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NEGOTIABLE INSTRUMENTS ACT, 1881
1. Short title
2. [Repealed by the Amending Act, 1891 (12 of 1891)
5. âBill of
6. âChequeâ
7. âDrawerâ, âdraweeâ
8. âHolderâ
9. âHolder in due courseâ
10. âPayment in due courseâ
11. âInland instrumentâ
12. âForeign instrumentâ
13. âNegotiable instrumentâ
14. Negotiation
15. Indorsement
16.
18.
22.
23.
24.
25.
CHAPTER III
CHAPTER IV OF NEGOTIATION
47.
50.
52.
53.
54.
55.
56.
58.
CHAPTER V OF PRESENTMENT
65.
66.
67.
68. Presentment for payment of instrument payable at speci ed place and not elsewhere
69. Instrument payable at speci ed place 16
70. Presentment where no exclusive place speci ed 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 speci ed 17
80. Interest when no rate speci ed 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 quali ed 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 acceptorâs hands 21
CHAPTER VIII
91.
92.
93.
94.
95.
96.
97.
98.
CHAPTER IX
CHAPTER XI
112.
113.
117.
118.
121.
CHAPTER XVI OF INTERNATIONAL LAW
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 insuf ciency, etc., of funds in the account
139. Presumption in favour of holder
140. Defence which may not be allowed in any prosecution under section 138
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:â
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 Actâ
*Dated 9-12-1881
1. Substituted for âall the Provinces of Indiaâ by the Adaptation of Laws Order, 1950, w.e.f. 26-1-1950.
2. Words âexcept the State of Jammu and Kashmirâ omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
3[***]
âBankerâ: 4[âbankerâ includes any person acting as a banker and any post office savings bank].
5[***]
CHAPTER II OF NOTES, BILLS AND CHEQUES
âPromissory noteâ.
4. A âpromissory noteâ 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) âI promise to pay B or order Rs. 500â.
(b) âI acknowledge myself to be indebted to B in Rs. 1, 000, to be paid on demand, for value received.â
(c) âMr B, I.O.U Rs. 1,000.â
(d) âI promise to pay B Rs. 500 and all other sums which shall be due to him.â
(e) âI promise to pay B Rs. 500 first deducting thereout any money which he may owe me.â
(f) âI promise to pay B Rs. 500 seven days after my marriage with C.â
(g) âI promise to pay B Rs. 500 on Dâs death, provided D leaves me enough to pay that sum.â
(h) âI promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next.â
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.
âBill of exchangeâ.
5. A âbill of exchangeâ 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 âconditionalâ 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 âbankerâ 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 âcertainâ, 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 âcertain personâ, within the meaning of this section and section 4, although he is mis-named or designated by description only.
6[âChequeâ.
6. A âchequeâ 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.âFor the purposes of this section, the expressionsâ
7[(a) âa cheque in the electronic formâ 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) âa truncated chequeâ 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.âFor the purposes of this section, the expression âclearing houseâ 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.âFor the purposes of this section, the expressions âasymmetric crypto systemâ, âcomputer resourceâ, âdigital signatureâ, âelectronic formâ and âelectronic signatureâ shall have the same meanings respectively assigned to them in the Information Technology Act, 2000 (21 of 2000).]
âDrawerâ, âDraweeâ.
7. The maker of a bill of exchange or cheque is called the âdrawerâ; the person thereby directed to pay is called the âdraweeâ.
âDrawee in case of needâ.âWhen 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 âdrawee in case of needâ.
6. Substituted for âA âchequeâ is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demandâ 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:
â(a) âa cheque in the electronic formâ 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;â
8. Inserted by the Negotiable Instruments (Amendment) Act, 2015, w.r.e.f. 15-6-2015.
âAcceptorâ.âAfter 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 âacceptorâ.
âAcceptor for honourâ.â9[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 âacceptor for honourâ.
âPayeeâ.âThe person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the âpayeeâ.
âHolderâ.
8. The âholderâ 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.
âHolder in due courseâ.
9. âHolder in due courseâ 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.
âPayment in due courseâ.
10. âPayment in due courseâ 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.
âInland instrumentâ.
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.
âForeign instrumentâ.
12. Any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.
âNegotiable instrumentâ.
13. 12[(1) A ânegotiable instrumentâ means a promissory note, bill of exchange or cheque payable either to order or to bearer.
9. Substituted for âWhen acceptance is refused and the bill is protested for non-acceptanceâ by the Negotiable Instruments Act, 1885.
10. Substituted for âpayable to, or to the order of, a payeeâ by the Negotiable Instruments (Amendment) Act, 1919.
11. Substituted for âa Stateâ by the Repealing and Amending Act, 1957, w.e.f. 17-9-1957.
12. Substituted by the Negotiable Instruments (Amendment) Act, 1919.
