled to demand any further
information regarding the truncated cheque from the bank holding the truncated
cheque in case of any reasonable suspicion about the genuineness of the
apparent tenor of instrument, and if the suspicion is that of any fraud,
forgery, tampering or destruction of the instrument, it is entitled to further
demand the presentment of the truncated cheque itself for verification:
Provided that the truncated
cheque so demanded by the drawee bank shall be retained by it, if the payment
is made accordingly.]
65.
Hours for presentment—Presentment
for payment must be made during the usual hours of business, and, if at a banker's within banking
hours.
66.
Presentment for payment of instrument payable after date or sight—A promissory note or bill of exchange,
made payable at a specified period after date or sight thereof, must be presented
for payment at maturity.
67.
Presentment for payment of promissory note payable by instalments.—A promissory note payable by
instalments must be presented for payment on the third day after the date fixed
for payment of each instalment; and non-payment on such presentment has the
same effect as non-payment of a note at maturity.
68.
Presentment for payment of instrument payable at specified place and not
elsewhere.—A promissory note, bill of exchange or cheque made, drawn or
accepted payable at a specified place and not elsewhere must, in order to
charge any party thereto, be presented for payment at that place.
69.
Instrument payable at specified place.—A promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the
maker or drawer thereof, be presented for payment at that place.
70.
Presentment where no exclusive place specified.—A promissory note or bill of exchange, not made payable as mentioned in sections 68 and 69, must be presented for
payment at the place of business (if any), or at the usual residence, of the
maker, drawee or acceptor thereof, as the case may be.
71.
Presentment when maker, etc., has no known place of business or
residence.—If the maker, drawee or acceptor of a negotiable instrument has no known place
of business or fixed residence, and no place
1. Added by
Act 2 of 1885, s. 4.
2. Subs. by
Act 12 of 1921, s. 2 for “twenty-four”.
3. Section
64 renumbered as sub-section (1)
thereof by Act 55 of 2002, s. 3 (w.e.f. 6-2-2003).
4. Ins. by
s. 3 ibid., (w.e.f. 6-2-2003).
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.— 1[Subject to the provisions of
section 84,] a cheque must, in order
to charge the drawer be presented at the bank upon which it is drawn before the
relation between the drawer and his banker has been altered to the prejudice of
the drawer.
73.
Presentment of cheque to charge any other person.—A cheque must, in order to charge any person except the drawer, be presented within a reasonable time after
delivery thereof by such person.
74.
Presentment of instrument payable on demand.—Subject to the provisions of section 31, a negotiable instrument payable on demand must be presented for
payment within a reasonable time after it is received by the holder.
75.
Presentment by or to agent, representative of deceased, or assignee of
insolvent.—Presentment for acceptance or payment may be made to the duly authorized agent
of the drawee, maker or acceptor, as the case may be, or, where the drawee,
maker or acceptor has died, to his legal representative, or, where he has been
declared an insolvent, to his assignee.
2[75A. Excuse for delay in
presentment for acceptance or payment—Delay in
presentment 3 [for acceptance or payment] is excused if
the delay is caused by circumstances beyond the control of the holder, and not
imputable to his default, misconduct or negligence. When the cause of delay
ceases to operate, presentment must be made within a reasonable time.]
76.
When presentment unnecessary.—No
presentment for payment is necessary, and the instrument is dishonoured at the due date for presentment, in any of the
following cases:—
(a) if the maker, drawee or acceptor
intentionally prevents the presentment of the instrument, or,
if the instrument being payable at his place of business, he closes such
place on a business day during the usual business hours, or,
if the instrument being payable at some other specified place, neither
he nor any person authorized to pay it attends at such place during the usual
business hours, or,
if the
instrument not being payable at any specified place, he cannot after due search
be foun d;
(b) as against any party
sought to be charged therewith, if he has engaged to pay notwithstanding
non-presentment;
(c) as against any party if,
after maturity, with knowledge that the instrument has not been presented—
he makes a part payment on account of the amount due on the instrument,
or promises to pay the amount due thereon in whole or in part,
or
otherwise waives his right to take advantage of any default in presentment for
payment;
(d) as against the drawer, if the drawer
could not suffer damage from the want of such presentment.
