THE NEGOTIABLE INSTRUMENTS ACT 2022 by Bhashyam & Adiga

THE NEGOTIABLE INSTRUMENTS ACT

CHAPTER I

Preliminary

1 Short title, local extent, saving of usages relating to hundis, etc. Commencement

2 Repeal of enactments (Repealed)

3 Interpretation clause “Banker”

CHAPTER II

Of notes, bills and cheques

4 “Promissory note”

5 “Bill of Exchange”

6 “Cheque”

7 “Drawer”, “Drawee”, “Drawee in case of need”, “Acceptor”, “Acceptor for honour”, “Payee”

8 “Holder”

9 “Holder in due course”

10 “Payment in due course”

11 Inland instrument

12 Foreign instrument

13 Negotiable instrument

14 Negotiation

15 Indorsement

16 Indorsement “in blank” and “in full”, “indorsee”

17 Ambiguous instruments

18 Where amount is stated differently in figures and words

19 Instruments payable on demand

20 Inchoate stamped instruments

21 “At Sight”, “On Presentment”, “After Sight”

22 “Maturity” Days of grace

23 Calculating maturity of bill or note payable so many months after date or sight

24 Calculating maturity of bill or note payable so many days after date or sight

25 When day of maturity is a holiday

CHAPTER III

Parties to Notes, Bills and Cheques

26 Capacity to make, etc., promissory notes, etc.

27 Agency

28 Liability of agent signing

29 Liability of legal representative signing

30 Liability of drawer

31 Liability of drawee of cheque

32 Liability of maker of note and acceptor of bill

33 Only drawee can be acceptor except in need or for honour

34 Acceptance by several drawees not partners

35 Liability of indorser

36 Liability of prior parties to holder in due course

37 Maker, drawer and acceptor principals

38 Prior party a principal in respect of each subsequent party

39 Suretyship

40 Discharge of indorser’s liability

41 Acceptor bound although indorsement forged

42 Acceptance of bill drawn in fictitious name

43 Negotiable instrument made, etc., without consideration

44 Partial absence or failure of money consideration

45 Partial failure of consideration not consisting of money

45A Holder’s right to duplicate of lost bill

CHAPTER IV

Of Negotiation

46 Delivery

47 Negotiation by delivery

48 Negotiation by indorsement

49 Conversion of indorsement in blank into indorsement in full

50 Effect of indorsement

51 Who may negotiate

52 Indorser who excludes his own liability or makes it conditional

53 Holder deriving title from holder in due course

54 Instrument indorsed in blank

55 Conversion of indorsement in blank into indorsement in full

56 Indorsement for part of sum due

57 Legal representative cannot by delivery only negotiate instrument indorsed by deceased

58 Instrument obtained by unlawful means or for unlawful consideration

59 Instrument acquired after dishonour or when overdue, Accommodation note or bill

60 Instrument negotiable till payment or satisfaction

CHAPTER V

Of Presentment

61 Presentment for acceptance

62 Presentment of promissory note for sight

63 Drawee’s time for deliberation

64 Presentment for payment

65 Hours for presentment

66 Presentment for payment of instrument payable after date or sight

67 Presentment for payment of promissory note payable by instalments

68 Presentment for payment of instrument payable at specified place and not elsewhere

69 Instrument payable at specified place

70 Presentment where no exclusive place specified

71 Presentment when maker, etc., has no known place of business or residence

72 Presentment of cheque to charge drawer

73 Presentment of cheque to charge any other person

74 Presentment of instrument payable on demand

75 Presentment by or to agent, representative of deceased or assignee of insolvent

75A Excuse for delay in presentment for acceptance or payment

76 When presentment unnecessary

77 Liability of banker for negligently dealing with bill presented for payment

CHAPTER VI

Of Payment and Interest

78 To whom payment should be made

79 Interest when rate specified

80 Interest when no rate specified

81 Delivery of instrument on payment or indemnity in case of loss

CHAPTER VII

Of discharge from liability on Notes,

Bills and Cheques

82 Discharge from liability — (a) by cancellation; (b) by release; (c) by payment

83 Discharge by allowing drawee more than forty-eight hours to accept

84 When cheque not duly presented and drawer damaged thereby

85 Cheque payable to order

85A Drafts drawn by one branch of a bank on another payable to order

