The Negotiable Instruments Act, 1881 (Act no. 26 of 1881) dated 9th December, 1881, was enacted with the object and motive to provide definition of Promissory Notes, Bills of Exchange and Cheques and also to amend the laws relating thereto. The Act was intended to bring into force on 1st March, 1882. Before enacting this Act, the provisions of English Negotiable Instrument Act were applicable in India. Similarly, this Act operates subjected to the provisions of Section 31 and 32 of the Reserve Bank of India Act, 1934. The first Chapter in the Act deals with preliminary provisions including short titling of the Act and its extension over whole of India, which formerly, extent to whole India but not to state of Jammu and Kashmir. Further, it is required under this Act that, the provisions of this Act should not affect the provision of Section 21 of the Indian Paper Currency Act, 1871 or even should not affect any local usages relating to any instrument. Section 3 thereof deals with interpretation of certain terms used while elaborating the provisions under the Act.
The transfer of such Instruments from one party to another is denoted as Negotiation under the provisions of the Act, similarly, the second chapter defines the most important terms like promissory notes, bills of exchange, Cheques, Drawer, Drawee, Accepter, Payee, Holder, Holder in due Course, etc. Moreover, the terms like, Negotiable Instruments, Inland Instrument and Foreign Instruments are also defined under this chapter.
The next Chapter i.e. Chapter III from section 26 of the Act, explains the parties to negotiation, wherein, capacity of the person to execute such instruments is given as the person who is capable of contracting, should also be capable of making, accepting, etc. of promissory notes, bills of exchange, etc. Even minor person can also make such instruments, however, he should be not bound by such making of instruments but others are to be bound. Further provisions deals with the liabilities in respect of executing such instruments under the Act.
The next chapter of the Act is dealing with negotiations. Section 46 thereof describes delivery which is important for completion of making, accepting or endorsing the promissory note, bills of exchange, etc. Further provisions deals with negotiation by delivery and negotiation by endorsement, and also speaks about the person who may negotiate the instruments. This chapter contains all other relevant provisions relating to negotiation.
Another important chapter is containing provisions as to presentment of instrument, wherein, Section 61 deals with presentment for acceptance of bills of exchange in case no time or place is given under it, then it must be presented to the drawee within reasonable time after reasonable search of person entitled as to acceptance. And if all detains as to place, person and time of such presentment are given in the bills of exchange, then these details should be complied with.
Further, Section 64 of the Act is important so far as it relates to the presentment of such instruments to their makers, acceptors or drawees for the payment, however, it is specifically provided under this provision that if such presentment is not made within given time and within business hours, then such makers, acceptors or drawees will not be held liable. Similarly, Section 68 makes says that, if any particular place is specified for presentment of such instruments with certain motive, then such presentation must be made at that place only and in case where no such place is mentioned, then those instruments to be presented at the place of business or usual residence of maker, acceptor or drawee thereof and if no such places are specified (i.e. even no business or residence place is given) then such presentation to be made wherever such person can be found. Similarly, if any delay in presenting the instrument is caused due to such circumstances not under the control of holder of instrument, then such delay is excusable.
Chapter VI deals with provisions as to payment and interest to be made in pursuance of such instruments. Such payments should only be made to such persons mentioned under the instruments so as to discharge the maker or acceptor thereof. Section 79 and 80 makes provisions as to payment interest and its rate. If such rate of interest is specified, then such interest should be paid at that rate only. And if no rate of interest is specified then it should be at rate of given percent under section 80 of the Act. The next Chapter i.e. VII of the Act of speaks of discharge of liability of the maker, acceptor, etc. in cases as specified under Section 82 and subsequent provisions of the Act. And the another chapter deals with provisions relating to dishonor of such instruments, wherein Section 91 of the Act prescribes that if the drawee makes default in acceptance of bills under given situations then on such non-acceptance the bills are said to be dishoroured. Such dishonor is also found in case of non-payment. Moreover, on such dishonoured the notice thereof should be given by holder of such instrument being liable thereof, to those persons who he intent to make severally liable. And the other subsequent chapter of the Act deals with provisions as to acceptance of honor of such instruments and liability of persons thereof.
The most important provisions are given in the last chapters of the Act, where the compensation provisions are provided, which are often seen invoked while claims preferred before the Courts of Law. The Section 117 of the Act deals with rules as to compensation which are mentioned under several clauses of the provision. Similarly, the important rules of evidence especially given under subsequent Chapter, where presumptions as to negotiable instruments are provided under Section 118 and other subsequent provisions. The next Chapter deals with provisions as to crossing of cheques.
Further, Section 138 of the Act is very important as it relates to the dishonor of the Cheques for the reasons specified under this section.
Similarly, Section 139 of the Act speaks of presumption in favour of holder of the cheque, that such holder had been issued the cheque for discharge of any debt of other liability. Similarly, further Section 140 of the Act deals with defences not available in proceedings under Section 138. And subsequently provisions deals with offences by companies and cognizance of the offences i.e. presentation of the case with complaint within given time and other aspect of the matter. The Act was amended in the year 2002 with the view to update its provision to make it effective as to prevailing circumstances.
by Faim Khalilkhan Pathan