The Negotiable Instrument Act was promulgated in the year 1881 with a total of 142 sections. The act was amended and the amendment Act inserts five new sections from 143 to 147 touching various limbs of the parent Act and Cheque truncation through digitally were also included and the amendment Act has been recently brought into force on Feb. 6, 2003.
In this article, Team YLCC brings you the important provisions of the Negotiable Instrument Act for Competitive Exams. Read on!
- SECTION 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.
- SECTION 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.
- SECTION 22- Definition of Maturity.
The maturity of a promissory note or bill of exchange is the date at which it falls due. The section also defines days of grace.
- SECTION 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.
- SECTION 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.
- SECTION 45 – Partial failure of consideration not consisting of money.
Where a part of the consideration for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.
- SECTION 45A – Holder’s right to duplicate of lost bill.
Where a bill of exchange has been lost before it is over-due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.
- SECTION 52 – Indorser who excludes his own liability or makes it conditional.
The indorser of a negotiable instrument may, by express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen. Where an indorser so excludes his liability and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to him.
- SECTION 58 – Instrument obtained by unlawful means or for unlawful consideration.
When a negotiable instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, no possessor or indorsee who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party prior to such holder, unless such possessor or indorsee is, or some person through whom he claims was, a holder thereof in due course.
- SECTION 60 – Instrument negotiable till payment or satisfaction.
A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof by the maker, drawee or acceptor at or after maturity, but not after such payment or satisfaction.
- SECTION 78 – To whom payment should be made.
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.
- SECTION 91 – Dishonour by non-acceptance.
A bill of exchange is said to be dishonoured by non-acceptance when the drawee, or one of several drawees not being partners, makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted.
- SECTION 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.
- SECTION 119 – Presumptions 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.
- SECTION 120 – Estoppel against denying original validity of instrument.
No maker of a promissory note, and no drawer of a bill of exchange or cheque, and no acceptor of a bill of exchange for the honour of the drawer shall, in a suit thereon by a holder in due course, be permitted to deny the validity of the instrument as originally made or drawn.
- SECTION 138 – Dishonour of cheque for insufficiency, etc., of funds in the account.
Dishonour of cheque is not an offence in itself but to become an offence, the following ingredients should be there:
- There should be a drawer that draws the cheque
- The cheque drawn should be in discharge of some liability.
- Presentation of the cheque to the drawee bank.
- The cheque returned by the bank was unpaid on account of insufficient funds.
- The cheque should be presented within six months from the date on which it was drawn or within the period of its validity, whichever is earlier.
- Within thirty days of receiving a memo of return from the bank, a notice should be served to demand the payment of the said money.
- The drawer fails to pay the said money within 15 days of the receipt of the said notice.
The offence is said to be committed only when he fails to pay the debt within 15 days and such person shall be punishable with imprisonment for a term which may be extended to two years, or with a fine which may extend to twice the amount of the cheque, or with both.
YLCC would like to thank Simran Kaur for her valuable insights in this article.
