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NEGOTIABLE INSTRUMENTS ACT

Ministry of Law and Justice

Act nº 26 of 1881


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter V
  • Chapter VI
  • Chapter VII
  • Chapter VIII
  • Chapter IX
  • Chapter X
  • Chapter XI
  • Chapter XII
  • Chapter XIII
  • Chapter XIV
  • Chapter XV
  • Chapter XVI
  • Chapter XVII. Of Penalties in Case of Dishonour of Certain Cheques for Insufficiency of Funds in the Accounts
  • Schedules
  • Amending Acts
  • Act nº 26 of 1881

Preamble

THE NEGOTIABLE INSTRUMENTS ACT, 18811

[Act, No. 26 of 1881]

[9th December, 1881]

PREAMBLE

An Act to define and amend 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:--

1. For the Statement of Objects and Reasons, see Gazette of India, 1876, p. 1836; for the Reports of the Select Committee, see Gazette of India, 1877, Pt. V, p. 321; 1878, Pt. V, p. 145; 1879, Pt.V, p. 75; 1881, Pt.V, p. 85; for discussions in Council, see Gazette of India, 1876 Supplement, p.1081; and Gazette of India, 1881, Supplement, p. 1409.


Chapter I

Section 1. Short title

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* to **[the whole of India ***[***]]; but nothing herein contained affects the @Indian Paper Currency Act, 1871 (3 of 1871), section 21,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.

Section 2. Repeal of enactments

[Rep. by the Amending Act, 1891 (12 of 1891), sec. 2 and Sch. I].

Section 3. Interpretation clause

In this Act--

1 [***]

"Banker".--2 ["banker" includes any person acting as a banker and any post office savings bank].

3 [* * *]

1. Definition of "India" omitted by Act 62 of 1956, sec. 2 and Sch (w.e.f. 1-11-1956).

2. Substituted by Act 37 of 1955, sec. 2, for the definition of the word "banker" (w.e.f. 1-4-1956).

3. Definition of "notary public" omitted by Act 53 of 1952, sec. 16 (w.e.f. 14-2-1956).


Chapter II

Section 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 Bor order Rs. 500."

(b) "I acknowledge myself to be indebted to Bin 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 BRs. 500 and all other sums which shall be due to him."

(e) "I promise to pay BRs. 500 first deducting there out any money which he may owe me."

(f) "I promise to pay BRs. 500 seven days after my marriage with C."

(g) "I promise to pay BRs. 500 on D's death, provided D leaves me enough to pay that sum."

(h) "I promise to pay BRs. 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.

Section 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 a "certain person", within the meaning of this section and section 4, although he is mis-named or designated by description only.

Section 6. "Cheque"

1[ 6 . "Cheque"

A "cheque" is a bill of exchange dr awn on a specified banker and not expressed to be payable other wise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

Explanation 1 .-- For the purposes of this section, the expressions--

(a) "a cheque in the electronic form" me ans 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;

(b) "a truncated cheque' me ans 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, sub stituting the further physical movement of the cheque in writing.

Explanation II.-- For the purposes of this section, the expression "clearing house" me ans the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.]

1 . Substituted b y Act 55 of 2002, sec. 2, for "A "cheque" is a bill of exchange dr awn on a specified banker and not expressed to be payable other wise than on demand" (w .e.f . 6 - 2 - 2003 ).


Section 7. "Drawer", "drawee"

The maker of a bill of exchange or cheque is called the"drawer"; the person thereby directed to pay is called the"drawee".

"drawee in case of need".--When in thebill or in any indorsement thereon the name of any person is given in additionto the drawee to be resorted to in case of need such personis called a "drawee in case of need".

"acceptor".--After thedrawee of abill has signed his assent upon the bill, or, if there are more partsthereof than one, upon one of such parts, and delivered the same, or givennotice of such signing to the holder or to some person onhis behalf,he is called the "acceptor".

"acceptor for honour".--1 [When a bill of exchangehas been noted or protested for non-acceptance or for better security], ana anyperson accepts it supra protest forhonour of the drawer or of any one of the indorsers, such person iscalled an "acceptor for honour".

"Payee".--The person named in theinstrument, to whom or to whose order the money is by theinstrument directed to be paid, is called the "payee".

1.Substituted by Act 2 of 1885, sec. 2, for "Whenacceptance is refused and the bill is protested for non-acceptance".


Section 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.

Section 9. "Holder in due course"

"Holder in due course" means any person who forconsideration became the possessor of a promissory note, bill of exchange orcheque if payable to bearer, or the payee or indorsee thereof, if 1 [payable toorder],before the amount mentioned in it became payable, and without havingsufficient cause to believe that any defect existed in the title of the personfrom whom he derived his title.

1.Substituted by Act 8 of 1919, sec. 2, for "payable to, orto the order of, a payee".


Section 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.

Section 11. "Inland instrument"

A promissory note, bill of exchange or cheque dr awn or made in1[India] and made payable in, or dr awn upon any person resident in,1[India] sh all be deemed to be an inland instrument.

1 . Substituted b y Act 36 of 1957, sec. 3 and Sch. II, for "a State".


Section 12. "Foreign instrument."

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