86 Parties not consenting discharged by qualified or limited acceptance

87 Effect of material alteration, Alteration by indorsee

88 Acceptor or indorser bound notwithstanding previous alteration

89 Payment of instrument on which alteration is not apparent

90 Extinguishment of rights of action on bill in acceptor’s hands

CHAPTER VIII

Of Notice of Dishonour

91 Dishonour by non-acceptance

92 Dishonour by non-payment

93 By and to whom notice should be given

94 Mode in which notice may be given

95 Party receiving must transmit notice of dishonour

96 Agent for presentment

97 When party to whom notice given is dead

98 When notice of dishonour is unnecessary

CHAPTER IX

Of Noting and Protest

99 Noting

100 Protest, Protest for better security

101 Contents of protest

102 Notice of protest

103 Protest for non-payment after dishonour by non-acceptance

104 Protest of foreign bills

104A When noting equivalent to protest

CHAPTER X

Of reasonable time

105 Reasonable time

106 Reasonable time of giving notice of dishonour

107 Reasonable time for transmitting such notice

CHAPTER XI

Of acceptance and payment for honour and

reference in case of need

108 Acceptance for honour

109 How acceptance for honour must be made

110 Acceptance not specifying for whose honour it is made

111 Liability of acceptor for honour

112 When acceptor for honour may be charged

113 Payment for honour

114 Right of payer for honour

115 Drawee in case of need

116 Acceptance and payment without protest

CHAPTER XII

Of compensation

117 Rules as to compensation

CHAPTER XIII

Special rules of evidence

118 Presumptions as to negotiable instruments — (a) of consideration; (b) as to date; (c) as to time of acceptance; (d) as to time of transfer; (e) as to order of indorsement; (f) as to stamps; (g) that holder is a holder in due course

119 Presumption on proof of protest

120 Estoppel against denying original validity of instrument

121 Estoppel against denying capacity of payee to indorse

122 Estoppel against denying signature or capacity of prior party

CHAPTER XIV

Of crossed cheques

123 Cheque crossed generally

124 Cheque crossed specially

125 Crossing after issue

126 Payment of cheque crossed generally, Payment of cheque crossed specially

127 Payment of cheque crossed specially more than once

128 Payment in due course of crossed cheque

129 Payment of crossed cheque out of due course

130 Cheque bearing “not negotiable”

131 Non-liability of banker receiving payment of cheque

131A Application of chapter to drafts

CHAPTER XV

Of bills in sets

132 Set of bills

133 Holder of first acquired part entitled to all

CHAPTER XVI

Of international law

134 Law governing liability of maker, acceptor or indorser 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

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 account

1 Competence of the Parliament

2 Statement of objects and reasons

3 Object

4 Salient features

5 Non- compliance with the provision

6 Scope

7 Nature

8 Applicability

9 Applicability of provisions to cheques issued before 1-4-1989

10 Issue of cheque is not an offence

11 Ingredients of the offence

12 Dishonour of cheque issued for discharge of legally enforceable debt/liability

13 Section 138 and Criminal Law

14 Power of courts

15 Interference by High Court in disputed questions of fact

16 Bailable offence

17 Trial of offence: Summary procedure

18 Directions for Summary Trial

19 Defence evidence

20  Month’, meaning of

21 Presentation of cheques any number of times during validity period

22 Filing of a civil suit

23 Arbitration proceedings

24 Prosecution for cheating: Not barred

25 Prosecution based on successive dishonour of cheque

26 Filing of a complaint

27 Condonation of delay in filing complaint

28 Place of filing complaint

29 Locus standi to file complaint

30 Verification of complaint

31 Cause of action

32 Complaint not signed by complainant

33 Permissibility for the substitution of complainant

34 Deficit Court Fee

35 Sole proprietorship concern

36 Complaint by company

37 Delegation of power of attorney

38 Power of Attorney to witness transaction

39 Complaint by Power of Attorney Holder

40 Complaint, maintainability

41 Reasons for return

42 ‘Refer to drawer’, meaning of

43 ‘Such person shall be deemed to have committed an offence’