77.
Liability of banker for negligently dealing with bill presented for
payment.—When a bill of exchange, accepted payable at a
specified bank, has been duly presented there for payment and dishonoured, if
the banker so negligently or improperly keeps, deals with or delivers back such
bill as to cause loss to the holder, he must compensate the holder for such
loss.
CHAPTER
VI
OF PAYMENT AND INTEREST
78.
To whom payment should be made.—Subject
to the provisions of section 82, clause (c),
payment of the amount due on a
promissory note, bill of exchange or cheque must, in order to discharge the
maker or acceptor, be made to the holder of the instrument.
79.
Interest when rate specified.—When
interest at a specified rate is expressly made payable on a promissory note or bill of exchange, interest shall be calculated
at the rate specified, on the amount of the
1. Ins. by
Act 6 of 1897, s. 2.
2. Ins. by
Act 25 of 1920. s. 2.
3. Subs. by
Act 12 of 1921, s. 3, for “for payment”.
principal money due thereon, from the date of the instrument, until
tender or realization of such amount, or until such date after the institution
of a suit to recover such amount as the Court directs.
80.
Interest when no rate specified.— When no
rate of interest is specified in the instrument, interest on the amount due thereon shall, 1[notwithstanding any agreement
relating to interest between any parties to the instrument], be calculated at
the rate of 2[eighteen per centum] per annum, from the date at which the same ought
to have been paid by the party charged, until tender or realization of the
amount due thereon, or until such date after the institution of a suit to
recover such a mount as the Court directs.
Explanation.—When the party charged is the indorser of an instrument dishonoured by
non-payment he is liable to pay
interest only from the time that he receives notice of the dishonour.
81.
Delivery of instrument on payment, or indemnity in case of loss.—3[(1)] Any person liable to pay,
and called upon by the holder thereof to pay, the amount due on a promissory
note, bill of exchange or cheque is before payment entitled to have it shown,
and is on payment entitled to have it delivered up, to him, or if the
instrument is lost or cannot be produced, to be indemnified against any further
claim thereon against him.
4[(2) Where the cheque is an electronic
image of a truncated cheque, even after the payment the banker.
who
received the payment shall be entitled to retain the truncated cheque.
(3) A certificate issued on
the foot of the printout of the electronic image of a truncated cheque by the
banker who paid the instrument, shall be prima
facie proof of such payment.]
CHAPTER VII
OF DISCHARGE
FROM LIABILITY ON NOTES, BILLS AND CHEQUES
82.
Discharge from liability.—The
maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon—
(a) by cancellation.—to a
holder thereof who cancels such acceptor's or indorser’s name with intent to discharge him, and to all parties
claiming under such holder;
(b) by release.—to a holder thereof who otherwise discharges such
maker, acceptor or indorser, and to all parties deriving title under such
holder after notice of such discharge;
(c) by payment.—to all parites thereto, if the instrument is payable to
bearer, or has been indorsed in blank, and such maker, acceptor or indorser
makes payment in due course of the amount due thereon.
83.
Discharge by allowing drawee more than forty-eight hours to accept.—If the holder of a bill of exchange
allows the drawee more than 5[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 discharge from liability to such holder.
6[84. When cheque not duly
presented and drawer damaged thereby.—(1) Where a cheque is not presented for payment within a
reasonable time of its issue, and the drawer or person on whose account it is
drawn had the right, at the time when presentment ought to have been made, as
between himself and the banker, to have the cheque paid and suffers actual
damage through the delay, he is discharged to the extent of such damage, that
is to say, to the extent to which such drawer or person is a creditor of the
banker to a larger amount than he would have been if such cheque had been paid.
(2) In determining what is a reasonble 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 of person is so
discharged shall be a creditor, in lieu of such drawer or person, of such
banker to the extent of such discharge and entitled to recover the amount from
him.
Illustrations
(a) A
draws a cheque for Rs. 1,000, and, when the cheque ought to be presented, has
funds at the bank to meet it. The bank fails before the cheque is presented.
The drawer is discharged, but the holder can prove against the bank for the
amount of the cheque.
