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03/01/2023 The Negotiable Instruments Act, 1881

The Negotiable Instruments Act, 1881

( ACT NO. XXVI OF 1881 )

[ 9th December, 1881 ]

♣An Act to define and amend the law relating to Promissory Notes, Bills of Exchange and
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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.

Commencement It extends to the whole of Bangladesh; but nothing herein contained affects

the provisions of 2[Articles 23 and 24 of the Bangladesh Bank Order, 1972];

and it shall come into force on the first day of March, 1882.

Application [1A. Every negotiable instrument shall be governed by the provisions of this
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of the Act
Act, and no usage or custom at variance with any such provision shall apply

to any such instrument.]

[Repealed] 2. [Repealed by the Amending Act, 1891 (Act No. XII of 1891).]

Interpretation- 3. In this Act, unless there is anything repugnant in the subject or context,-
clause.
(a) “accommodation party” means a person who has signed a negotiable

instrument as a maker, drawer, acceptor or indorser without receiving the

value thereof and for the purpose of lending his name to some other person;

(b) “banker” means a person transacting the business of accepting, for the

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purpose of lending or investment, of deposits of money form the public,

repayable on demand or otherwise and withdrawable by cheque, draft, order

or otherwise, and includes any Post Office Savings Bank;

(c) “bearer” means a person who by negotiation comes into possession of a

negotiable instrument, which is payable to bearer;

(d) “delivery” means transfer of possession, actual or constructive, from one

person to another;

(e) “issue” means the first delivery of a promissory note, bill of exchange or

cheque complete in form to a person who takes it as a holder;

(f) “material alteration” in relation to a promissory note, bill of exchange or

cheque includes any alteration of the date, the sum payable, the time of

payment, the place of payment, and, where any such instrument has been

accepted generally, the addition of a place of payment without the acceptor's

assent; and

(g) “notary public” includes any person appointed by the Government to

perform the functions of notary public under this Act and a notary appointed

under the Notaries Ordinance, 1961.

CHAPTER II
OF NOTES, BILLS AND CHEQUES

“Promissory 4. A “promissory note” is an instrument in writing (not being a bank-note or a

note”
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.Illustrations

A signs instruments in the following terms:

(a) “I promise to pay B or order Taka 500.”

(b) “I acknowledge myself to be indebted to B in Taka 1,000 to be paid on

demand, for value received.”

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(c) “Mr. B, I O U Taka 1,000.”

(d) “I promise to pay B Taka 500 and all other sums which shall be due to

him.”

(e) “I promise to pay B Taka 500, first deducting thereout any money which

he may owe me.”

(f) “I promise to pay B Taka 500 seven days after my marriage with C.”

(g) “I promise to pay B Taka 500 on D's death, provided D leaves me enough

to pay that sum.”

(h) “I promise to pay B Taka 500 and to deliver to him may 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.

“Bill of 5. A “bill of exchange” is an instrument in writing containing an unconditional

exchange”
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.

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 payable at the current rate of exchange, and although

it is to be paid in stated instalments and contains a provision that on default

of payment of one or more instalments or interest, the whole or the unpaid

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balance shall become due.

Where the person intended can reasonably be ascertained from the

promissory note or the bill of exchange, he is a “certain person” within the

meaning of this section and section 4, although he is misnamed or

designated by description only.

An order to pay out of a particular fund is not unconditional within the

meaning of this section; but an unqualified order to pay, coupled with-

(a) an indication of a particular fund out of which the drawee is to reimburse

himself or a particular account to be debited to the amount, or

(b) a statement of the transaction which gives rise to the note or bill, is

unconditional.

Where the payee is a fictitious or non-existing person the bill of exchange

may be treated as payable to bearer.

“Cheque” 6. A “cheque” is a bill of exchange drawn on a specified banker and not

expressed to be payable otherwise than on demand.

