OF

2. PAYMENT
P
ALTERATI
STRUMENT ON WHICH
IS NOT
Where a
APPARENT (Sec. 89)
N o
l i a b i l i t y o f

promissory note, bill of exchange

appear to have been
altered, or where a chequecheque
nersonpaying an or has been materially altered but ao
so
ne o is presented for
pesentation appear to be crossed or to have had a payment does not at tne
pstrumento n
payment thereof by a person or wniu ated,
crossing which has deein he
w h i c hm a t e r i a l

apparent tenor thereof at the time banker liable to pay, and th

of pavment paying the san
alteration is not
person banker from all
or and atherwise in due course, shall discharge
discnargo such a a

of the instrument liability thereon, and such pavment shall not be

pparent
having been altered, or the cheque questionea oy Ison
of b a n k e r
or (a) Where the cheque is an crossed
Daty clectronic image of a truncated cheque, any ditterene P rent
learing house in LCor or Such
electronic image and the truncated
shall be the cheque shall be a material alteration and
Case o f t r u n c a t e d duty of the bank or the clearing
house, as the case may be, to ensu
exactness of the
apparent tenor of electronic image of the truncated cheque while truncang
cheque and
transmitting the image.
(b) Any bank or a clearing house which
receives a transmitted electronic image of a truncared
Cheque, shall verify from the party who transmitted the image to it, that the image so
transmitted to it and received by it, is
eactly the same.

2.54 DISHONOUR BY NON-ACCEPTANCE Sec. (Sec. 91)

Nov. 2002 When a bill exchange may be dishonoured by 'non-acceptance' and 'non-payment under the provisions of Negotiable
Instrumenis Act, 1881?

Hay 2008 What is meant

by "Presentmenf of a bill of exchange under the
exchange presented for payment? State when is the presentment not necessary.
Negoliable Instruments Act, 1881? When is such a bill of

Nov. 2018 What are the circumstancesunderwhich abill of exchange can be dishonoured by non-acceptance?
A bill is dishonoured by non-acceptance ifit is duly presented for acceptancc, but the bill is not
Meaning
accepted.
Cases in which a (a) Where a bill is not accepted by the drawee within 48 hours of presentment of bill.
If the holder allows to the draweemore than 48 hours for acceptance, all the prior parties
billis dishonoured
not consenting to the same are discharged from liability to such holder.
by non-acceptance In case there are two or more drawees who are not partners, if the bill is not accepted by
all
(b)
the drawees.
Where the drawee is a fictitious person
(c) reasonable search.
(d) When the drawee cannot be found even after a

When the drawee is incompetent to

contract.
(e) conscnt to
Where the drawee gives a qualified acceptance,
and the holder does not give his
(
the qualified acceptance.
an immediate right to sue all the prior parties.
Effects The holder gets
 Non-applicability A promissory note o r a chcquc cannot be dishonoured by no-acceptanCe Since a promissore
ory
note or a cheque does not require any acceptance.

12.55 PROVISIONS WITH RESPECT TO PRESENTMENT, (Sec. 61 to 65 and 72 to 83

PAYMENT AND INTEREST
(a) A bill of exchange payable a certain period after sight must, il no ume or place is
Presentment for
specified thercin for presentmet, be prescnted to the drawce thercol for acceptance, if
acceptance (Sec. 61) he can, after reasonable scarch, be found, by a person citilled to dtcmand acccptance
Within a reasonable time after it is drawn, and in busincss hours on a business day. In
default of such presentment, no party thercto is liable thereon to the person making such
default. If the drawee cannot, after reasonable scarch, be found, thc bill is dishonoured,
If the bill is directed to drawce at a particular place, it must be presented al that place,
(b) and if at the due date for presentment he cannot, after reasonable search, be found
thereon, the bill is dishonoured.
When authorised by agreement or usage, a presentment through the post office by mcans
(c)
of a registered letter is sufficient.
A promissory note, payable at a certain period after sight, must be presented to the maker
Presentment of
thereof for sight (if he can after reasonable search be found) by a person entitled to demand
promissory note for
business hours on a business day. In
payment, within a reasonable time after it is made and in
sight (Sec. 62) default of such presentment, no party thereto is liable thereon to the person making such
default.
The holder must, if so required by the drawee of a bill of exchange presented to him for
Drawee's time for
to consider whether he
deliberation (Sec. 63) acceptance, allow the drawee 48 hours (exclusive of public holidays)
will accept it.
be presented for payment to the
Presentment for (a) Promissory notes, bills of exchange and cheques must
behalf of the holder. In default
payment maker, acceptor or drawee thereof respectively, by or on
to such holder.
of such presentment, the other parties thereto are not liable thereon
(Sec. 64) (6) Where authorised by agreement or usage, a presentment through
the post office by
means of a registered letter is sufficient.
Where a promissory note is payable on demand and is not payable at a specified place,
(c)
no presentment is necessary in order to charge the maker
thereof.