(b) A draws a cheque at Umballa on a bank in Calcutta. The bank
fails before the cheque could be [presented in ordinary course. A is not
discharged, for he has not suffered actual damage through any delay in
presenting the cheque.]
85.
Cheque payable to order.—1[(1)] Where a cheque payable
to order purports to be endorsed by or on
behalf of the payee, the drawee is discharged by payment in due course.
2[(2) Where a cheque is originally expressed to be payable to bearer,
the drawee is discharged by payment in due course to the bearer thereof,
notwithstanding any endorsement whether in full or in blank appearing, thereon,
and notwithstanding that any such endorsement purports to restrict or exclude
further negotiation.]
3[85A. Drafts drawn by one branch of a bank on another payable to order.—where any
draft, that is, an order to pay
money, drawn by one office of a bank upon another office of the same bank for a
sum of money payable to order on demand, purports to be endorsed by or on
behalf of the payee, the bank is discharged by payment in due course.]
86.
Parties not consenting discharged by qualified or limited acceptance. —If the holder of a bill of
exchange acquiesces in a qualified acceptance, or one limited to part of the
sum mentioned in the bill, or which substitutes a different place or time for
payment, or which, where the drawees are not partners, is not signed by all the
drawees, all previous parties whose consent is not obtained to such acceptance
are discharged as against the holder and those claiming under him, unless on
notice given by the holder they assent to such acceptance.
Explanation.—An
acceptance is qualified
(a) where it is conditional, declaring the payment to be dependent
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 on the order, it
undertakes the payment at a specified place, and not otherwise or elsewhere; or
where, a place of payment being specified in the order, it undertakes the
payment at some other place and not otherwise or elsewhere;
(d) where it undertakes the payment at a time other than that at
which under the order it would be legally due.
87.
Effect of material alteration.—Any
material alteration of a negotiable instrument renders the same void as against anyone who is a party
thereto at the time of making such alteration and does not consent thereto,
unless it was made in order to carry out the common intention of the original
parties;
Alteration
by indorsee.—And any such alteration, if made
by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof.
The
provisions of this section are subject to those of sections 20, 49, 86 and 125.
88.
Acceptor or indorser bound notwithstanding previous alteration.—An acceptor or indorser of a negotiable
instrument is bound by his acceptance or indorsement notwithstanding any
previous alteration of the instrument.
89.
Payment of instrument on which alteration is not apparent.—4[(1)] Where a promissory note, bill of exchange or cheque has been
materially altered but does not appear to have been so altered,
or where a cheque is presented for payment which
does not at the time of presentation appear to be crossed or to have had a
crossing which has been obliterated,
payment thereof by a person or
banker liable to pay, and paying the same according to the apparent tenor
thereof at the time of payment and otherwise in due course, shall discharge
such person or banker from all liability thereon; and such payment shall not be
questioned by reason of the instrument having been altered or the cheque
crossed.
1[(2) Where the cheque is an
electronic image of a truncated cheque, any difference in apparent tenor of
such electronic image and the truncated cheque shall be a material alteration
and it shall be the duty of the bank or the clearing house, as the case may be,
to ensure the exactness of the apparent tenor of electronic image of the
truncated cheque while truncating and transmitting the image.
(3) Any bank or a clearing house which receives a transmitted
electronic image of a truncated cheque, shall verify from the party who
transmitted the image to it, that the image so transmitted to it and received
by it, is exactly the same.].
90. Extinguishment of rights of action on bill in acceptor's hands.—If
a bill of exchange which has been
negotiated is, at or after maturity, held by the acceptor in his own right, all
rights of action thereon are extinguished.
CHAPTER
VIII
OF NOTICE OF DISHONOUR
91.
Dishonour by non-acceptance.—A bill of
exchange is said to be dishonoured by non-acceptance when the drawee, or one of several drawees not being partners,
makes default in acceptance upon being duly required to accept the bill, or
where presentment is excused and the bill is not accepted.
Where the drawee is incompetent to contract, or the
acceptance is qualified, the bill may be treated as dishonoured.
92.
Dishonour by non-payment.—A
promissory note, bill of exchange or cheque is said to be dishonoured by non-payment when the maker of the note, acceptor of
the bill or drawee of the cheque makes default in payment upon being duly
required to pay the same.
