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THE NEGOTIABLE INSTRUMENTS ACT- 1881

Preamble

- The Negotiable Instrument Act 1881 is an Act to define and amend the law relating to Promissory Notes, Bills of Exchange and Cheques. 

- WHEREAS it is expedient to define and amend the law relating to promissory notes, bills of exchange and cheques; It is hereby enacted.

Chapter I to XVII and Sections 1 to 141

Chapter 

Short title:

1. This Act may be called the Negotiable Instruments Act 1881. Application of the Act : Whole Bangladesh 

2. Repealed

3. Interpretations –Clauses :-  Banker, Deliver Material Parts, issue, bearer, Accommodation Party Etc……

Chapter II 

Definition of Negotiable Instruments

4. Promissory note: 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 on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

5. Bill of exchange  -A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

6. Cheque: A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. 

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

8. “Holder” The “holder” of a promissory note, bill of exchange or cheque means the payee or indorsee who is in possession of it or the bearer thereof but does not include a beneficial owner claiming through a benamidar. 

9. “Holder” in due course” means any person who for consideration becomes the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if payable to order, before it became overdue, without notice that the title of the person from whom he derived his own title was defective. “Holder in due course”

10. “Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.

13.(1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.

14. When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated. 

15. Endorsement: When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the “indorser”.

18. 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:

25. 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.

CHAPTER III

PARTIES TO NOTES, BILLS AND CHEQUES

26. (Capacity to make, etc, promissory notes, etc) Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque. 

27.  (Agent Liability) Every person capable of binding himself or of being bound, by the making, drawing, acceptance or negotiation of a negotiable instrument, may so bind himself or be bound by a duly authorised agent acting in his name. Transferor by delivery and transferee 

28A.(1) Where the holder of a negotiable instrument payable to bearer negotiates it by delivery without indorsing it, he is called a “transferor by delivery”.

29A.  (Signature is essential) No person is liable as maker, drawer, indorser or acceptor of a promissory note, bill of exchange or cheque who has not signed it as such:

30-Liability of drawer 

1) (a) The drawer of a bill of exchange by drawing it, engages that on due presentment it shall be accepted and paid according to its tenor, and that if it be dishonoured, he will compensate the holder or any indorser who is compelled to pay it; and b) the drawer of a cheque by drawing it, engages that in the case of dishonour by the drawee he will compensate the holder: Provided that due notice of dishonour of the bill or cheque has been given to or received by the drawer as hereinafter provided. 2) The drawee of a bill of exchange is not liable thereon until acceptance in the manner provided by this Act. 

31. Liability of drawee of cheque : 

 The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default. 

32. Liability of maker of note and acceptor of bill 

35. Liability of indorser In the absence of a contact to the contrary, the indorser of a negotiable instrument, by indorsing it, engages that on due presentment it shall be accepted and paid according to its tenor and that if it be dishonoured he will compensate the holder or subsequent indorser who is compelled to pay it for any loss or damage caused to him by such dishonour. Every indorser after dishonour is liable as upon an instrument payable on demand. 

36. Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied. 

45A Holder’s right to duplicate of lost bill. Where a bill of exchange has been lost before it is overdue, 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.

CHAPTER IV

OF NEGOTIATION

46. Deliver: The making, acceptance or indorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive. 

47 Negotiation by Delivery 

48  Negotiation by Endorsement:  Subject to the provisions of section 58, a promissory note, bill if exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof. 

49 Conversion of indorsement in blank into indorsement in full 

50 Effect of indorsement –  make it endorsee property 

51 Who may negotiate? 

* * 52-54 Types of Endorsement

56 Requisites of valid indorsement…………..  

57-59 Rights Holder ( Defective Title )

CHAPTER V

OF PRESENTMENT 

61- Presentment for acceptance

62- Presentment for payment :Subject to the provisions of section 76, promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder. 

65 Presentment Hours:  Presentment for payment must be made during the usual hours of business, and, if at a banker's within banking hours

66- 70 Rules for presentment for acceptance 

74. Presentment of instrument payable on demand 

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

CHAPTER VII

OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES

82. Discharge from liability - The maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon- 

(a) by cancellation 

(b) by release 

(c) by payment.

85. (1) Where a cheque payable to order purports to be indorsed by or on behalf of the payee, the drawee is discharged by payment in due course.

(2) Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer thereof, notwithstanding any indorsement whether in full or in blank appearing thereon, and notwithstanding that any such indorsement purports to restrict or exclude further negotiation.  

87. Effect of material Alteration: Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties; 

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 

99. Noting

100. Protest

CHAPTER X

OF REASONABLE TIME

105-Reasonable Time

106-Reasonable time of giving notice 

CHAPTER XI

OF ACCEPTANCE AND PAYMENT FOR HONOUR AND REFERENCE IN CASE OF NEED

108-116 – Acceptance for Honour- Payment for honour- Drawee in case of need.

CHAPTER XII

OF COMPENSATION  *

117-Rules as to compensation

CHAPTER XIV

SPECIAL PROVISIONS RELATING TO CHEQUES CROSSING

122A.(Revocation of Banker’s authority ) The duty and authority of a banker to pay a cheque drawn on him by his customer are determined by- (1) countermand of payment; (2) notice of the customer's death; (3) notice of adjudication of the customer as an insolvent. 

