NEGOTIABLE INSTRUMENTS ACT, 1881

[Act No. 26 of Year 1881, dated 9-12-1881]

An Act to define the law relating to promissory notes, bills of
exchange and cheques. Whereas it is expedient to define and
amend the law relating to promissory notes, bills of exchange
and cheques; It is hereby enacted as follows: Chapter
CHAPTER I
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
XIV
CHAPTER
CHAPTER
XVI
CHAPTER
XVII

Title
PRELIMINARY

Sections
Section 1-3
Section 4II OF NOTES, BILLS AND CHEQUES
25
Section 26III PARTIES TO NOTES, BILLS AND CHEQUES
45
Section 46IV OF NEGOTIATION
60
Section 61V OF PRESENTMENT
77
Section 78VI OF PAYMENT AND INTEREST
81
OF DISCHARGE FROM LIABILITY ON NOTES,
Section 82VII
BILLS AND CHEQUES
90
Section 91VIIIOF NOTICE OF DISHONOUR
98
Section 99IX OF NOTING AND PROTEST
104
Section
X OF REASONABLE TIME
105-107
OF ACCEPTANCE AND PAYMENT FOR HONOUR Section
XI
AND REFERENCE IN CASE OF NEED
108-116
XII OF COMPENSATION
Section 117
Section
XIIISPECIAL RULES OF EVIDENCE
118-122
Section
OF CROSSED CHEQUES
123-131
Section
XV OF BILLS IN SETS
132-133
Section
OF INTERNATIONAL LAW
134-137
OF PENALTIES IN CASE OF DISHONOUR OF
Section
CERTAIN CHEQUES FOR INSUFFICIENCY OF
138-142
FUNDS IN THE ACCOUNTS
SCHEDULE : ENACTMENT REPEALED
FOOT NOTES

NEGOTIABLE INSTRUMENTS ACT, 1881

CHAPTER I
PRELIMINARY
1. Short title
This Act may be called the Negotiable Instruments Act, 1881.
Local extent, saving of usage relating to hundis, etc., commencement: It
extends 1to 2[the whole of India 3[* * *]]; but nothing herein contained
affects the 4[Indian Paper Currency Act, 1871 (3 of 1871)], section 21, or
affects any local usage relating to any instrument in an oriental language:
PROVIDED that such usages may be excluded by any words in the body of
the instrument, which indicate an intention that the legal relations of the
parties thereto shall be governed by this Act; and it shall come into force on
the first day of March, 1882.
2. Repeal of enactments
[Rep. by the Amending Act, 1891 (12 of 1891), sec. 2 and Sch. I, part I.]
3. Interpretation clause
In this Act5[* * *]
"Banker" : 6["banker" includes any person acting as a banker and any post
office savings bank].
7[***]
CHAPTER II
OF NOTES, BILLS AND CHEQUES
4. "Promissory note"
A "promissory note" is an instrument in writing (not being a bank-note or a
currency-note) containing an unconditional undertaking signed by the maker,
to pay a certain sum of money only to, or to the order of, a certain person, or
to the bearer of the instrument.
Illustrations
A signs instruments in the following terms:
(a) "I promise to Pay B or order Rs.500".
(b) "I acknowledge myself to be indebted to B in Rs.1,000, to be paid on
demand, for value received."
(c) "Mr B I.O.U Rs.1,000."
(d) "I promise to pay B Rs. 500 and all other sums which shall be due to him."
(e) "I promise to pay B Rs. 500 first deducting thereout any money which he
may owe me."
(f) I promise to pay B Rs. 500 seven days after my marriage with C.
(g) I promise to pay B Rs. 500 on D's death, provided D leaves me enough to
pay that sum.
(h) I promise to pay B Rs. 500 and to deliver to him my black horse on lst
January next.
The instruments respectively marked (a) and (b) are promissory notes. The
instruments respectively marked (c), (d), (e), (f), (g) and (h) are not
promissory notes.