93.
By and to whom notice should be given.—When a promissory note, bill of exchange or cheque is dishonoured by non-acceptance or
non-payment, the holder thereof, or some party thereto, who remains liable
thereon, must give notice that the instrument has been so dishonoured to all
other parties whom the holder seeks to make severally liable thereon, and to
some one of several parties whom he seeks to make jointly liable thereon.
Nothing in this section renders it necessary to
give notice to the maker of the dishonoured promissory note or the drawee or
acceptor of the dishonoured bill of exchange or cheque.
94.
Mode in which notice may be given.—Notice
of dishonour may be given to a duly authorized agent of the person to whom it is required to be given, or, where he has
died, to his legal representative, or, where he has been declared an insolvent,
to his assignee; may be oral or written; may, if written, be sent by post; and
may be in any form; but it must inform the party to whom it is given, either in
express terms or by reasonable intendment, that the instrument has been
dishonoured, and in what way, and that he will be held liable thereon; and it
must be given within a reasonable time after dishonour, at the place of
business or (in case such party has no place of business) at the residence of
the party for whom it is intended.
If the notice is duly directed and sent by post and
miscarries, such miscarriage does not render the notice invalid.
95.
Party receiving must transmit notice of dishonour.—Any party receiving notice of dishonour must, in order to render any prior party liable to himself, give notice
of dishonour to such party within a reasonable time, unless such party
otherwise receives due notice as provided by section 93.
96.
Agent for presentment.—When the
instrument is deposited with an agent for presentment, the agent is entitled to the same time to give
notice to his principal as if he were the holder giving notice of dishonour,
and the principal is entitled to a further like period to give notice of
dishonour.
97.
When party to whom notice given is dead.—when the party to whom notice of
dishonour is dispatched is dead, but
the party dispatching the notice is ignorant of his death, the notice is
sufficient.
1. Ins. by
Act 55 of 2002, s. 5 (w.e.f. 6-2-2003).
98.
When notice of dishonour is unnecessary.—No notice of dishonour is necessary—
(a) when it is dispensed with by
the party entitled thereto;
(b) in order to charge the
drawer when he has countermanded payment; (c)
when the party charged could not suffer damage for want of notice;
(d) when the party entitled to
notice cannot after due search be found; or the party bound to give notice is,
for any other reason, unable without any fault of his own to give it;
(e) to charge the drawers,
when the acceptor is also a drawer; (f)
in the case of a promissory note which is not negotiable;
(g) when the party entitled to
notice, knowing the facts, promises unconditionally to pay the amount due on
the instrument.
CHAPTER
IX
O F N O T I NG A N D P R O T E S
T
99.
Noting.—When a promissory note or bill
of exchange has been dishonoured by non-acceptance or non-payment, the holder may cause such dishonour to be noted by a
notary public upon the instrument, or upon a paper attached thereto, or partly
upon each.
Such note must be made within a reasonable time
after dishonour, and must specify the date of dishonour, the reason, if any,
assigned for such dishonour, or, if the instrument has not been expressly
dishonoured, the reason why the holder treats it as dishonoured, and the
notary's charges.
100.
Protest.—When a promissory note or bill of
exchange has been dishonoured by non-acceptance or non-payment, the holder may, within a reasonable time, cause such
dishonour to be noted and certified by a notary public. Such certificate is
called a protest.
Protest
for better security.—When the acceptor of a bill of
exchange has become insolvent, or his credit
has been publicly impeached, before the maturity of the bill, the holder may,
within a reasonable time, cause a notary public to demand better security of
the acceptor, and on its being refused may, within a reasonable time, cause
such facts to be noted and certified as aforesaid. Such certificate is called a
protest for better security.
101. Contents of protest.—A protest
under section 100 must contain—
(a) either the instrument itself, or a literal transcript of the
instrument and of everything written or printed thereupon;
(b) the name of the person for whom and
against whom the instrument has been protested;
(c) a statement that payment or acceptance, or better security, as
the case may be, has been demanded of such person by the notary public; the
terms of his answer, if any, or a statement that he gave no answer or that he
could not be found;
(d) when the note or bill has been dishonoured, the place and time
of dishonour, and, when better security has been refused, the place and time of
refusal;
(e) the subscription of the notary public
making the protest;
(f) in the event of an acceptance for honour or of a payment for
honour, the name of the person by whom, of the person for whom, and the manner
in which, such acceptance or payment was offered and effected.