123. ( Cheque Crossed Generally):- Where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines, or of two paralled transverse lines simply, either with or without the words “not negotiable”, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed generally. 

123A. Cheque crossed “account- payee” 

(1) Where a cheque crossed generally bears across its face an addition of the words “account payee” between the two parallel transverse lines constituting the general crossing, the cheque, besides being crossed generally, is said to be crossed “account payee”. Cheque crossed “account payee” 

(2) When a cheque is crossed “account payee”- 

(a) it shall cease to be negotiable; and 

(b) it shall be the duty of the banker collecting payment of the cheque to credit the proceeds thereof only to the account of the payee named in the cheque.

123A. Cheque crossed “account- payee”
(1) Where a cheque crossed generally bears across its face an addition of the words “account payee” between the two parallel transverse lines constituting the general crossing, the cheque, besides being crossed generally, is said to be crossed “account payee”. Cheque crossed “account payee”

(2) When a cheque is crossed “account payee”-
(a) it shall cease to be negotiable; and
(b) it shall be the duty of the banker collecting payment of the cheque to credit the proceeds thereof only to the account of the payee named in the cheque.] 

Crossing 

124. Cheque crossed specially: Where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker.

125. Crossing after issue -Where a cheque is uncrossed, the holder may cross it generally or specially. - Where a cheque is crossed generally, the holder may cross it specially. - Where a cheque is crossed generally or specially, the holder may add the words "not negotiable". - Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker, his agent, for collection. - When an uncrossed cheque, or a cheque crossed generally, is sent to a banker for collection, he may cross it specially to himself. 

125A Crossing a material part of a cheque A crossing authorised by this Act is a material part of the cheque; it shall not be lawful for any person to obliterate, or, except as authorised by this Act, to add to or alter, the crossing
126. Payment of cheque crossed generally
-  Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker.
-Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection.  

127. Payment of cheque crossed specially more than once
 Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.

128.  ( Cross Cheque Payment in Due Course)
Where the banker on whom a crossed cheque is drawn in good faith and without negligence pays it, if crossed generally, to a banker, and if crossed specially, to the banker to whom it is crossed or his agent for collection, being a banker, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof. 

129. (Payment of crossed cheque out of due course )

Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid: Provided……

130. A person taking a cheque crossed generally or specially, bearing in either case the words “not negotiable,” shall not have, and shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had. 

131. Non-liability of banker receiving payment of cheque:

Statutory Protection for Banker:  Subject to the provisions of this Act relating to cheques crossed “account payee”, where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment. Non-liability of banker receiving payment of cheque

131B. Protection for “account payee”

 Where a cheque is delivered for collection to a banker which does not at the time of such delivery appear to be crossed “account payee” or to have had a crossing “account payee” which has been obliterated or altered, the banker, in good faith and without negligence collecting payment of the cheque and crediting the proceeds thereof to a customer, shall not incur any liability by reason of the cheque having been crossed “account payee”, or of such crossing having been obliterated or altered, and of the proceeds of the cheque having been credited to a person who is not the payee thereof. 

21 CHAPTER XVII

ON PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS IN THE ACCOUNTS

138. (1)Where any cheque drawn by a person on an account…returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or ……..

(2) such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to  thrice the amount of the cheque, or with both: (3) Notwithstanding anything contained in sub- section (1) and (2), the holder of the cheque shall retain his right to establish his claim through civil Court if whole or any part of the value of the cheque remains unrealized. Provided that nothing contained in this section shall apply unless- 

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;  through civil Court if whole or any part of the value of the cheque remains unrealized.

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within  thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within  thirty days of the receipt of the said notice. 

The notice required to be served under clasue (b) of sub-section (1) shall be served in the following manner- (a) by delivering it to the person on whom it is to be served; or (b) by sending it by registered post with acknowledgement due to that person at his usual or last known place of abode or business in Bangladesh; or (c) by publication in a daily Bangla national newspaper having wide circulation. Where any fine is realized under sub-section (1), any amount up to the face value of the cheque as far as is covered by the fine realized shall be paid to the holder. (3) Notwithstanding anything contained in sub- section (1) and (2), the holder of the cheque shall retain his right to establish his claim

Restriction in respect of appeal

138A. Notwithstanding anything contained in the Code of Criminal Procedure, 1898, no appeal against any order of sentence under sub-section (1) of section 138 shall lie, unless an amount of not less than fifty per cent of the amount of the dishonoured cheque is deposited before filing the appeal in the court which awarded the sentence.

Offences of Companies

140. (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation - For the purposes of this section- (a) “company” means anybody corporate and includes a firm or other association of individuals; and (b) “director” in relation to a firm, means a partner in the firm.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation - For the purposes of this section- (a) “company” means anybody corporate and includes a firm or other association of individuals; and (b) “director” in relation to a firm, means a partner in the firm.

Cognizance of offences

141. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act V of 1898),- (a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque; (b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138; (c) no court inferior to that of a Court of Sessions shall try any offence punishable under section 138.