5. "Bill of exchange"
A "bill of exchange" is an instrument in writing containing an unconditional
order, signed by the maker, directing a certain person to pay a certain sum
of money only to, or to the order of, a certain person or to the bearer of the
instrument.
A promise or order to pay is not "conditional" within the meaning of this
section and section 4, by reason of the time for payment of the amount or
any instalment thereof being expressed to be on the lapse of a certain period
after the occurrence of a specified event which, according to the ordinary
expectation of mankind, is certain to happen, although the time of its
happening may be uncertain.
The sum payable may be "certain", within the meaning of this section and
section 4, although it includes future interest or is payable at an indicated
rate of exchange, or is according to the course of exchange, and although
the instrument provides that, on default of payment of an instalment, the
balance unpaid shall become due.
The person to whom it is clear that the direction is given or that payment is
to be made may be "certain person", within the meaning of this section and
section 4, although he is misnamed or designated by description only.
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 the bill or in any endorsement thereon the
name of any person is given in addition to the drawee to be resorted to in
case of need, such person is called a "drawee in case of need".
"Acceptor": After the drawee of a bill has signed his assent upon the bill, or, if
there are more parts thereof than one, upon one of such parts, and delivered
the same, or given notice of such signing to the holder or to some person on
his behalf, he is called the "acceptor".
"Acceptor for honour" : 8[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 endorser, such
person is called an "acceptor for honour".
"Payee" : The person named in the instrument, to whom or to whose order
the money is by the instrument directed to be paid, is called the "payee".
8. "Holder"
The "holder" of a promissory note, bill of exchange or cheque means any
person entitled in his own name to the possession thereof and to receive or
recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so
entitled at the time of such loss or destruction.
9. "Holder in due course"
"Holder in due course" means any person who for consideration became the

possessor of a promissory note, bill of exchange or cheque if payable to

bearer, or the payee or endorsee thereof, if 9[payable to order], before the
amount mentioned in it became payable, and without having sufficient cause
to believe that any defect existed in the title of the person from whom he
derived his title.
10. "Payment in due course"
"Payment in due course" means payment in accordance with the apparent
tenor of the instrument in good faith and without negligence to any person in
possession thereof under circumstances which do not afford a reasonable
ground for believing that he is not entitled to receive payment of the amount
therein mentioned.
11. "Inland instrument"
A promissory note, bill of exchange or cheque drawn or made in 10[India]
and made payable in, or drawn upon any person resident in 10[India] shall
be deemed to be an inland instrument.
12. "Foreign instrument"
Any such instrument not so drawn, made or made payable shall be deemed
to be foreign instrument.
13. "Negotiable instrument"
11[(1 ) A "negotiable instrument" means a promissory note, bill of exchange
or cheque payable either to order or to bearer.
Explanation 1 : 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 2 : 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
endorsement is an endorsement in blank.
Explanation 3 : 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.]
12[(2)] A negotiable instrument may be made payable to two or more
payees jointly, or it may be made payable in the alternative to one of two, or
one or some of several payees.]
14. Negotiation
When a promissory note, bill of exchange or cheque is transferred to any
person, so as to constitute the person the holder thereof, the instrument is
said to be negotiated.
15. Endorsement
When the maker or holder of a negotiable instrument signs the same,
otherwise than as such maker, for the purpose of negotiation on the back or
face thereof or on a slip of paper annexed thereto, or so signs for the same

purpose a stamped paper intended to be completed as a negotiable

instrument, he is said to endorse the same, and is called the "endorser".
16. Endorsement "in blank" and "in full"-"endorsee"
13[(1) If the endorser signs his name only, the endorsement is said to be "in
blank", and if he adds a direction to pay the amount mentioned in the
instrument to, or to the order of, a specified person, the endorsement is said
to be "in full", and the person so specified is called the "endorsee" of the
instrument.
(2) The provisions of this Act relating to a payee shall apply with the
necessary modifications to an endorsee.]
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
14[India], and either wholly blank or having written thereon an incomplete
negotiable instrument, he thereby gives prima facie authority to the holder
thereof to make or complete, as the case may be, upon it a negotiable
instrument, for any amount specified therein and not exceeding the amount
covered by the stamp. The person so signing shall be liable upon such
instrument, in the capacity in which he signed the same, to any holder in due
course for such amount; provided that no person other than a holder in due
course shall recover from the person delivering the instrument anything in
excess of the amount intended by him to be paid thereunder.
21. "At sight", "On presentment", "After sight"
In a promissory note or bill of exchange the expressions "at sight" and "on
presentment" means on demand. The expression "after sight" means, in a
promissory note, after presentment for sight, and, in a bill of exchange after
acceptance, or noting for non-acceptance, or protest for non-acceptance.
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 at stated number of months after date or after sight, or after a
certain event, is at maturity, the period stated shall be held to terminate on
the day of the month, which corresponds with the day on which the
instrument is dated, or presented for acceptance or sight, or noted for nonacceptance, or protested for non-acceptance, or the event happens or,
where the instrument is a bill of exchange made payable at stated number of
months after sight and has been accepted for honour, with the day on which
it was so accepted. If the month in which the period would terminate has no
corresponding day, the period shall be held to terminate on the last day of
such month.
Illustrations
(a) A negotiable instrument dated 29th January, 1878, is made payable at
one month after date. The instrument is at maturity on the third day after the
28th February, 1878.
(b) A negotiable instrument, dated 30th August, 1878, is made payable three
months after date. The instrument is at maturity on the 3rd December, 1878.
(c) A promissory note or bill of exchange, dated 31st August, 1878, is made
payable three months after date. The instrument is at maturity on the 3rd
December, 1878.
24. Calculating maturity of bill or note payable so many days after
date or sight
In calculating the date at which a promissory note or bill of exchange made
payable at 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 15[***] and
any other day declared by the 16[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, endorsement, delivery and negotiation of a promissory note, bill
of exchange or cheque.
Minor: A minor may draw, endorse, deliver and negotiate such instruments
so as to bind all parties except himself.