Hours for (a) Presentment for payment must be made during the usual hours of business.
within
presentment (Sec. 65) (6) If an instrument is presented for payment to a banker, it must be presented
banking hours.
the drawer, be
Subject to the provisions of section 84, a cheque must, in order charge
to
Presentment of
between the drawer and his
cheque t0 charge presented at the bank on which it is drawn before the relation
banker has been altered to the prejudice of the drawer.
drawer (Sec. 72)
drawer, be presented within a
Presentment of A cheque must, in order to charge any person Cxccpt the
reasonable time after delivery thereof by such person.
cheque to charge any
other person (Sec. 73)
Presentment of Subject to the provisions of section 31, a negotiable instrument payable on demand tnust be
instrument payable at presented for payment within a reasonable time after it is received by the holder.

demand (Sec. 74)

Presentment for acceptance or payment may be made to the duly authorised agent of the
Presentment by or to
agent, representative drawee, maker or acceptor, as the case may be, or, where the drawee, maker or acceptor has
died, to his legal representative, or, where he has been declared an insolvent, to his assignee
of deceased, or
assignee of insolvent
 Chap
[Link]/'1nenis Ac, 1007
delay in
C u s ef o r Delay in
presentment for acceptance 1s cxcused if
is the delay is causcu
presentmentfor
Crcmstances beyond
plancC
payment
CXCunot imputable to his default,
or pay1ment
the control tofhthe
e holder, and
and
tance or payment Wha no to operate, presentment
must

itlgigence,
nen the cause of the delay
ceascs
acceptan
be made
be made within a
(Sec.75A)
reasonable time.
No presentment f o r payment i s necessary, and the instrument is dishonoured at the d u
ucc dac
W h e n p r e s e n t m e n t

for
unnecessary
presetment, in any of the following cases:
d I f the maker, drawee or acccptor intentionally prevents the pres
(Sec. 76)
instrument. place on
he cioses
n ea instrument being payable at his place of business,
business
day during the usual busincss hours.
u t the instrument being pavable at some other specified place, neither he no d
hours.
the usual business
authorised to it attends at such place during
thPSOn pay
e mstrument notbeing payable at any specified place, he cannot aL

search be found. to pay

if he has engaged
(t gainst any party sought to be charged therewith,
notwithstanding non-presentiment. instrumentnas
(c) AS aganst any party if, after maturity, with knowledge that the
been presented, he -
Or
due on the instrument,
(i) part payment on account of the amount
nakes a
in or
i) promises to pay the anmount due therein whole or part;
w a i v e s his right to take advantage of any default
in presentment for paynent.
such
from the want of
(cl) AS against the drawer, if the drawer could not suffer damage

presentment.
has been duly presen
When bill of exchange, accepted payable at a specified bank,
Liability of banker for
a
or improperly keeps, deals
for payment and dishonoured, if the banker so negligently
negligently dealing with there he must compensate the
holder
With or delivers back such bill as to cause loss to the holder,
bill presented for
for such loss.
payment (Sec. 77) must, in order
bill of exchange or cheque
To whom payment Payment of the amount due on a promissory note, instrument.
to discharge the maker or acceptor, be
made to the holder of the
should be made (Sec. 78)| note or bill of
is expressly made payable
rate
on a promissory
Interest when rate When interest at a specified the amount of the principal
calculated at the rate specified, on
exchange, interest shall be until
specified firom the date of the instrument,
-