“Drawer” 7. The maker of a bill of exchange or cheque is called the “drawer;” the
“Drawee”
person thereby directed to pay is called the “drawee.”
“Drawee in
case of
When in the bill or in any indorsement thereon the name of any person is
need”
“Acceptor” given in additional to the drawee to be resorted to in case of need, such
“Acceptor person is called a “drawee in case of need.”
for honour”
“Payee” After the drawee of a bill has signed his assent upon the bill, or, if there are

more parts thereof than one, upon one of such parts, and delivered the

same, or given notice of such signing to the holder or to some person on his

behalf, he is called the “acceptor”.

When a bill of exchange has been noted or protested for non-acceptance or

for better security, and any person accepts it supra protest for honour of the

drawer or of any one of the indorsers, such person is called an “acceptor for

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honour.” “Acceptor for honour”

The person named in the instrument, to whom or to whose order the money

is by the instrument directed to be paid, is called the “payee”.

“Holder” “Payee”

8. 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. “Holder”

Explanation - Where the note, bill or cheque is lost and not found again, or is

destroyed, the person in possession of it or the bearer thereof at the time of

such loss or destruction shall be deemed to continue to be its holder.

“Holder in
9. “Holder” in due course” means any person who for consideration becomes
due course”
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”

Explanation - For the purposes of this section the title of a person to a

promissory note, bill of exchange or cheque is defective when he is not

entitled to receive the amount due thereon by reason of the provisions of

section 58.

“Payment in
10. “Payment in due course” means payment in accordance with the
due course”
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.

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Inland 11. A promissory note, bill of exchange or cheque drawn or made in

instrument
Bangladesh, and made payable in, or drawn upon any person resident in,

Bangladesh shall be deemed to be an inland instrument.

Foreign 12. Any such instrument not so drawn, made or made payable shall be
instrument
deemed to be a foreign instrument.

“Negotiable 13.(1) A “negotiable instrument” means a promissory note, bill of exchange

instrument”
or cheque payable either to order or to bearer.

Explanation (i) - A promissory note, bill of exchange or cheque is payable to

order which is expressed to be so payable or which is expressed to be

payable to a particular person, and does not contain words prohibiting

transfer or indicating an intention that it shall not be transferable.

Explanation (ii) - A Promissory note, bill of exchange or cheque is payable to

bearer which is expressed to be so payable or on which the only or last

indorsement is an indorsement in blank.

Explanation (iii) - Where a promissory note, bill of exchange or cheque either

originally or by indorsement, is expressed to be payable to the order of a

specified person, and not to him or his order, it is nevertheless payable to

him or his order at his option.

(2) A negotiable instrument may be made payable to two or more payees

jointly or it may be made payable in the alternative to one of two, or one or

some of several payees.

Negotiation 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.

Indorsement 15. 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

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purpose a stamped paper intended to be completed as a negotiable

instrument, he is said to indorse the same, and is called the “indorser”.

Indorsement 16. (1) If the indorser signs his name only, the indorsement is said to be “in
“in blank”
blank”, and if he adds a direction to pay the amount mentioned in the
and “in full”
“Indorsee” instrument to, or to the order of, a specified person, the indorsement is said

to be “in full”, and the person so specified is called the “indorsee” of the

instrument.

(2) The provisions of this Act relating to a payee shall apply with the

necessary modifications to an indorsee.

Ambiguous 17. Where an instrument may be construed either as a promissory note or

instruments
bill of exchange, the holder may at his election treat it as either, and the

instrument shall be thenceforward treated accordingly.

Where 18. If the amount undertaken or ordered to be paid is stated differently in

amount is
figures and in words, the amount stated in words shall be the amount
stated
differently in undertaken or ordered to be paid:
figures and
words Provided that if the words, are ambiguous or uncertain, the amount may be

ascertained by referring to the figures.

Instruments 19. A promissory note or bill of exchange is payable on demand,-

payable on
demand. (a) where it is expressed to be so, or to be payable at sight or on

presentment; or

(b) where no time for payment is specified in it; or

(c) where the note or bill accepted or indorsed after it is overdue, as regards

the person accepting or indor-sing it.