Nothing herein contained shall be deemed to empower a corporation to

make, endorse 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 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 endorsing bills of
exchange so as to bind his principal.
An authority to draw bills of exchange does not of itself import an authority
to endorse.
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 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 endorser
In the absence of a contract to the contrary, whoever endorses and delivers
a negotiable instrument before maturity, without, in such endorsement,
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 endorser as hereinafter provided.
Every endorser 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
endorses 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 endorser's liability
Where the holder of a negotiable instrument, without the consent of the
endorser, destroys or impairs the endorser's remedy against a prior party,
the endorser 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 endorsements in blankFirst endorsement, "B".
Second endorsement, "Peter Williams".
Third endorsement, "Wright & Co.".
Fourth endorsement "John Rozario".
This bill A puts in suit against John Rozario and strikes out, without John
Rozario's consent, the endorsements by Peter Williams and Wright & Co. A is
not entitled to recover anything from John Rozario.
41. Acceptor bound, although endorsement forged
An acceptor of a bill of exchange already endorsed is not relieved from
liability by reason that such endorsement is forged, if he knows or had
reason to believe the endorsement 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 endorsement 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, endorsed, 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 endorsement to a holder
for a 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 endorsed 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, endorse or transfer the same to him for a consideration
which he has failed to pay or perform in full shall recover therein an amount
exceeding the value of the consideration (if any) which he has actually paid
or performed.
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 endorser with

his endorsee. Other signers may by agreement stand in immediate relation

with a holder.
Illustration
A draws a bill on B for Rs. 500 payable to the order of A. B accepts the bill,
but subsequently dishonours it by non-payment. A sues B on the bill. B
proves that it was accepted for value as to Rs. 400, and as an
accommodation to the plaintiff as to the residue. A can only recover Rs. 400.
45. Partial failure of consideration not consisting of money
Where a part of the consideration for which a person signed a promissory
note, bill of exchange or cheque, though not consisting of money, is
ascertainable in money without collateral enquiry, and there has been a
failure of that party, the sum which a holder standing in immediate relation
with such signer is entitled to receive from him is proportionally reduced.
17[45A. 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 endorsement 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 endorsing
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.
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 endorsement 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.
Illustration
(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 endorsement
Subject to the provisions of section 58, a promissory note, bill of
exchange or cheque 18[payable to order], is negotiable by the holder
by endorsement and delivery thereof.
49. Conversion of endorsement in blank into endorsement in
full
The holder of a negotiable instrument endorsed in blank may, without
signing his own name, by writing above the endorser's signature a
direction to pay to any other person as endorsee, convert the
endorsement in blank into an endorsement in full; and the holder does
not thereby incur the responsibility of an endorser.
50. Effect of endorsement
The endorsement of a negotiable instrument followed by delivery
transfers to the endorsee the property therein with the right of further
negotiation, but the endorsement may by express words, restrict or
exclude such right, or may merely constitute the endorsee an agent to
endorse the instrument, or to receive its contents for the endorser, 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 on order for the account to B".
(d) "the within must be credited to C".
These endorsements 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, bring part of the consideration in a certain
deed of assignment executed by C to endorser and others".
These endorsements 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 endorsees, of a negotiable instrument
may, if the negotiability of such instrument has not been restricted or
excluded as mentioned in section 50, endorse and negotiate the same.
Explanation : Nothing in this section enables a maker or drawer to
endorse or negotiate an instrument, unless he is in lawful possession
or is holder thereof, or enables a payee or endorsee to endorse or
negotiate an instrument, unless he is holder thereof.
Illustration
A bill is drawn payable to A or order. A endorses it to B, the
endorsement not containing the words "or order" or any equivalent
words. B may negotiate the instrument.
52. Endorser who excludes his own liability or makes it
conditional
The endorser of a negotiable instrument may, by express words in the
endorsement, exclude his own liability thereon, or make such liability
or the right of the endorsee to receive the amount due thereon depend
upon the happening of a specified event, although such event may
never happen.
Where an endorser so excludes his liability and afterwards becomes
the holder of the instrument all intermediates endorsers are liable to
him.
Illustrations

