WITH SECTION NOTES
Negotiable Instruments Act 1881
NEGOTIABLE INSTRUMENTS ACT, 1881
6. “Cheque”
7. “Drawer”, “drawee”
23.
24.
43.
44.
45.
CHAPTER III
CHAPTER IV OF NEGOTIATION
46. Delivery 21
47. Negotiation by delivery 21
48. Negotiation by endorsement 21
49. Conversion of endorsement in blank into endorsement in full 22
50. Effect of endorsement 22
51. Who may negotiate 22
52. Endorser who excludes his own liability or makes it conditional 22
53. Holder deriving title from holder in due course 23
54. Instrument endorsed in blank 23
55. Conversion of endorsement in blank into endorsement in full 23
56. Endorsement for part of sum due 23
57. Legal representative cannot by delivery only negotiate instrument endorsed by deceased 23
58. Instrument obtained by unlawful means or for unlawful consideration 23
59. Instrument acquired after dishonour or when overdue 24
60. Instrument negotiable till payment or satisfaction 24
CHAPTER V OF PRESENTMENT
61. Presentment for acceptance 24
62. Presentment of promissory note for sight 24
63. Drawee’s time for deliberation 25
64. Presentment for payment 25
65. Hours for presentment 25
66. Presentment for payment of instrument payable after date or sight 25
67. Presentment for payment of promissory note payable by instalments 25
68. Presentment for payment of instrument payable at speci ed place and not elsewhere 25
69. Instrument payable at speci ed place 26
70. Presentment where no exclusive place speci ed 26
71. Presentment when maker, etc., has no known place of business or residence
72. Presentment of cheque to charge drawer 26
73. Presentment of cheque to charge any other person 26
74. Presentment of instrument payable on demand 26
75. Presentment by or to agent, representative of deceased, or assignee of insolvent 26
75A. Excuse for delay in presentment for acceptance or payment 26
76. When presentment unnecessary 27
77. Liability of banker for negligently dealing with bill presented for payment 27
CHAPTER VI OF PAYMENT AND INTEREST
78. To whom payment should be made
79. Interest when rate speci ed
80. Interest when no rate speci ed
81. Delivery of instrument on payment, or indemnity in case of loss 28
CHAPTER VII
DISCHARGE FROM LIABILITY ON NOTES, BILLS
AND CHEQUES
82. Discharge from liability
83. Discharge by allowing drawee more than forty-eight hours to accept 29
84. When cheque not duly presented and drawer damaged thereby 29
85. Cheque payable to order
85A. Drafts drawn by one branch of a bank on another payable to order 30
86. Parties not consenting discharged by quali ed or limited acceptance 31
87. Effect of material alteration
88. Acceptor or endorser bound notwithstanding previous alteration 31
89. Payment of instrument on which alteration is not apparent 31
90. Extinguishment of rights of action on bill in acceptor’s hands 32
CHAPTER VIII
112.
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 42
136. Instrument made, etc., out of India, but in accordance with the law of India 42
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:—
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.
COMMENTS
SECTION NOTES
1.1 Negotiable instruments
This Act applies to all Negotiable instruments, whether payable to bearer to order.
*Dated 9-12-1881
1. Substituted for “all the Provinces of India” by the Adaptation of Laws Order, 1950, w.e.f. 26-1-1950.
2. Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
The scope of the term “negotiable instruments” covers Promissory Note, Bill of Exchange and Cheque.
See Sections 13, 4, 5 and 6 of this Act.
1.2 Applicability of this Act to hundis to which local usages apply
The provisions of this Act do not affect any local usage relating to any instrument in an oriental language.
Such usage shall apply unless such usage is 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.
Repeal of enactments.
2. [Repealed by the Amending Act, 1891 (12 of 1891).]
Interpretation clause.
3. In this Act—
3[***]
“Banker”: 4[“banker” includes any person acting as a banker and any post office savings bank].
5[***]
SECTION NOTES
COMMENTS
The term ‘Negotiable Instrument’ is not defined in this section but in section 13(1)
“Promissory note”.
CHAPTER II
OF NOTES, BILLS AND CHEQUES
4. 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 B or order Rs. 500”.
(b) “I acknowledge myself to be indebted to B in Rs. 1, 000, to be paid on demand, for value received.”
(c) “Mr B, I.O.U Rs. 1,000.”
3. Omitted by the Jammu and Kashmir (Extension of Laws) Act, 1956, w.e.f. 1-11-1956.
4. Substituted for “banker” 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.
(d) “I promise to pay B Rs. 500 and all other sums which shall be due to him.”
(e) “I promise to pay B Rs. 500 first deducting thereout any money which he may owe me.”
(f) “I promise to pay B Rs. 500 seven days after my marriage with C.”
(g) “I promise to pay B Rs. 500 on D’s death, provided D leaves me enough to pay that sum.”
(h) “I promise to pay B Rs. 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.