1[A notary public may make the demand mentioned in clause (c) of this section either in person or
by his clerk or, where authorized by agreement or usage, by registered letter.]
102.
Notice of protest.—When a promissory note or bill
of exchange is required by law to be protested, notice of such protest must be given instead of notice of
dishonour, in the same manner and subject to the same conditions; but the
notice may be given by the notary public who makes the protest.
1. Ins. by
Act 2 of 1885, s. 5.
103.
Protest for non-payment after dishonour by non-acceptance.—All bills of exchange drawn payable
at some other place than the place mentioned as the residence of the drawee,
and which are dishonoured by non-acceptance, may, without further presentment
to the drawee, be protested for non-payment in the place specified for payment,
unless paid before or at maturity.
104.
Protest of foreign bills.—Foreign
bills of exchange must be protested for dishonour when such protest is required by the law of the place where they are drawn.
1[104A. When noting equivalent to
protest.—For the purposes of this Act,
where a bill or note is required to
be protested within a specified time or before some further proceeding is
taken, it is sufficient that the bill has been noted for protest before the
expiration of the specified time or the taking of the proceeding; and, the
formal protest may be extended at any time thereafter as of the date of the
noting.]
CHAPTER X
O F R E A S O N A B L E T I M E
105.
Reasonable time.—In determining what is a
reasonable time for presentment for acceptance or payment, for giving notice of dishonour and for noting, regard
shall be had to the nature of the instrument and the usual course of dealing
with respect to similar instruments; and, in calculating such time, public
holidays shall be excluded.
106.
Reasonable time of giving notice of dishonour.—If the holder and the party to whom notice of dishonour is given carry on business or live (as the case may be)
in different places, such notice is given within a reasonable time if it is
dispatched 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
dispatched in time to reach its destination on the day next after the day of
dishonour.
107.
Reasonable time for transmitting such notice.—A party receiving notice of dishonour, who seeks to enforce his right against a prior party, transmits the notice
within a reasonable time if he transmits it within the same time after its
receipt as he would have had to give notice if he had been the holder.
CHAPTER XI
OF ACCEPTANCE AND PAYMENT
FOR HONOUR AND REFERENCE
IN CASE OF NEED
108.Acceptance for honour.—When a bill of exchange has been noted or protested for non-acceptance
or for better security, any person
not being a party already liable thereon may, with the consent of the holder,
by writing on the bill, accept the same for the honour of any party thereto. 2***
109.
How acceptance for honour must be made.—A person desiring to accept for honour must, 3[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. 4***
110.
Acceptance not specifying for whose honour it is made.—Where the acceptance does not express for whose honour it is made, it shall be deemed to be made for the
honour of the drawer.
111.
Liability of acceptor for honour.—An
acceptor for honour binds himself to all parties subsequent to the party for whose honour he accepts to pay the amount of the
bill if the drawee do not; and such party and all prior parties are liable in
their respective capacities to compensate the acceptor for honour for all loss
or damage sustained by him in consequence of such acceptance.
But an acceptor for honour is not
liable to the holder of the bill unless it is presented, or (in case the
address given by such acceptor on the bill is a place other than the place
where the bill is made payable) forwarded for presentment, not later than the
day next after the day of its maturity.
112.
When acceptor for honour may be charged.—An acceptor for honour cannot be charged unless the bill has at its maturity been presented to the drawee for
payment, and has been dishonoured by him, and noted or protested for such
dishonour.
1. Ins. by
Act 2 of 1885, s. 6.
2. The
second sentence rep. by s. 7, ibid,.
3. Subs. by
s. 8, ibid., for “in the presence of
a notary public, subscribe the bill with his own hand, and”.
4. The words
“and such declaration must be recorded by the notary in his register” rep. by
s. 8, ibid.
113.