(a) The endorser of a negotiable instrument signs his name, adding the
words "without recourse".
Upon this endorsement he incurs no liability.
(b) A is the payee and holder of a negotiable instrument. Excluding
personal liability by an endorsement, "without recourse", he transfers
the instrument to B, and B endorses it to C, who endorses it to A. A is
not only reinstated in his former rights, but has the rights of an
endorsee against B and C.
53. Holder deriving title from holder in due course
A holder of a negotiable instrument who derives title from a holder in
due course has the rights thereon of that holder in due course.
54. Instrument endorsed in blank
Subject to the provisions hereinafter contained as to crossed cheques,
a negotiable instrument endorsed in blank is payable to the bearer
thereof even although originally payable to order.
55. Conversion of endorsement in blank into endorsement in
full
If a negotiable instrument, after having been endorsed in blank, is
endorsed in full, the amount of it cannot be claimed from the endorser
in full, except by the person to whom it has been endorsed in full, or by
one who derives title through such person.
56. Endorsement 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 endorsed on
the instrument, which, may then be negotiated for the balance.
57. Legal representative cannot by delivery only negotiate
instrument endorsed 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 endorsed 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 endorsee 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 endorsee 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 endorsed 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 accepter 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 drawee at a particular place, it must be
presented at that place, and if at the due- date for presentment he

cannot, after reasonable search, be found thereon, the bill is

dishonoured.
17[When 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 19[forty-eight]
hours (exclusive of public holidays) to consider whether he will accept
it.
64. Presentment for payment
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.
20[Where authorised 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.
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 the place.
70. Presentment where no exclusive place specified
A promissory note or bill of exchange, not made payable as mentioned
in sections 68 and 69, must be presented for payment at the place of
business(if any) or at the usual residence, of the maker, drawee or
acceptor thereof, as the case may be.
71. Presentment when maker, etc., has no known place of
business or residence
If the maker, drawee, or acceptor of a negotiable instrument has no
known place of business or fixed residence, and no place is specified in
the instrument for presentment for acceptance or payment, such
presentment may be made to him in person wherever he can be found.
72. Presentment of cheque to charge drawer
20[Subject to the provisions of section 84] a cheque must, in order to
charge the drawer, be presented at the bank on 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 at 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
authorised agent of the drawee, maker or acceptor, as the case may
be, or, where the drawee, maker or acceptor has died, to his legal

representative, or, where he has been declared an insolvent, to his

assignee.
21[75A. Excuse for delay in presentment for acceptance or payment
Delay in presentment 22[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 the 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 authorised to pay it attends at such place during the
usual business hours, or
If the instrument not being payable at any specified place, he cannot
after due search be found;
(b) as against any party sought to be charged therewith, if he has
engaged to pay notwithstanding non-presentment;
(c) as against any party if, after maturity, with knowledge that the
instrument has not been presentedhe makes a part payment on account of the amount due on the
instrument, or promises to pay the amount due therein whole or in
part,
or otherwise waives his right to take advantage of any default in
presentment for payment;
(d) as against the drawer, if the drawer could not suffer damage from
the want of such presentment.
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 principal money due thereon, from
the date of the instrument, until tender or realisation 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, 23[notwithstanding any agreement relating
to interest between any parties to the instrument], be calculated at the
rate of 24[eighteen per centum] per annum, from the date at which the
same ought to have been paid by the party charged, until tender or
realisation of the amount due thereon, or until such date after the
institution of a suit to recover such amount as the court directs.
Explanation: When the party charged is the indorser of an instrument
dishonoured by non-payment, he is liable to pay interest only from the
time that he receives notice of the dishonour.
81. Delivery of instrument on payment or indemnity in case of
loss
Any person liable to pay, and called upon by the holder thereof to pay,
the amount due on a promissory note, 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