44 Payment of cheque stopped by drawer

45 Propriety of order of issue process

46 Bank account closed

47 Exceeds arrangement: Dishonour on ground of

48 Insufficient balance

49 Cheque reported stolen

50 Alteration in date and drawer’s signature differs

51 Drawer’s signature incomplete

52 Drawer’s signature denial

53 Recourse to Proceedings

54 Making endorsement ‘sans recourse’ on cheque

55 Bank documents: Admissibility in evidence

56 Exclusion of mens rea

57 Cheque drawn by a person

58 Cheque issued in illegal transaction

59 Liability of director

60 Liability of drawer of cheque

61 Cheque issued by authorised signatory: Liability

62 Vicarious liability

63 Cheque issued by mandate holder: Liability

64 Forfeiture of right of holder/payee

65 Self drawn cheque

66 Pay Order, dishonour of

67 Post-dated cheques, dishonour of, effect

68 An account maintained with a banker

69 Joint bank account operated by ‘Either or Survivor’: Liability

70 Banker

71 Undated cheque

72 Any debt or other liability: Legally enforceable liability

73 Debt/Liability: Proof of

74 Existence of debt or liability on the date of cheque

75 Time-barred debt

76 Discharge of liability in excess of liability incurred

77 Legally enforceable liability

78 Burden of proof

79 Presumption

80 Modification of discharge of liability

81 Part payment

82 Other liabilities

83 Cheque received as guarantee or security

84 Chit funds

85 Uncertain future liabilities

86 Proceedings against guarantor: Maintainable

87 Blank cheque issued as security

88 Misuse of blank cheque: Expert opinion

89 Cheque issued as collateral security

90 Liability need not be of drawer

91 Discharge of debt of wife

92 Discharge of Debt of Father

93 Death of drawer of cheque

94 Holder in due course

95 Drawer alone can be prosecuted

96 Cheque discounting facility with bank: Liability

97 Offence

98 Failure’ to make payment

99 Cognizance of offence

100 Quashing of Cognizance

101 Without prejudice to any other provision of this Act

102 Material alterations in cheque

103 Typographical error

104 Clubbing of complaints

105 Punishment

(a)Prior to 6-2-2003

(b)On and from 6-2-2003

106 Sentences to run concurrently: Powers of Court

107 Sentence of imprisonment till rising of court

108 Suspension of sentence

109 Penalty provision created by legal fiction

110 Provision, not for compensation

111 Compensation

112 Mode of recovery of fine and compensation

113 Compensation, reduced

114 Sentence of fine and compensation

115 Inadequacy of sentence

116 Payment of interest on award of compensation

117 Default sentence

118 Compounding of offence

119 Acquittal

120 Propriety of order of acquittal

121 Conviction

122 Release on probation

123 Pendency of parallel proceedings

124 Lok adalats

125 Presentation of cheque

126 Territorial jurisdiction

127 Transfer of cases

128 Compliance of procedure of trial on transfer of a Magistrate

129 Provisos

(1) Period for presentment: clause (a)

(2) Notice of demand for payment: clause (b)

130 Issuance of notice

131 Handwritten notice

132 Construction of Proviso

133 Demand notice: Limitation period

134 Notice to company sufficient

135 Notice to director itself

136 Form or format of notice

137 Permissibility for the use of printed format

138 Notice not signed by Advocate: Validity

139 Contents of notice

140 Notice sent under certificate of posting

141 Notice: Service of

142 Fresh notice

143 Constructive service of notice

144 Deemed service of notice

145 Demand notice sent by registered post

146 Demand notice: Burden of proof of service

147 Copy of demand notice: Admissibility

148 Omnibus Demand in Notice

149 Period for payment

150 Date of service of statutory notice

151 Period for filing of complaint

152 Computation of period of limitation of notice

153 Computation of period of one month for filing of complaint

154 Extension of limitation period

155 Averment in complaint

156 “Date of receipt” to be understood as “date of knowledge of receipt” of the notice