Inchoate 20.(1) Where one person signs and delivers to another a paper stamped in
stamped
accordance with the law relating to stamp duty chargeable on negotiable
instruments
instruments, either wholly blank or having written thereon an incomplete

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negotiable instrument, in order that it may be made, or completed into a

negotiable instrument he thereby gives prima facie authority to the person

who receives that paper to make or complete it, as the case may be, into a

negotiable instrument for the amount, if any, specified therein, or, where no

amount is specified for any amount, not exceeding, in either case, the

amount covered by the stamp.

(2) The person so signing shall, subject to the provisions of sub-section (3),

be liable upon such instrument, in the capacity in which he signed the same,

to any holder in due course, for the amount specified in the instrument or

filled up therein:

Provided that no person other than a holder in due course shall receive from

the person so signing the paper anything in excess of the amount intended

by him to be paid thereunder.

(3) In order that any such instrument may on completion be enforceable

against any person who became a party thereto before such completion, it

must be filled up within a reasonable time and strictly in accordance with the

authority given:

Provided that if any such instrument after completion is negotiated to a

holder in due course, it shall be valid and effectual for all purposes in his

hands, and he may enforce it as if it had been filled up within a reasonable

time and strictly in accordance with the authority given.

“At sight” 21. The expression “after sight” means, in a promissory note, after
“On
presentment for sight, and, in a bill of exchange, after acceptance, or noting
presentment”
“After sight” for non-acceptance, or protest for non-acceptance.

When note [21A. A promissory note or bill of exchange payable on demand shall be
4

or bill
deemed to be overdue when it appears on the face of it to have been in
payable on
demand is circulation for an unreasonable length of time.
overdue

A note or

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bill payable
21B. A promissory note or bill of exchange is payable at a determinable
at a
determinable future time within the meaning of this Act if it is expressed to be payable-
future time
(a) at a fixed time after date or sight; or

(b) on or at a fixed time after the occurrence of a specified event which is

certain to happen, though the time of its happening may be uncertain.

Anti-dating 21C. A promissory note, bill of exchange or cheque is not invalid by reason
and post-
only that it is anti-dated or post-dated:
dating
Provided that anti-dating or post-dating does not involve any illegal or

fraudulent purpose or transaction.]

“Maturity” 22. The maturity of a promissory note or bill of exchange is the date at which
Days of
it falls due.
grace
Every promissory note or bill of exchange which is not expressed to be

payable on demand, at sight or on presentment is at maturity on the third day

after the day on which it is expressed to be payable.

Calculating 23. In calculating the date at which a promissory note or bill of exchange,
maturity of
made payable a stated number of months after date or after sight, or after a
bill or note
payable so certain event, is at maturity, the period stated shall be held to terminate on
many
the day of the month which corresponds with the day on which the
months
after date or instrument is dated, or presented for acceptance or sight, or noted for non-
sight acceptance, or protested for non-acceptance, or the event happens, or,

where the instrument is a bill of exchange made payable a stated number of

months after sight and has been accepted for honour, with the day on which

it was so accepted. If the month in which the period would terminate has no

corresponding day, the period shall be held to terminate on the last day of

such month.

Illustrations

(a) A negotiable instrument, dated 29th January, 1878, is made payable at

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one month after date. The instrument is at maturity on the third day after the

28th February, 1878.

(b) A negotiable instrument, dated 30th August 1878, is made payable three

months after date. The instrument is at maturity on the 3rd December, 1878.

(c) A promissory note or bill of exchange, dated 31st August, 1878, is made

payable three months after date. The instrument is at maturity on the 3rd

December, 1878.

Calculating 24. In calculating the date at which a promissory note or bill of exchange
maturity of
made payable a certain number of days after date or after sight or after a
bill or note
payable so certain event is at maturity, the day of the date, or of presentment for
many days
acceptance or sight, or of protest for non-acceptance, or on which the event
after date or
sight happens, shall be excluded.

When day of 25. When the day on which a promissory note or bill of exchange is at
maturity is a
maturity is a public holiday, the instrument shall be deemed to be due on the
holiday
next preceding business day.

Explanation - The expression “public holiday” includes Sundays and the days

declared by the Government, by notification in the official Gazette, to be

public holidays.