The maker, acceptor or endorser respectively of a negotiable
instrument is discharged from liability thereon(a) By cancellation-to a holder thereof who cancels such acceptor's or
endorser'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 endorser, 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 endorsed in blank, and such maker, acceptor or
endorser 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 19[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
25[(1) Where a cheque is not presented for payment within a
reasonable time of its issue, and the drawer or person on whose
account it is drawn had the right, at the time when presentment ought
to have been made, as between himself and the banker, to have the
cheque paid and suffers actual damage through the delay, he is
discharged to the extent of such damage, that is to say, to the extent
to which such drawer or person is a creditor of the banker to a large
amount than he would have been if such cheque had been paid.
(2) In determining what is a reasonable time, regard shall be had to the
nature of the instrument, the usage of trade and of bankers, and the
facts of the particular case.
(3) The holder of the cheques as to which such drawer or person is so
discharged shall be a creditor, in lieu of such drawer or person, of such
banker to the extent of such discharge and entitled to recover the
amount from him.
Illustrations
(a) A draws a cheque for Rs. 1,000, and, when the cheque ought to be
presented, has funds at the bank to meet it. The bank fails before the

cheque is presented. The drawer is discharged, but the holder can

prove against the bank for the amount of the cheque.
(b) A draws a cheque at Umballa on a bank in Calcutta. The bank fails
before the cheque could be presented in ordinary course. A is not
discharged, for he has not suffered actual damage through any delay
in presenting the cheque.
85. Cheque payable to order
26[(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) 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.]
21[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. Affect 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 endorsee:
and any such alteration, if made by an endorsee, discharges his
endorser 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 endorser bound notwithstanding previous
alteration
An acceptor or endorser of a negotiable instrument is bound by this
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 tenor thereof at the time of payment
and otherwise in due course, shall discharge such a 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
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
drawees, 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 nonacceptance 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 authorised agent of the person to
whom it is required to be given, or, where he has died, to his legal
representative, or, where he has been declared an insolvent, to his assignee;
may be oral or written; may, if written, be sent by post; and may be in any
form; but it must inform the party to whom it is given, either in express
terms or by reasonable intendment, that the instrument has been
dishonoured, and in what way, and that he will be held liable thereon; and it
must be given within a reasonable time after dishonour, at the place of
business or (in case such party has no place of business) at the residence of
the party for whom it is intended.
If the notice is duly directed and sent by post and miscarries, such
miscarriage does not render the notice invalid.
95. Party receiving must transmit notice of dishonour
Any party receiving notice of dishonour must, in order to render any prior
party liable to himself, give notice of dishonour to such party within a
reasonable time, unless such party otherwise receives due notice as
provided by section 93.
96. Agent for presentment
When the instrument is deposited with an agent for presentment, the agent
is entitled to the same time to give notice to his principal as if he were the