157 Proof of service of demand notice

158 Receipt of notice by wife of accused drawer

159 Notice, interpretation of

160 Validity of demand notice

161 Exact date of issue of notice or date of service of the notice in the complaint

162 Words ‘said amount of money’, meaning

163 Notice of demand: Cheque Number

164 Dishonour of cheque for higher amount

165 Prior discharge

166 Consolidated notice for more than one cheques: Validity

167 Premature complaint

168 Subsequent events: Consequence of part payment by drawer after issue of notice

169 Deposit by accused of entire amount during trial

170 Single complaint in respect of more than one dishonoured cheque

171 Summoning of accused

172 Examination of complainant

173 Production of additional evidence

174 Examination of witnesses

175 Dismissal of complaint

176 Dismissal of complaint for non-appearance of complainant/counsel

177 Personal attendance of accused

178 Death of payee

179 Death of drawer

180 Death of drawer-partner

181 Death of complainant

182 Discharge of accused

183 Non-mention of necessary ingredients in pre-summoning statement

184 No grant of injunction

185 Private complaint by accused: Maintainability

186 Drawer declared insolvent

187 Delay in disposal of cases: Practice and procedure

188 Additional evidence: Permissibility

189 Quashing of complaint

190 Quashing of proceedings

191 Propriety of non-consideration of issue of limitation

192 Writ jurisdiction of High Court

193 Nature and extent of presumption: Standard of proof

194 Rejection of application for sending cheque to FSL

195 Money lending transaction

196 Application for Opinion of handwriting export

197 Preponderance of probabilities

198 Power of successor Magistrate

199 Revision, scope

200 Remand of case

201 Instruction, while working abroad

202 Filing of case against directors

203 Cheques whether supported by consideration

139 Presumption in favour of holder

1 Presumption against the drawer,

2 Scope

3 Termination of dealership due to dishonour of cheque

4 Nature and extent of presumption

5 Shall be presumed

6 Propriety of presumption

7 Unless the contrary is proved

8 Rebuttal evidence: Quantum of

9 Holder of a cheque as referred to in section 138

10 Rebuttal plea

11 Non-rebuttal of presumption

12 Presumption available to payee and holder

13 Discharge in whole or in part of any debt or other liability

14 Presumption of existence of legally enforceable debt

140 Defence which may not be allowed in any prosecution under section 138

1 Scope

2 Exclusion of mens rea

3 It shall not be

4 Reason to believe

5 ‘Issuance’ of cheque

6 Cheque may be dishonoured on presentation

7 Closure of account prior to date of drawal of cheque

141 Offences by companies

1 Offences by companies

2 Non-banking financial companies

3 Scope

4 “At the time the offence was committed”, scope of

5 Complaint, maintainability

6 Non-incorporation of particulars

7 Reliance on affidavit

8 Validity

9 Expression ‘Company’: Meaning and scope

10 Expression “other association of individuals”

11 Status of a sole proprietorship concern

12 Liabilities of a firm and its partners

13 Joint family business

14 Legal liabilities of a company

15 Trustees of a trust

16 Hindu Undivided Family (HUF)

17 Section 141, sub-section (1)

(a)Every person incharge

(b)Vicarious liability

(c)Quashing of prosecution

(d)As well as the company

18 Post-dated cheques

19 Demand notice

20 Section 141 — First proviso — Meaning of

21 Nominated directors not liable for prosecution — Second proviso

22 Section 141(2): With the consent or connivance of, or is attributable to, any neglect on the part of

23 Section 141(2): Director — Manager or other officer — Meaning of

24 Vacation of office: Quashing of prosecution

25 Vicarious liability: Prosecution of Director: Sustainability

26 Winding up proceedings pending

27 Explanation (b)

28 Company not prosecuted

29 Proceeding against company and its Managing Director

30 Companies under winding up

31 Sick industrial companies

32 Duty of Courts: Frivolous litigation

33 Company changing name

142 Cognizance of offences

1 Scope

2 Proviso differs prosecution

3 Notwithstanding anything contained in Code of Criminal Procedure

4 Filing of complaint: Legal requirements

5 Cognizance of the offence: Section 142(1)(a)

6 Complaint by payee or holder in due course

7 Fresh complaint remedy

8 Complaint by company

9 Complaint by co-operative society

10 Complaint by Government Company

11 Sole proprietorship firm

12 Partnership firm

13 Complaint by unregistered firm

14 Limitation for taking cognizance

15 Cheques issued in favour of bank

16 Complaint in writing: Section 142(1)(b)

17 Issuing of fresh demand notice

18 Complaint filed by power of attorney holder

19 Ingredients of offence

20 Complaint filed by advocate

21 Complaint sent by post

22 “Within one month of the date on which the cause of action arises”