CHAPTER III
PARTIES TO NOTES, BILLS AND CHEQUES

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

of exchange or cheque.

Minor Where such an instrument is made, drawn or negotiated by a minor, the

making, drawing or negotiation entitles the holder to receive payment of such

instrument and to enforce it against any party thereto other than the minor.

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Nothing herein contained shall be deemed to empower a corporation to

make, indorse or accept such instruments except in cases in which, under

the law for the time being in force, they are so empowered.

Agency 27. 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.

A general authority to transact business and to receive and discharge debts

does not confer upon an agent the power of accepting or indorsing bills of

exchange so as to bind his principal.

An authority to draw bills of exchange does not of itself import an authority to

indorse.

Authority of [27A. A partner acting in the firm name may bind the firm by the making,
5

partner
drawing, acceptance or negotiation of a negotiable instrument to the extent

authorised by law relating to partnership for the time being in force.]

Liability of 28.(1) Where a person signs a promissory note, bill of exchange or cheque
agent
without adding to his signature words indicating that he signs it as an agent
signing
for and on behalf of a principal or in a representative character, he is

personally liable thereon but the mere addition to his signature of words

describing him as an agent or as filling a representative character does not

exempt him from personal liability.

(2) Notwithstanding anything contained in sub-section (1), any person

signing a promissory note, bill of exchange or cheque for and on behalf of

the principal is not liable to a person who induces him to sign upon the belief

that the principal alone would be held liable.

Transferor [28A.(1) Where the holder of a negotiable instrument payable to bearer

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by delivery
negotiates it by delivery without indorsing it, he is called a “transferor by
and
transferee delivery”.

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(2) A transferor by delivery is not liable on the instrument.

(3) A transferor by delivery who negotiates a negotiable instrument thereby

warrants to his immediate transferee, being a holder for consideration, that

the instrument is what it purports to be, that he has a right to transfer it, and

that at the time of transfer he is not aware of any defect which renders it

valueless.]

Liability of 29. A legal representative of a deceased person who signs his name to a
legal
promissory note, bill of exchange or cheque is liable personally thereon
representative
signing unless he expressly limits his liability to the extent of the assets received by

him as such.

Signature 29A. No person is liable as maker, drawer, indorser or acceptor of a

essential to
promissory note, bill of exchange or cheque who has not signed it as such:
liability
Provided that where a person signs any such instrument in a trade or

assumed name he is liable thereon as if he had signed it in his own name.

Forged or 29B. Subject to the provisions of this Act, where a signature on a promissory
unauthorised
note, bill of exchange or cheque is forged or placed thereon without the
signature
authority of the person whose signature it purports to be, the forged or

unauthorised signature is wholly inoperative, and no right to retain the

instrument or to give a discharge therefor or to enforce payment thereof

against any party thereto can be acquired through or under that signature,

unless the party against whom it is sought to retain or enforce payment of

the instrument is precluded from setting up the forgery or want of authority:

Provided that nothing in this section shall effect the ratification of an

unauthorised signature not amounting to a forgery.

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Stranger 29C. A person placing his signature upon a negotiable instrument otherwise
signing
than as maker, drawer or acceptor is presumed to be an indorser unless he
instrument
presumed to clearly indicates by appropriate words his intention to be bound in some
be indorser
other capacity.]

Liability of 30.(1) (a) The drawer of a bill of exchange by drawing it, engages that on
drawer
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.

Liability of 31. The drawee of a cheque having sufficient funds of the drawer in his
drawee of
hands properly applicable to the payment of such cheque must pay the
cheque
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.

Liability of 32.(1) In the absence of a contract to the contrary, the maker of a promissory
maker of
note, by making it, and the acceptor before maturity of a bill of exchange by
note and
acceptor of accepting it, engages that he will pay it according to the tenor of the note or
bill
his acceptance respectively, and in default of such payment, such maker or

acceptor is bound to compensate any party to the note or bill or any loss or

damage sustained by him and caused by such default.