Payment for honour.—When a bill of exchange has been
noted or protested for non-payment, any person
may pay the same for the honour of any party liable to pay the same, provided
that the person so paying 1[or his agent in that behalf] has previously declared before a notary
public the party for whose honour he pays, and that such declaration has been
recorded by such notary public.
114.
Right of payer for honour.—Any
person so paying is entitled to all the rights in respect of the bill, of the holder at the time of such
payment, and may recover from the party for whose honour he pays all sums so
paid, with interest thereon and with all expenses properly incurred in making
such payment.
115.
Drawee in case of need.—Where a
drawee in case of need is named in a bill of exchange, or in any indorsement thereon, the bill is not dishonoured
until it has been dishonoured by such drawee.
116.
Acceptance and payment without protest.—A drawee in case of need may accept and pay the bill of exchange without previous protest.
CHAPTER
XII
O F C OMP E N S A T I ON
117.
Rules as to compensation.—The
compensation payable in case of dishonour of a promissory note, bill of exchange or cheque, by any
party liable to the holder or any indorsee, shall 2*** 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 3[eighteen per centum] per annum
from the date of payment until tender or realization thereof, together with all
expenses caused by the dishonour and payment;
(d) when the person charged and such indorser reside at different
places, the indorser is entitled to receive such sum at the current rate of
exchange between the two places;
(e) the party entitled to compensation may draw a bill upon the
party liable to compensate him, payable at sight or on demand, for the amount
due to him, together with all expenses properly incurred by him. Such bill must
be accompanied by the instrument dishonoured and the protest thereof (if any).
If such bill is dishonoured, the party dishonouring the same is liable to make
compensation thereof in the same manner as in the case of the original bill.
CHAPTER
XIII
SP E CI A L R U L ES O
F EV I DE N CE
118.
Presumptions as to negotiable instruments.—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 naturity;
1. Ins. by
Act 2 of 1885, s. 9.
2. The brackets, words and figures "(except in cases provided for by
the Code of Civil Procedure, s. 532,)" omitted by Act 30 of 1926 , s. 3.
3. Subs. by
Act 66 of 1988 , s. 3 , for “six per centum” (w.e.f . 30 - 12 - 1988 ).
(e) as to order of
indorsements:—that the indorsements appearing upon a negotiable instrument
were made in the order in which they appear then on;
(f) as
to stamp:— 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 instrutment has been obtained from its
lawful owner, or from any person in lawful custody thereof, by means of an
offence or fraud, or has been obtained from the maker or acceptor thereof by
means of an offence or fraud, or for unlawful consideration, the burden of
proving that the holder is a holder in due course lies upon him.
119. Presumption on proof of protest.—In a suit
upon an instrument which has been dishonoured, the Court shall, on proof of the protest, presume the fact of
dishonour, unless and until such fact is disproved.
120.
Estoppel against denying original validity of instrument.—No maker of a promissory note, and
no drawer of a bill of exchange or cheque, and no acceptor of a bill of
exchange for the honour of the drawer shall, in a suit thereon by a holder in
due course, be permitted to deny the validity of the instrument as originally
made or drawn.
121.
Estoppel against denying capacity of payee to indorse.—No maker of a promissory note and no
acceptor of a bill of exchange 1[payable to order] shall, in a suit thereon by a holder in due course,
be permitted to deny the payee's capacity, at the date of the note or bill, to
indorse the same.
122.
Estoppel against denying signature or capacity of prior party.—No indorser of a negotiable instrument
shall, in a suit thereon by a subsequent holder, be permitted to deny the
signature or capacity to contract of any prior party to the instrument.
CHAPTER
XIV
O F C ROSSED C HEQUES
123.
Cheque crossed generally.—Where a cheque bears across its face an
addition of the words “and company”
or any abbreviation thereof, between two parallel transverse lines, or of two
parallel transverse lines simply, either with or without the words “not
negotiable”, that addition shall be deemed a crossing, and the cheque shall be
deemed to be crossed generally.
124.
Cheque crossed specially.—Where a
cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, that addition
shall be deemed a crossing and the cheque shall be deemed to be crossed
specially, and to be crossed to that banker.
125.