money due thereon,

(Sec. 79) tender or rcalisation of such amount;
or
(a) such amount as the court
directs.
institution of a suit to recover
(b) such date after the
interest on the amount due
When interest is specified in the instnument,
rate of
interest between any parties
no
Interest when no rate (a) relating to
thereon shall, notwithstanding any agreement annum, from the
datc at which
specified calculated at the rate of 18% per
to the instrument, be
(Sec. 80) the same ought to have been paid
by the party charged, until
tender or realisation of
the amount due thereon; or
i) of a suit to recover such amount as
the court directs.
date after the institution
i) such an instrument dishonoured by non-payment,
When the party charged
is the endorser of
(b) he receives notice of the dishonour.
liable to pay interest onlyfrom thetimethat
he is
thereof to pay, the amount due
to and called upon by the holder
(a) Any person liable pay, is before payment entitled to have it
Delivery of instrument note, bill of exchange or cheque
on a promissory if the instrument
on payment or entitled to have it delivered up, to him, or,
shown, and is on payment
be produced, to be indemniied against any further claim thereon
indemnity in ease o is lost or cannot
loss against him.
of a tuncated chequc, even after the payment
the cheque is an electronic image
Sec. 81) (b) Where
who received the payment shall
be entitled to retain the truncated cheque
the banker
 elcctronic imagc of a i .
of the printout ol the
(c) A certificate issucd on the foot be prima lacic neaeuncated
the instnent, shall
chcque by the banker who paid of such
payment.
negotiable instrument is dischr.
Discharge from liability The makcr, acceptor or endorser respectively of a
harged from
(Sec. 82) liability thercon
canccls such acceptor's or endorscr'e
(a) by caneellation, to a holder thereof who name
with intent to discharge him, and to
all parties claiming under such holder:
otherwISe disc1arges such maker, accent.
(b) by release, to a holder thercof wlho under sucn holder alter notice of .
title
endorser, and to all parties deriving
discharge:
if thc instrument iS payable to bcarer, or hae .
(c) bypayment, to all parties thereto,
or endorser makes paymnent in due cou
cndorsed in blank, and such maker, acceptor Ourse
of the amount due thereon.
1f the holder of a bill of exchangc allows the drawee more than 48 hours, cxclusive
Discharge by allowing public holidays, to consider whether hc will acccpt the same, all previous parties
of
drawee more than 48 not
Irom liability to such holder.
hours to accept consenting to such allowance are thereby discharged
(Sec. 83)

12.56 ACCEPTANCE OF BILL DRAWN IN FICTITIOUS NAME Sec. 42

An acceptor of a bill of cxchange
drawn in a fictitious name
and payable to the drawer's order
1S not,
b y reason that such name is fictitious,
relieved from liability
to any holder in due course
claiming under an endorsement by the same hand as the drawer's signature,
and purporting to be made by the drawer.

Nov. 2008, Whether a holder in due course can recover paymentfrom the acceptor the drowe Sec: 42
May 2017signsitinfictitious name?
P 12.56A. X draws a bll on Y but signs it in the fictitious name of Z. The bill is payable to the order of Z. The bill is duly accepted by Y. M obtains
the bill rom X thus becoming its holder in due course. Can Y avoid payment of the bill? Decide in the light of the provisions of the Negotiable
Insruments Act, 1881.
Ans.
Y is liable to M for the since where a bill is signed by the drawer in a fictitious inume, the acceptor cannot allege against a holder
payment of the bill in due course that the drawer is ficlitiouUS;
since if can be proved lhat the signatures of the person signing in the capacity of drawer and that of the
person signing in the capacity of the endorser are in same handwriting.

12.57 HOLDER'S RIGHT TO DUPLICATEOFLOST BILL (Sec.454)

Right of holder to Where a bill of exchange has been lost before it is overdue, the person who was the holder of it
obtain duplicate of 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 bill
lost shall be found again.
If the drawer, on request by the holder to provide to him a duplicate of the lost bill, refuses to
Remedy in case of
refusal by drawer give such duplicate bill, the drawer may be compelled to do so.
2.58 D DRAWEEIN
ln the term
ASE OF NEED (Sec. 7and 115)
Explo Drawee In cose of need' as vsed in the
Nov2014

Negoioble Instrument Act,

me of any pCison may be given in
The n a bill as 'drawee
in case ofnec
need'
aiscs on the bill only when the bill
hisliabili is not
wed until it accepted by the drawee nar
1amed in the bill.
The
noi dishonoure
bill is has been dishonoured by drawee in Case of nccd
CCEPTANCEFOR HONOUR (Sec.108to 112)
Explain the fen
'Acceptance for Honour as used in the
2.59
lerm
N o v .2 0 1 4

The person who Negoliable Inst

Instrument Act, 1881.

Meaning
honour
accepts the bill for the honour of any other persOn a s

Conditionsfor The bill ust have been

noted for non-acceptance
"acceptance for The acceptance is
for the
given-
honour of any party
honour"
already liable under the bill,
by any person who is
already not liable under the bill,
with the consent of thc
holder of the bill.
The acceptance must be made in writing on the bill.
Liability of acceptor He is liable to pay the amount urity.
of the bill, if the drawcc does not pay ou pted.
i e is hable
for honour only to the parties subsequent to the party for whose honour the bill is a
is enitied was
Te 1s
acceptorHe entitled to recover the amount paid by him from the party for whose honour tne
Rights of
for honour
accepted, and from all the parties prior to such party.