COMMENTS
SECTION NOTES
4.1 Ingredients of a “promissory note”
The following are the essential ingredients of a “promissory note” as per section 4 :
(a) It is an instrument in writing.
(b) It is signed by the maker of the instrument.
(c) It contains an undertaking (promise).
(d) Such undertaking is unconditional.
(e) Such undertaking is to pay a certain sum of money only.
(f) Such undertaking is to pay to, or to the order of, a certain person, or to the bearer of the instrument [See Section 13 for definitions of ‘payable to bearer’ and ‘payable to order’]
(g) Bank-notes and currency notes are not promissory notes.
See also Section 17.
4.2 Unconditional undertaking/promise
A promise will be treated as unconditional if the time for payment is expressed to be on the lapse of a certain period after the occurrence of a specified event which is certain to occur but its time of occurrence is uncertain (An example of such an event which is certain but timing is uncertain is the death of a certain individual) [See 2nd Para of Section 5]
A mere acknowledgement of indebtedness is not a promise/undertaking to pay [See Illustration (c) of this section]
4.3 Certain sum of money
The sum payable may be “certain” 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. [See 3rd Para of Section 5]
See Illustrations (d) through (h) of this section [See Paras 4.6.2 to 4.6.6 below]
See also section 18
4.4 Certain person
The person to whom payment is to be made may be a “certain person” although he is misnamed or designated by description only. [See 4th Para of Section 5]
4.5 Illustrations of instruments/wordings of instruments which will be regarded as a promissory note:
4.5.1 Illustration (a) of Section 4:- “I promise to pay B or order Rs. 500.”
4.5.2 Illustration (b) of Section 4:- “I acknowledge myself to be indebted to B in Rs. 1,000, to be paid on demand, for value received.”
Note: From illustration (b) of section 4, it is clear that a promissory note payable on demand cannot be expressed payable to the bearer of the note. A promissory note payable on demand can only be expressed as payable to or to the order of a certain person. If a note is payable to its bearer on demand, it becomes a currency-note which can be issued only by Government of India/RBI and is not a promissory note.
4.6 Illustrations of instruments/wordings of instruments which will NOT be regarded as a promissory note:
4.6.1 Illustration (c) of Section 4:- “Mr. B, I.O.U. Rs. 1,000.”
Note: This is a mere acknowledgement of indebtedness but not an undertaking to pay. Therefore, it is not a promissory note.
4.6.2 Illustration (d) of Section 4:- “I promise to Pay B Rs. 500 and all other sums which shall be due to him.”
4.6.3 Illustration (e) of Section 4:- “I promise to Pay B Rs. 500, first deducting thereout any money which he may owe me.”
4.6.4 Illustration (f) of Section 4:- “I promise to Pay B Rs. 500 seven days after my marriage with C.”
4.6.5 Illustration (g) of Section 4:- “I, promise to Pay B Rs. 500 on D’s death, provided D leaves me enough to pay that sum.”
4.6.6 Illustration (h) of Section 4:- (h) “I promise to Pay B Rs. 500 and to deliver to him my black horse on 1st January next.”
“Bill of exchange”.
5. 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.
NEGOTIABLE INSTRUMENTS ACT 1881
– BARE ACT WITH SECTION NOTES
AUTHOR : TAXMANN'S EDITORIAL BOARD
PUBLISHER : TAXMANN
DATE OF PUBLICATION : JANUARY 2025
EDITION : 2025 EDITION
ISBN NO : 9789364553711
NO. OF PAGES : 72
BINDING TYPE : PAPERBACK
DESCRIPTION
Negotiable Instruments Act 1881 [Bare Act with Section Notes] by Taxmann is a thoroughly updated resource that provides the statutory provisions of the NI Act alongside concise notes for each section. It caters to the needs of professionals, academics, and students seeking a reliable guide on promissory notes, bills of exchange, and cheques. This 2025 edition offers the law in force, recent amendments, and essential clarifications, with each section supported by insightful notes on key interpretations, principles, and practical nuances. Important definitions, illustrations, and cross-references make it both a legislative document and a practical guide. This book is intended for the following audience:
• Legal Practitioners & Judges
• Corporate & Finance Professionals
• Academicians & Law Students
• Business Owners & Entrepreneurs
The Present Publication is the 2025 Edition, covering the amended and updated text of the Negotiable Instruments Act [Act No. 26 of 1881], with the following noteworthy features:
• [Authoritative Text] Presents the Negotiable Instruments Act 1881, updated for 2025
• [Section Notes] Offers concise notes after each section, clarifying definitions, legal concepts, and procedures
• [Updated Provisions] Includes all major amendments up to 2025, covering electronic transactions, truncated cheques, and digital signatures
• [Pre-amendment Provisions] Reproduces earlier texts in amendment footnotes for historical context and pre-amendment applicability
• [Subject Index] Provides a comprehensive alphabetical index for quick reference across topics
• [User-friendly Layout] Utilises clear headings, subheadings, and cross-references for easy navigation and reading