holder giving notice of dishonour, and the principal is entitled to a further like
period to give notice of dishonour.
97. When party to whom notice given is dead
When the party to whom notice of dishonour is despatched is dead, but the
party 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 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 damages for want of notice;
(d) when the party entitled to notice cannot after due search be found; or the
party bound to give notice is, for any other reason, unable without any fault
of his own to give it;
(e) to charge the drawers, when the acceptor is also a drawer;
(f) in the case of a promissory note which is not negotiable;
(g) when the party entitled to notice, knowing the facts, promises
unconditionally to pay the amount due on the instrument.
CHAPTER IX
OF NOTING AND PROTEST
99. Noting
When a promissory note or bill of exchange has been dishonoured by nonacceptance 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 nonacceptance or non-payment, the holder may, within a reasonable time, cause
such dishonour to be noted and certified by a notary public. Such certificate
is called a protest.
Protest for better security : When the acceptor of a bill of exchange has
become insolvent, or his credit has been publicly impeached, before the
maturity of the bill, the holder may, within a reasonable time, cause a notary
public to demand better security of the acceptor, and on its being refused
may, with a reasonable time, cause such facts to be noted and certified as
aforesaid. Such certificate is called a protest for better security.
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 nature 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.
17[A notary public may make the demand mentioned in clause (c) of this
section either in person or by his clerk or, where authorised by agreement or
usage, by registered letter.]
102. Notice of protest
When a promissory note or bill of exchange is required by law to be
protested, notice of such protest must be given instead of notice of
dishonour, in the same manner and subject to the same conditions; but the
notice may be given by the notary public who makes the protest.
103. Protest for non-payment after dishonour by non-acceptance
All bills of exchange drawn payable at some other place than the place
mentioned as the residence of the drawee, and which are dishonoured by
non-acceptance, may, without further presentment to the drawee, be
protested for non-payment, in the place specified for payment, unless paid
before or at maturity.
104. Protest of foreign bills
Foreign bills of exchange must be protested for dishonour when such protest
is required by the law of the place where they are drawn.
17[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
OF REASONABLE TIME
105. Reasonable time
In determining what is a reasonable time for presentment for acceptance or
payment, for giving notice of dishonour and for noting, regard shall be had to
the nature of the instrument and the usual course of dealing with respect to
similar instruments; and, in calculating such time, public holidays shall be
excluded.
106. Reasonable time of giving notice of dishonour
If the holder and the party to whom notice of dishonour is given carry on
business or live (as the case may be) in different places, such notice is given

within a reasonable time if it is despatched by the next post or on the day

next after the day of dishonour.
If the said parties carry on business or live in the same place, such notice is
given within a reasonable time if it is despatched in time to reach its
destination on the date 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 27[***].
109. How acceptance for honour must be made
A person desiring to accept for honour must, 28[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 endorser whom he names, or
generally for honour 29[***].
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 does
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 bills is a
place other than the place where the bill is made payable) forwarded for
presentment, not later than the day next after the day of its maturity.
112. When acceptor for honour may be charged
An acceptor for honour cannot be charged unless the bill has at its maturity
been presented to the drawee for payment, and has been dishonoured by
him, and noted or protested for such dishonour.
113. Payment for honour
When a bill of exchange has been noted or protested for non-payment, any
person may pay the same for the honour of any party liable to pay the same;
provided that the person so paying 17[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
endorsement 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
OF COMPENSATION
117. Rules as to compensation
The compensation payable in case of dishonour of promissory note, bill of
exchange or cheque, by any party liable to the holder or any endorsee, shall
30[***] be determined by the following rules:
(a) the holder is entitled to the amount due upon the instrument together
with the expense 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 endorser who, being liable, has paid the amount due on the same is
entitled to the amount so paid with interest at 31[eighteen per centum] per
annum from the date of payment until tender or realisation thereof, together
with all expenses caused by the dishonour and payment;
(d) when the person charged and such endorser reside at different places,
the endorser is entitled to receive such sum at the current rate of exchange
between the two places;
(e) the party entitled to compensation may draw a bill upon the party liable
to compensate him, payable at sight or on demand, for the amount due to
him, together with all expenses properly incurred by him. Such bill must be
accompanied by the instrument dishonoured and the protest thereof (if any).
If such bill is dishonoured, the party dishonouring the same is liable to make
compensation thereof in the same manner as in the case of the original bill.
CHAPTER XIII
SPECIAL RULES OF EVIDENCE
118. Presumptions as to negotiable instruments
Until the contrary is proved, the following presumption 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,
endorsed, negotiated or transferred, was accepted, endorsed, negotiated or
transferred for consideration;
(b) as to date-that every negotiable instrument bearing a date was made or
drawn on such date;