Crossing after issue.—Where a
cheque is uncrossed, the holder may cross it generally or specially. Where a cheque is crossed generally,
the holder may cross it specially.
Where a
cheque is crossed generally, or specially, the holder may add the words “not
negotiable”.
Where a cheque is crossed specially, the banker to
whom it is crossed may again cross it specially to another banker, his agent,
for collection.
126.
Payment of cheque crossed generally.—Where a
cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker.
Payment
of cheque crossed specially.—Where a
cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is
crossed, or his agent for collection.
127.
Payment of cheque crossed specially more than once.—Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the
purpose of collection, the banker on whom it is drawn shall refuse payment
thereof.
128.
Payment in due course of crossed cheque.—Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and
(in case such cheque has come to the hands of the payee) the drawer thereof,
shall respectively be entitled to the same rights, and be placed in the
1. Subs. by Act 8 of 1919, s. 5, for “payable to, or
to the order- of, a
specified person”.
same position in all respects, as they would respectively be entitled to
and placed in if the amount of the cheque had been paid to and received by the
true owner thereof.
129.
Payment of crossed cheque out of due course.—Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially
otherwise than to the banker to whom the same is crossed, or his agent for
collection, being a banker, shall be liable to the true owner of the cheque for
any loss he may sustain owing to the cheque having been so paid.
130.
Cheque bearing “not negotiable”.—A person
taking a cheque crossed generally or specially, bearing in either case the words “not negotiable”, shall not have,
and shall not be capable of giving, a better title to the cheque than that
which the person from whom he took it had.
131.
Non-liability of banker receiving payment of cheque.—A banker who has in good faith and
without negligence received payment for a customer of a cheque crossed
generally or specially to himself shall not, in case the title to the cheque
proves defective, incur any liability to the true owner of the cheque by reason
only of having received such payment.
1[Explanation 2[(I)].— A banker receives payment of a crossed cheque for a customer
within the meaning of this section notwithstanding that he credits his
customer's account with the amount of the cheque before receiving payment
thereof.]
3[Explanation II.—It shall be the duty of the banker who
receives payment based on an electronic image of a truncated cheque held with
him, to verify the prima facie
genuineness of the cheque to be truncated and any fraud, forgery or tampering
apparent on the face of the instrument that can be verified with due diligence
and ordinary care.]
4[131A. Application of Chapter to
drafts.—The provisions of this Chapter
shall apply to any draft, as defined
in section 85A, as if the draft were a cheque.]
CHAPTER XV
O F B I L L S I N S E T S
132.
Set of bills.—Bills of exchange may be drawn in
parts, each part being numbered and containing a provision that it shall continue payable only so long as the
others remain unpaid. All the parts together make a set; but the whole set
constitutes only one bill, and is extinguished when one of the parts, if a
separate bill, would be extinguished.
Exception.—When a person accepts or indorses different parts of the bill in favour
of different persons, he and the
subsequent endorsers of each part are liable on such part as if it were a
separate bill.
133.
Holder of first acquired part entitled to all—As between holders in due course of different parts of the same set, he who first acquired
title to his part is entitled to the other parts and the money representated by
the bill.
CHAPTER
XVI
O F I N T E R N A T I O N A L L A W
134.
Law governing liability of maker, acceptor or indorser of foreign
instrument.—In the absence of a contract to the contrary, the
liability of the maker or drawer of a foreign promissory note, bill of exchange
or cheque is regulated in all essential matters by the law of the place where
he made the instrument, and the respective liabilities of the acceptor and
indorser by the law of the place where the instrument is made payable.
Illustration
A bill of exchange was drawn by A
in California, where the rate of interest is 25 per cent., and accepted by B,
payable in Washington, where the rate of interest is 6 per cent. The bill is
erdorsed in 5[India], and is dishonoured. An action on the bill is brought against B
in 5[India]. He is liable to pay interest at the rate of 6 per cent. only;
but if A is charged as drawer, A is liable to pay interest at the rate of 25
per cent.
1. Ins. by
Act 18 of 1922, s. 2.
2. Explanation re-numbered as Explanation I
thereof by Act 55 of 2002, s. 6 (w.e.f. 6 -2-2003).