(2) The acceptor of a bill of exchange at or after maturity, by accepting it,

engages to pay the amount thereof to the holder on demand.

Only drawee 33. No person except the drawee of a bill of exchange, or all or some of

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can be several drawees, or a person named therein as a drawee in case of need, or
acceptor
an acceptor for honour, can bind himself by an acceptance.
except in
need or for
honour

Acceptance 34. Where there are several drawees of a bill of exchange who are not
by several
partners, each of them can accept it for himself, but none of them can accept
drawees not
partners it for another without his authority.

Liability of 35. In the absence of a contact to the contrary, the indorser of a negotiable
indorser
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.

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

Maker, 37. The maker of a promissory note or cheque, the drawer of a bill of
drawer and
exchange until acceptance, and the acceptor are, in the absence of a
accept or
principals contract to the contrary, respectively liable thereon as principal debtors, and

the other parties thereto are liable thereon as sureties for the maker, drawer

or acceptor, as the case may be.

Prior party a 38. As between the parties so liable as sureties, each prior party is, in the
principal in
absence of a contract to the contrary, also liable thereon as a principal
respect of
each debtor in respect of each subsequent party.
subsequent
party Illustration

A draws a bill payable to his own order on B who accepts. A afterwards

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indorses the bill to C, C to D, and D to E. As between E and B, B is the

principal debtor, and A, C and D are his sureties. As between E and A, A is

the principal debtor and C and D are his sureties. As between E and C, C is

the principal debtor and D is his surety.

Liability of 7
[38A.(1) An accommodation party is liable on a negotiable instrument to a
accommodation
holder in due course, notwithstanding that when such holder took the
party and
position of instrument he knew such party to be an accommodation party.
accommodation
party (2) An accommodation party to a negotiable instrument, if he has paid the

amount thereof, is entitled to recover such amount from the party

accommodated.]

Suretyship 39. When the holder of an accepted bill of exchange enters into any contract

with the acceptor which, under section 134 or 135 of the Contract Act, 1872,

would discharge the other parties, the holder may expressly reserve his right

to charge the other parties, and in such case they are not discharged.

Discharge 40. When the holder of a negotiable instrument, without the consent of the
of
indorser, destroys or impairs the indorser's remedy against a prior party, the
indorser’s
liability indorser is discharged from liability to the holder to the same extent as if the

instrument had been paid at maturity.

Illustration

A is the holder of a bill of exchange made payable to the order of B, which

contains the following indorsements in blank:-

First indorsement, “B”.

Second indorsement, “Peter Williams.”

Third indorsement, “Wright & Co.”

Fourth indorsement, “John Rozario.”

This bill A puts in suit against John Rozario and strike out, without John

Rozario's consent, the indorsements by Peter Williams, and Wright & Co. A

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is not entitled to recover anything from John Rozario.

Acceptor 41. An acceptor of a bill of exchange already indorsed is not relieved from
bound
liability by reason that such indorsement is forged, if he knew or had reason
although
indorsement to believe the indorsement to be forged when he accepted the bill.
forged

Acceptance 42. An acceptor of a bill of exchange drawn in a fictitious name and payable
of bill drawn
to the drawer's order is not, by reason that such name is fictitious, relieved
in fictitious
name from liability to any holder in due course claiming under an indorsement by

the same hand as the drawer's signature, and purporting to be made by the

drawer.

Negotiable 43. A negotiable instrument made, drawn, accepted, indorsed or transferred

instrument
without consideration, or for a consideration which fails, creates no obligation
made, etc.,
without of payment between the parties to the transaction. But if any such party has
consideration
transferred the instrument with or without indorsement to a holder for

consideration, such holder, and every subsequent holder deriving title from

him, may recover the amount due on such instrument from the transferor for

consideration or any prior party thereto.

Exception I - No party for whose accommodation a negotiable instrument

has been made, drawn, accepted or indorsed can, if he have paid the

amount thereof, recover thereon such amount from any person who became

a party to such instrument for his accommodation.

