NEGOTIABLE INSTRUMENTS ACT, 1881
1. Short title
2. [Repealed by the Amending Act, 1891 (12 of 1891)
6. “Cheque”
7. “Drawer”, “drawee”
8. “Holder”
9. “Holder in due course”
12. “Foreign instrument”
13. “Negotiable instrument”
15. Indorsement
17.
18.
22.
23.
24.
25.
CHAPTER III
CHAPTER IV OF NEGOTIATION
46. Delivery
47.
48.
50.
51.
52. Endorser who excludes his own liability or makes it conditional
53. Holder deriving title from holder in due course
54.
55.
56. Endorsement for part of sum due
57.
58.
59.
CHAPTER V OF PRESENTMENT
61. Presentment for acceptance 14
62.
64. Presentment for payment 15
65. Hours for presentment 15
66. Presentment for payment of instrument payable after date or sight 15
67. Presentment for payment of promissory note payable by instalments 15
68. Presentment for payment of instrument payable at specified place and not elsewhere 15
69. Instrument payable at specified place 16
70. Presentment where no exclusive place specified 16
71. Presentment when maker, etc., has no known place of business or residence 16
72. Presentment of cheque to charge drawer 16
73. Presentment of cheque to charge any other person 16
74. Presentment of instrument payable on demand 16
75. Presentment by or to agent, representative of deceased, or assignee of insolvent 16
75A. Excuse for delay in presentment for acceptance or payment 16
76. When presentment unnecessary 17
77. Liability of banker for negligently dealing with bill presented for payment 17
CHAPTER VI OF PAYMENT AND INTEREST
78. To whom payment should be made 17
79. Interest when rate specified 17
80. Interest when no rate specified 18
81. Delivery of instrument on payment, or indemnity in case of loss 18
CHAPTER VII
OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
82. Discharge from liability 18
83. Discharge by allowing drawee more than forty-eight hours to accept 19
84. When cheque not duly presented and drawer damaged thereby 19
85. Cheque payable to order 19
85A. Drafts drawn by one branch of a bank on another payable to order 20
86. Parties not consenting discharged by qualified or limited acceptance 20
87. Effect of material alteration 20
88. Acceptor or endorser bound notwithstanding previous alteration 20
89. Payment of instrument on which alteration is not apparent 20
90. Extinguishment of rights of action on bill in acceptor’s hands 21
CHAPTER VIII
91.
93.
94.
95.
96.
97.
98.
CHAPTER IX
112.
113.
114.
117.
118.
119.
120.
121.
CHAPTER XVI
134. Law governing liability of maker, acceptor or endorser of foreign instrument
135. Law of place of payment governs dishonour
136. Instrument made, etc., out of India, but in accordance with the law of India
137. Presumption as to foreign law
CHAPTER XVII
138. Dishonour of cheque for insufficiency, etc., of funds in the account
139. Presumption in favour of holder
Defence which may not be allowed in any prosecution under
Negotiable Instruments Act, 1881
[26 OF 1881]*
An Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. Preamble.
WHEREAS it is expedient to define and amend the law relating to promissory notes, bills of exchange and cheques; It is hereby enacted as follows:—
CHAPTER I
PRELIMINARY
Short title.
1. This Act may be called the Negotiable Instruments Act, 1881. Local extent, saving of usages relating to hundis, etc.
It extends to 1[the whole of India 2[***]]; but nothing herein contained affects the Indian Paper Currency Act, 1871 (3 of 1871), section 21, or affects any local usage relating to any instrument in an oriental language:
Provided that such usages may be excluded by any words in the body of the instrument, which indicate an intention that the legal relations of the parties thereto shall be governed by this Act; Commencement:
and it shall come into force on the first day of March, 1882. Repeal of enactments.
2. [Repealed by the Amending Act, 1891 (12 of 1891) ] Interpretation clause.
3. In this Act—
*Dated 9-12-1881
1.Substituted for “all the Provinces of India” by the Adaptation of Laws Order, 1950, w.e.f. 26-1-1950.
2.Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
3[***]
“Banker”: 4[“banker” includes any person acting as a banker and any post office savings bank].
5[***]
CHAPTER II OF NOTES, BILLS AND CHEQUES
“Promissory note”.
4. A “promissory note” is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
Illustrations
A signs instruments in the following terms:
(a) “I promise to pay B or order Rs. 500”.
(b) “I acknowledge myself to be indebted to B in Rs. 1, 000, to be paid on demand, for value received.”
(c) “Mr B, I.O.U Rs. 1,000.”
(d) “I promise to pay B Rs. 500 and all other sums which shall be due to him.”
(e) “I promise to pay B Rs. 500 first deducting thereout any money which he may owe me.”
(f) “I promise to pay B Rs. 500 seven days after my marriage with C.”
(g) “I promise to pay B Rs. 500 on D’s death, provided D leaves me enough to pay that sum.”
(h) “I promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next.”
The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.
“Bill of exchange”.
5. A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. A promise or order to pay is not “conditional” within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.
3. Omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
4. Substituted for “banker” by the Negotiable Instruments (Amendment) Act, 1955, w.e.f. 1-4-1956.
5. Omitted by the Notaries Act, 1952, w.e.f. 14-2-1956.
The sum payable may be “certain”, within the meaning of this section and section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due.
The person to whom it is clear that the direction is given or that payment is to be made may be a “certain person”, within the meaning of this section and section 4, although he is mis-named or designated by description only.
6[“Cheque”.
6. A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Explanation I.—For the purposes of this section, the expressions—
7[(a) “a cheque in the electronic form” means a cheque drawn in electronic form by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or with electronic signature, as the case may be;]
(b) “a truncated cheque” means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, immediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.
Explanation II.—For the purposes of this section, the expression “clearing house” means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.]
8[Explanation III.—For the purposes of this section, the expressions “asymmetric crypto system”, “computer resource”, “digital signature”, “electronic form” and “electronic signature” shall have the same meanings respectively assigned to them in the Information Technology Act, 2000 (21 of 2000).]
“Drawer”, “Drawee”.
7. The maker of a bill of exchange or cheque is called the “drawer”; the person thereby directed to pay is called the “drawee”.
“Drawee in case of need”.—When in the bill or in any 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”.
6. Substituted for ‘A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand’ by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, w.e.f. 6-2-2003.
7. Substituted by the Negotiable Instruments (Amendment) Act, 2015, w.r.e.f. 15-6-2015. Prior to its substitution, clause (a) read as under:
‘(a) “a cheque in the electronic form” means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system;’
8. Inserted by the Negotiable Instruments (Amendment) Act, 2015, w.r.e.f. 15-6-2015.
“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”.—9[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 endorsers, such person is called an “acceptor for honour”.
“Payee”.—The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the “payee”.
“Holder”.
8. The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.
“Holder in due course”.
9. “Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if 10[payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.
“Payment in due course”.
10. “Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.
“Inland instrument”.
11. A promissory note, bill of exchange or cheque drawn or made in 11[India] and made payable in, or drawn upon any person resident in, 11[India] shall be deemed to be an inland instrument.
“Foreign instrument”.
12. Any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.
“Negotiable instrument”.
13. 12[(1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.
9. Substituted for “When acceptance is refused and the bill is protested for non-acceptance” by the Negotiable Instruments Act, 1885.
10. Substituted for “payable to, or to the order of, a payee” by the Negotiable Instruments (Amendment) Act, 1919.
11. Substituted for “a State” by the Repealing and Amending Act, 1957, w.e.f. 17-9-1957.
12. Substituted by the Negotiable Instruments (Amendment) Act, 1919.