23 Quashing of prosecution

24 Sufficient cause for not making a complaint within time

25 Amendment prospective, not retrospective

26 Premature complaint

27 Jurisdiction of the court: Section 142(1)(c)

28 Cause of action

29 Defective notice

30 Question of limitation

(a)With effect from 6-2-2003

(b)Prior to 6-2-2003

31 Prospective operation

32 Successive presentation of cheque: Cause of action: Computation of

33 Importance of date seal of court on copy of complaint to be served on accused

34 Magistrate cannot refer the complaint to police for investigation

35 Nature of enquiry before issue of process

36 Recommended procedure for trial of section 138 complaint

37 Non-applicability of section 29(2) of the Cr PC

38 When punishment more severe than Magistrate empowered to give warranted

39 Power of Court

40 Power of attorney holder

41 Territorial jurisdiction settled by the insertion of section 142(2)

142A Validation for transfer of pending cases

143 Power of Court to try cases summarily

1 Trial of offence: Summary procedure

2 Summary trial of cases

3 Recording of reasons: Requirement of

4 Summary trial provisions under the Code of Criminal Procedure

5 Sentence of imprisonment or fine

6 When the Magistrate may not hold a summary trial

7 Day to day trial

8 Trials to conclude within six months

9 Directions to courts, for speedy disposal of dishonour of cheque cases

144 Mode of service of summons

145 Evidence on affidavit

1 Evidence on affidavit

2 Section 145 not to be dissected into pre-summoning and post-summoning stage of trial

3 Section 145 is an enabling provision

4 Scope and nature of provision: Overriding effect

5 Right to fair trial

6 Amendment retrospective or prospective

7 Territorial jurisdiction

146 Bank’s slip prima facie evidence of certain facts

147 Offences to be compoundable

1 Compounding of offence

2 Right of accused to tender his evidence on affidavit

3 Procedure to be followed: Applicability of section 320, Cr PC

4 Permission from Court

5 Deposit of ‘Amount due’ in Court

6 Mere compromise and an action of compounding a crime: Distinction

Annexure 1 Specimen Notices

SPECIMEN 1 Proforma of a notice in connection with payment of arrears of salary

SPECIMEN 2 Proforma of a notice in connection with rendering services

SPECIMEN 3 Proforma of a notice on behalf of a business firm for the amount outstanding on account of supply of goods

SPECIMEN 4 Proforma of a notice on behalf of the supplier of goods

SPECIMEN 5 Proforma of a notice on account of purchases made on credit

SPECIMEN 6 Proforma of a notice on behalf of a Bank

SPECIMEN 7 Proforma of a notice on behalf of a company

SPECIMEN 8 Proforma of a notice on behalf of a Pvt. Ltd. Company to a Limited Company on account of non-payment for the supply of goods

Annexure 2 Specimen Complaints

SPECIMEN 1 Proforma of a complaint for supply of goods on credit

SPECIMEN 2 Proforma of a complaint on behalf of a sole proprietorship concern

SPECIMEN 3 Proforma of a complaint on behalf of a Pvt. Ltd. Co. against a Limited Company

SPECIMEN 4 Proforma of a complaint by a leasing company

SPECIMEN 5 Proforma of a complaint on behalf of a Ltd. Company against another Ltd. Company

SPECIMEN 6 Proforma of a complaint on behalf of a partnership concern

SPECIMEN 7 Proforma of a complaint on behalf of a creditor against a debtor

SPECIMEN 8 Proforma of a complaint on behalf of the sole proprietorship concern

Annexure 3     The Negotiable Instruments (Amendment) Act, 2018

Annexure 4 The Negotiable Instruments (Amendment) Act, 2015

Annexure 4A The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002

Annexure 5 Bankers’ Books Evidence Act, 1891 [As amended by the Negotiable Instruments (Amendment & Miscellaneous Provisions) Act, 2002]

APPENDIX A Agreements controlling negotiable instruments

APPENDIX B Payment by bills, notes and cheques

APPENDIX C Suits on negotiable instruments

APPENDIX D Bills of Exchange Act, 1882

APPENDIX E The Cheques Act, 1957

APPENDIX F Uniform Commercial Code

SUBJECT INDEX