12.60 PAYMENT FOR HONOUR (Sec.113 113 and 114)

A person who pays a bill for honour of any other person is called as 'payer 1orhonour
Meaning
Conditions for The bill must have been noted for
non-payment.
payment for Payment for honour is made-
for the honour of any party already liable under the bill,
honour
by any person (whether or not he is already liable under the bill);
with the consent of the holder of the bill.
The payment must be recorded by Notary Public.
The payer for honour is entitled to all the rights of a holder.
Rights of payer for
He can recover all the sums paid by him from
honour
(a) the party for whose honour he pays; and
(b) all the parties prior to such party.

2.61 DISHOvouRBY NON-PAYMENI 92

in payment is made
Kind of negotiable A negotiable instrunment shall be dishonoured by non-payment if default
by the following parties
instrume
Promissory note Maker

Bill Acceptor (Drawee, in case the bill does not require acceptance)

Cheque Drawee

2:62 NOTICE OF DISHONOURaccount (Sec. 93 and 98

cand he has no duthof1ty To
overdraw. He issued a cheque for Rs. 5,000/-
to Gopal
May 2014 Ram has Rs. 2,000/- in his bank must necessarily give notice of dishonor to Ram under the
Point ouf wheiher (Gopdi
which was dishonored by the bank.
Negofiable instruments Act, 1881?
the Negoficable lnstruments Act, 1881.
May 2004 Describe the circumstances where
under notice of disnonouris exCUsed under*
 dishonoured by non-acceptan
Noticc by whom, (a) When a promissory note, bill of exchange or cheque is ptance or
non-payment, the holder thereof, or some party thereto who remains liable therea
and to whom? thereon,
give notice that the instrument has heen so dishonoured to all other parties whom the hl nust
(Sec. 93) der
sceks to make severally liable thereon.
(b) lt shall not be necessary to give notice to the maker of the dishonoured promissory note
r
he drawce or acceptor of the dishonoured bill of exchange or cheque.

Contents of notice Notice must disclose the fact of dishonour of negotiable instrument
A party to whom notice of dishonour is not given is discharged from l1ability on the negotiahl
Effects of default
instrument.
When notice of (a)
(b)
When notice of dishonour is dispensed with by a party.
Where the drawer of the cheque has countermanded payment, notice to drawer is not
dishonour is
requircd to be given.
unnecessary or
(c) When the party entitled to noticc cannot be found even after due search.
cxcused (d) Where the party bound to give notice is unable to give notice without any fault of his own.
(Sec. 98) (e) When the party charged could not suffer damages for want of notice
(1) Where the acceptor is also a drawer, noticc of dishonour is not required to be given to the
drawer.
(g) Where the negotiable instrument is a promissory note which is not negotiable.
(h) When the party entitled to notice, knowing the facts, promises unconditionally to pay the
amount duc on the instrument.

NOTING AND PROTESTING

(Sec. 99 and 100
12.63 When a promissory note or bill of exchange has been dishonoured by non-acceptance or non-
Noting (Sec. 99) payment, the holder may cause such dishonour to be noted by a notary public upon the instrument,
or upon a paper attached thereto, or partly upon each, such note must be made within a reasonable
time after dishonour, and must specify the date of dishonour, the reason, if any assigned for such
or if the instrument has not been expressly dishonoured,
the reason why the holder
dishonour,
treats it as dishonoured, and the notary's charges.
When promissory bill of exchange has been dishonoured by non-acceptance or non-
note or
Protest (Sec. 100) (a) a
to be noted and
a reasonable timec, cause such dishonour
payment, the holder may, within
certified by a notary public. Such certificate is called a protest.
or his credit has been publicly
(b) When the acceptor of a bill of exchange has become insolvent,
the holder may, within a reasonable time, cause a
impeached, before the maturity of the bill,
of the acceptor, and on its being refused may, with a
notary public to demand better security
cause such facts to be noted and
certified as aforesaid. Such certificate is
reasonable time,
called a protest for better security.