(c) as to time of acceptance-that every accepted bill of exchange was

accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer-that every transfer of a negotiable instrument was
made before its maturity;
(e) as to order of endorsements-that the endorsements appearing upon a
negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps-that a lost promissory note, bill of exchange or cheque was
duly stamped;
(g) that holder is a holder in due course-that the holder of a negotiable
instrument is a holder in due course; provided that, where the instrument
has been contained from its lawful owner, or from any person in lawful
custody thereof, by means of an offence or fraud, or has been obtained from
the maker or acceptor thereof by means of an offence or fraud, or for
unlawful consideration, the burden of proving that the holder is a holder in
due course lies upon him.
119. Presumption on proof of protest
In a suit upon an instrument which has been dishonoured, the court shall, on
proof of the protest, presume the fact of dishonour, unless and until such fact
is disproved.
120. Estoppel against denying original validity of instrument
No maker of a promissory note, and no drawer of a bill of exchange or
cheque, and no acceptor of a bill of exchange for the honour of the drawer
shall, on proof of the protest, presume the fact of dishonour, unless and until
validity of the instrument as originally made or drawn.
121. Estoppel against denying capacity of payee to endorse
No maker of a promissory note, and no acceptor of a bill of exchange
32[payable to order] shall, in suit thereon by a holder in due course, be
permitted to deny the payee's capacity, at the rate of the note or bill, to
endorse the same.
122. Estoppel against denying signature or capacity of prior party
No endorser 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 instruments.
CHAPTER XIV
OF CROSSED CHEQUES
123. Cheque crossed generally
Where a cheque bears across its face an addition of the words "and
company" or any abbreviation thereof, between two parallel transverse
lines or of two parallel transverse lines simply, either with or without
the word "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 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.
33[Explanation: A banker receives payment of a crossed cheque for a
customer within the meaning of this section notwithstanding that he
credits his customer's account with the amount of the cheque before
receiving payment thereof.]
34[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
OF BILLS IN SETS
132. Set of bills
Bills of exchange may be drawn in parts, each part being numbered
and containing a provision that it shall continue payable only so long
as the others remain unpaid. All the parts together make a set; but the
whole set constitutes only one bill, and is extinguished when one of the
parts of a separates bill, would be extinguished.
Exception: When a person accepts or endorses different parts of the
bill in favour of different person, 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 represented by the bill.
CHAPTER XVI
OF INTERNATIONAL LAW
134. Law governing liability of maker, acceptor or endorser 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
endorser by the law of the place where the instrument is made
payable.
Illustration
A bill of exchange was drawn by A in California where the rate of
interest is 25 per cent, and accepted by B, payable in Washington
where the rate of interest is 6 per cent. The bill is endorsed in
35[India], and is dishonoured. An action on the bill is brought against B
in 14[India]. He is liable to pay interest at the rate of 6 per cent, only;
but if A is charged as drawer, A is liable to pay interest at the rate of 25
per cent.
135. Law of place of payment governs dishonour
Where a promissory note, bill of exchange or cheque is made payable
in a different place from that in which it is made or endorsed, 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 endorsed in 14[India], but accepted
payable in France, is dishonoured. The endorsee 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 endorsed
35[outside India], but in accordance with the 35[law of India], the
circumstance that any agreement evidenced by such instrument is
invalid according to the law of the country wherein it was entered into
does not invalidate any subsequent acceptance or endorsement made
thereon 35[within India].
137. Presumption as to foreign law
The law of any foreign country 36[***] regarding promissory note, bills
of exchange and cheques shall be presumed to be the same as that of
37[India], unless and until the contrary is proved.
38[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

accounts
Where any cheque drawn by a person on an account maintained by
him with a banker for payment of any amount of money to another
person from out of that account for the discharge, in whole or in part,
of any debt or other liability, is returned by the bank unpaid, either
because of the amount of money standing to the credit of that account
is insufficient to honour the cheque or that it exceeds the amount
arranged to be paid from that account by an agreement made with
that bank, such person shall be deemed to have committed an offence
and shall without prejudice to any other provisions of this Act, be
punished with imprisonment for a term which may extend to one year,
or with fine which may extend to twice the amount of the cheque, or
with both:
PROVIDED that nothing contained in this section shall apply unless(a) the cheque has been presented to the bank within a period of six
months from the date on which it is drawn or within the period of its
validity, whichever is earlier.
(b) the payee or the holder in due course of the cheque, as the case
may be, makes a demand for the payment of the said amount of
money by giving a notice, in writing, to the drawer of the cheque,
within fifteen days of the receipt of information by him from the bank
regarding the return of the cheque as unpaid, and
(c) the drawer of such cheque fails to make the payment of the said
amount of money to the payee or, as the case may be, to the holder in
due course of the cheque, within fifteen days of the receipt of the said
notice.
Explanation: For the purpose of this section, "debt or other liability"
means a legally enforceable debt or other liability.
139. Presumption in favour of holder
It shall be presumed, unless the contrary is proved, that the holder of a
cheque received the cheque of the nature referred to in section 138 for
the discharge, in whole or in part, or any debt or other liability.
140. Defence which may not be allowed in any prosecution
under section 138
It shall not be a defence in a prosecution of 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.
(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 purpose of this section
(a) "company" means any body corporate and includes a firm or other
association of individuals; and
(b) "director", in relating to a firm, means a partner in the firm.
142. Cognisance of offences
Notwithstanding anything contained in the Code of Criminal Procedure,
1973 (2 of 1974),(a) no court shall take cognisance of any offence punishable under
section 138 except upon a complaint, in writing, made by the payee or,
as the case may be, the holder in due course of the cheque;
(b) such complaint is made within one month of the date on which the
cause -of- action arises under clause (c) of the proviso to section 138;
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial
Magistrate of the first class shall try any offence punishable under
section 138.
SCHEDULE : ENACTMENT REPEALED
[Rep. by the Amending Act, 1891 (12) of 1891), sec. 2 and Sch.
1, Pt. I].