3. Ins. by s. 6, ibid., (w.e.f.
6-2-2003).
4.
Ins. by Act 33 of 1947, s. 2.
5. Subs. by Act 3 of 1951, s. 3 and the Sch. for “the States”.
135.
Law of place of payment governs dishonour.—Where a promissory note, bill of exchange or cheque is made payable in a different place from that in which it
is made or indorsed, the law of the place where it is made payable determines
what constitutes dishonour and what notice of dishonour is sufficient.
Illustration
A bill of exchange drawn and
indorsed in 1[India], but accepted payable in France, is dishonoured. The indorsee
causes it to be protested for such dishonour, and gives notice thereof in
accordance with the law of France, though not in accordance with the rules
herein contained in respect of bills which are not foreign. The notice is
sufficient.
136.
Instrument made, etc., out of India, but in accordance with the law of
India.—If a negotiable instrument is made, drawn, accepted or
indorsed 2[outside India], but in accordance with the 3[law of India], the circumstances
that any agreement evidenced by such instrument is invalid according to the law
of the country wherein it was entered into does not invalidate any subsequent
acceptance or indorsement made thereon 4[within India].
137.
Presumption as to foreign law.—The law
of any foreign country 5*** regarding promissory notes, bills of exchange and cheques shall be
presumed to be the same as that of 6[India], unless and until the contrary is proved.
7[CHAPTER XVII
OF PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS
138.
Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a
person on an account maintained by him with a banker for payment of any amount
of money to another person from out of that account for the discharge, in whole
or in part, of any debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement
made with that bank, such person shall be deemed to
have committed an offence and shall, without prejudice to any other provision
of this Act, be punished with imprisonment for 8[a term which may be extended to
two years’], or with fine which may extend to twice the amount of the cheque,
or with both:
Provided
that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the tank 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, 9[within thirty days] of the
receipt of information by him from the bank regarding the return of the cheque
as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said
amount of money to the payee or, as the case may be, to the holder in due
course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.
139. 139.
Presumption in favour of holder.—It shall
be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to
in section 138 for the discharge, in whole or in part, of any debt or other
liability.
140.
Defence which may not be allowed in any prosecution under section 138.—It shall not be a defence in
a prosecution for an offence under section 138 that the drawer had no reason to
believe when he issued the cheque that the cheque may be dishonoured on
presentment for the reasons stated in that section.
141.
Offences by companies.—(1) If the person committing an
offence under section 138 is a company, every
person who, at the time the offence was committed, was in charge of, and was
responsible to, the company for the conduct of the business of the company, as
well as the company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section
shall render any person liable to punishment if he proves that the offence was
committed without his knowledge, or that he had exercised all due diligence to
prevent the commission of such offence:
1[Provided
further that where a person is nominated as a Director of a company by virtue
of his holding any office or employment in the Central Government or State
Government or a financial corporation owned or controlled by the Central
Government or the State Government, as the case may be, he shall not be liable
for prosecution under this Chapter.]
(2)
Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a
company and it is proved that the offence has been committed with the consent
or connivance of, or is attributable to, any neglect on the part of, any
director, manager, secretary or other officer of the company, such director,
manager, secretary or other officer shall also be deemed to be guilty of that
offence and shall be liable to be proceeded against and punished accordingly.
Explanation.—For the
purposes of this section, —
(a) “company” means anybody corporate and
includes a firm or other association of individuals;
and
(b) “director”, in relation to a firm,
means a partner in the firm.
142.
Cognizance of offences.— 2 [(1)] 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:
3[Provided
that the cognizance of a complaint may be taken by the Court after the
prescribed period, if the the complainant satisfies the Court that he had
sufficient cause for not making a complaint within such period;]
(c) no court inferior to that of
a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try
any offence punishable under section 138.].
4[(2) The offence under section 138 shall be inquired into and tried
only by a court within whose local jurisdiction,—
(a) if the cheque is delivered
for collection through an account, the branch of the bank where the payee or
holder in due course, as the case may be, maintains the account, is situated;
or
(b) if the cheque is presented for
payment by the payee or holder in due course, otherwise through an account, the
branch of the drawee bank where the drawer maintains the account, is situated