DISCHARGE OF A NEGOTIABLE INSTRUMENT

12.64 the party prinmarily liable on the negotiable înstrument
in due A negotiable instrument is dischargcd if
Payment makes the payment in due course in accordance
with the provisions of Sec. 10.
course instrument must be cancelled or the fact of payment
When the payment is made, the negotiable
must be recorded on negotiable instrument.
liable on the negotiable instrument, with
Where the holder cancels the name of the party primarily
Cancellation
intent to discharge him, the negotiable instrument discharged.
is
the party primarily liable on the
Where the holder releases or renounces his rights against
Release instrument is discharged.
negotiable instrument, the negotiable
instrument becomes the holder of the negotiable
Negotiation back Where the party primarily liable on a negofiable
instrument, the negotiable instrument is discharged.
instrument is discharged if becomes time barred.
it
Operation of law A negotiable
 SU Uments
nents ACt, T8
DISCHARGE OF PARTY
Where payment
(Sec.82 to 90
Payment is made by than the party
primarily liable on the
any party liable
e on
on the negotiable instrument (other
negotiabi
discharged. negotiable iinstrument), such a party
e n t ) , such party and
aand all parties subsequent
to
ni
alc

Cancellation

party primar1ly liable on the OT any party liable on the negotiable instrument (other nato him
are discharged. negotiable instrument),
8udle
instrument), such a party and all parties subsequent
party an
Where the holder
R e l e a s e
releases any party liable negoliable instrument (other
than the par
primarily liable on the P a y lable on the negotiadIe
negotiable instrument), such a party and all parties subsequent to
discharged.
Negotiation back Where a party
already liable on the negotiable instrument
the negotiable (other than the party primarily nabi
instrument)
intermediate parties are becomes the holder of the negotiable instrument, such a party and al
drawee If the
If the 1holder allows
discharged.
Allowing more than 48
hours to the drawee to accept the bill, all the prior parties no
more than 48 consenting to the same are discharged from
a *
liability to such holder.
hours to accept

here the holder consents

Where
Qualificd

are discharged.
to qualified acceptance, all the prior parties not consenting to the
sanc
acceptance

DVery paty not

Material
consenting to a material alteration of a negotiable instrument is
aisCdug
.
alteration

Ooration of law A party is discharged if he is declared as an insolvent by the Court.

Opera

Mov.2009 Nov.2017
2009,Nov 2017
Whether striking off the name of an endorser resuits In a
Nov. discharge of a subsequent party
9 65A. 'N' is the holder of a bill of exchange made poyable to the order of P". The bill of exchange contains the following endOrsemenis
P12.6
blank:

First endorsement 'P.'

Second endorsement 'Q
Third endorsement R'
Fourth endorsement S
N strikes out, without S's consent, fhe endorsements by Q and 'R'. Decide with reasons whelher 'N is entitled to recover anything from s
under the provisions of Negoliable Instruments Act, 1881
[Nov. 2009]
OR
F'i the holder ofa bll of exchange mode payoble to the order of F. Ihe bill of exchange contains the following endorsements In blank:
Fist endorsement 'F".
Second endorsement G'
Third endorsement 'H' and
Fourthendorsement
F shikes out, without l's consent, the endorsements by 'G and H'. Decide with reasons whether E is entitled to recover anything from'"
under the provisions of Negotiable instruments Act, 1881. INov. 2017]
OR
Xs the holder of a bill of exchange of which Y is the payee and it contains the following endorsement in blank:
Fist endorsement, "Y" Second endorsement, "C"
Third endorsement, "D" Fourth endorsement, "E"
A, the holder, intentionally strikes out the endorsement by D and C. Will E be liable fo X? Discuss with reference to the provisions of the
Negofiable Instruments Act, 1881. Nov. 2018
Ans.
ecis of striking of fhe name of Where the holder cancels the name ot any paty iadle on rie negoicble instrumnent, such c party and oll
an endorser parties subseqent to him are discharged.
Sis discharged Since ihe holder, N has siruck off ihe name of and R, cnds is ihe party subsequent to O ond R
RI5nof enitled to Since S has been discharged due to cancellction of endorsement af G and R.
recover
uything from S
12.66 MEANING OF HUNDI
Hundi means a bill of exchange drawn in an oriental language, i.e. local language. Negotiable lnstruments Act, 1881 appi
pplies
usage of trade or custom prevailing in the area in which Hundi
to Hundies if there is no local 1s
drawn. However, if there is
anycustom or usage prevailing in such area, the same will apply to Hundics, and therefore Negotiable Instruments Act, 181
shall not 381
apply to Hundies.

12.67 KINDS OF IUNDIES

Nam Jog hundi Hundi payable to a party named in the Hundi or to his order.
Dhani Jog hundi Hundi payable to the Dhani or the owner, i.e. the bearer.
Darshani hundi Hundi payable at sight.
Miadi hundi or Hundi payable after a specified period of time.
Muddati hundi
Shahjog hundi Hundi payable to a Shah.

Jokhmi hundi Hundi drawn in respect of goods shipped on the vessel, and i payable only when the goode
reach their destination safely.
Peth Duplicate copy of a hundi
Perpeth Triplicate copy of a hundi
Khoka Hundi which has already been paid or discharged