Foot Notes
1 The Act has been extended to Goa, Daman, and Diu by Regulation 12
of 1962, and to Dadra and Nagar Haveli w.e.f. 1st. July, 1965 by
Regulation No. 6 of 1963.
2 Substituted by the AO 1950 for the words "all the Provinces of India".
3 The words "except the State of Jammu and Kashmir" omitted by Act
No. 62 of 1956.
4 See now the Reserve Bank of India Act, 1934
5 Definition of "India" omitted by Act No. 62 of 1956.
6 Substituted by Act No. 37 of 1955, for the definition of word "banker"
w.e.f. 1st. April, 1956.
7 Definition of "notary public" omitted by Act No. 53 of 1952 w.e.f.
14th. February, 1956.
8 Substituted by Act No. 2 of 1885, for the words "When acceptance is
refused and the bill is protested for non-acceptance".
9 Substituted for the words "payable to, or to the order of, a payee" by
Act No. 8 of 1919.
10 Substituted by Act No. 36 of 1957, for the words "a State".
11 Substituted by Act No. 8 of 1919.
12 Added by Act No. 5 of 1914.
13 Section 16 renumbered as sub-section (1) and sub-section (2)
added by Act No. 5 of 1914.
14 Substituted by Act No. 3 of 1951 for the words "the States".
15 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 No. 37 of 1955 w.e.f. 1st. April, 1956.
16 Substituted by the AO 1937, for "LG".
17 Inserted by Act No. 2 of 1885.
18 Substituted for words "payable to the order of a specified person, or
to a specified person on order" by Act No. 8 of 1919.
19 Substituted by Act No. 12 of 1921 for the words "twenty-four".
20 Inserted by Act No. 6 of 1897.

21 Inserted by Act No. 25 of 1920.

22 Inserted by Act No. 12 of 1921.
23 Substituted by Act No. 30 of 1926, for the words "except in cases
provided for by the Code of Civil Procedure".
24 Substituted by Act No. 66 of 1988 for the words "six per centum",
w.e.f. 30th. December, 1988.
25 Substituted by Act No. 6 of 1987.
26 Section 85 re-numbered as sub-section (1) and sub-section (2),
added by Act No. 17 of 1934.
27 Second sentence omitted by Act No. 2 of 1885.
28 Substituted by Act No. 2 of 1885, for the words "in the presence of a
notary public, subscribe the bill with his own hand, and".
29 The words "and such declaration must be recorded by the notary in
his register" omitted by Act No. 2 of 1885.
30 The words, figure and brackets "(except in cases provided for by the
Code of Civil Procedure, s. 532)" omitted by Act No. 30 of 1926.
31 Substituted by Act No. 66 of 1988 for "six per centum" w.e.f. 30th.
December, 1988.
32 Substituted by Act No. 8 of 1919 for the words "payable to, or to the
order of, a specified person".
33 Added by Act No. 18 of 1922.
34 Added by Act No. 33 of 1947.
35 Certain words were successively amended by the AO 1948, the AO
1950 and Act No. 3 of 1951.
36 The words "or the State of Jammu and Kashmir" omitted by Act No.
62 of 1956.
37 The words "British India" has been successively substituted by the
AO 1948, AO 1950 and Act No. 3 of 1951 to read as above.
38 Inserted by Act No. 66 of 1988, w.e.f. 1-4-1989. Earlier Chapter XVII
relating to "Notaries Public" Inserted by Act No. 2 of 1985 was replaced
by the Notaries Act, 1952 (53 of 1952) w.e.f. 14th. February, 1956.