Exception II - No party to the instrument who has induced any other party to

make, draw, accept, indorse or transfer the same to him for a consideration

which he has failed to pay or perform in full shall recover thereon an amount

exceeding the value of the consideration (if any) which he has actually paid

or performed.

Partial 44. When the consideration for which a person signed a promissory note, bill
absence or
of exchange or cheque consisted of money, and was originally absent in part
failure of

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money- or has subsequently failed in part, the sum which a holder standing in
consideration
immediate relation with such signer is entitled to receive from him is

proportionally reduced.

Explanation - The drawer of a bill of exchange stands in immediate relation

with the acceptor. The maker of a promissory note, bill of exchange or

cheque stands in immediate relation with the payee, and the indorser with

his indorsee. Other signers may by agreement stand in immediate relation

with a holder.

Illustration

A draws a bill on B for Taka 500 payable to the order of A. B accepts the Bill,

but subsequently dishonours it by non-payment. A sues B on the bill. B

proves that it was accepted for value as to Taka 400, and as an

accommodation to the plaintiff as to the residue. A can only recover Taka

400.

Partial 45. Where a part of the consideration for which a person signed a
failure of
promissory note, bill of exchange or cheque, though not consisting of money,
consideration
not is ascertainable in money without collateral inquiry, and there has been a
consisting
failure of that part, the sum which a holder standing in immediate relation
of money
with such signer is entitled to receive from him is proportionally reduced.

Holder’s [45A. Where a bill of exchange has been lost before it is overdue, the
8

right to
person who was the holder of it may apply to the drawer to give him another
duplicate of
lost bill 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.

If the drawer on request as aforesaid refuses to give such duplicate bill, he

may be compelled to do so.]

PART IV
OF NEGOTIATION

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Delivery 46. The making, acceptance or indorsement of a promissory note, bill of

exchange or cheque is completed by delivery, actual or constructive.

As between parties standing in immediate relation, delivery to be effectual

must be made by the party making, accepting or indorsing the instrument or

by a person authorised by him in that behalf.

As between such parties and any holder of the instrument other than a

holder in due course, it may be shown that the instrument was delivered

conditionally or for a special purpose only, and not for the purpose of

transferring absolutely the property therein.

A promissory note, bill of exchange or cheque payable to bearer is

negotiable by the delivery thereof.

A promissory note, bill of exchange or cheque payable to order is negotiable

by the holder by indorsement and delivery thereof.

Negotiation
by delivery

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47. Subject to the provisions of section 58, a promissory note, bill of

exchange or cheque payable to bearer is negotiable by delivery thereof.

Exception - A promissory note, bill of exchange or cheque delivered on

condition that it is not to take effect except in a certain event is not negotiable

(except in the hands of a holder for value without notice of the condition)

unless such event happens.

Illustrations

(a) A, the holder of a negotiable instrument payable to bearer, delivers it to

B's agent to keep for B. The instrument has been negotiated.

(b) A, the holder of a negotiable instrument payable to bearer, which is in the

hands of A's banker, who is at the time the banker of B, directs the banker to

transfer the instrument to B's credit in the banker's account with B. The

banker does so, and accordingly now possesses the instrument as B's

agent. The instrument has been negotiated, and B has become the holder of

it.

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

Conversion 49. When a negotiable instrument has been indorsed in blank, any holder
of
may, without signing his own name, convert the blank indorsement into an
indorsement
in blank into indorsement in full by writing above the indorser's signature a direction to
indorsement
pay the amount to or to the order of himself or some other person; and the
in full
holder does not thereby incur the responsibility of an indorser.

Effect of 50.(1) Subject to the provisions of this Act relating to restrictive, conditional
indorsement
and qualified indorsement, the indorsement of a negotiable instrument

followed by delivery transfers to the indorsee the property therein with the

right of further negotiation.

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(2) An indorsement is restrictive which either-

(a) restricts or excludes the right to further negotiate the instrument; or

(b) constitutes the indorsee an agent of the indorser to indorse the

instrument or to receive its contents for the indorser or for some other

specified person:

Provided that the mere absence of words implying right to negotiate does not

make the indorsement restrictive.

Illustrations

B signs the following indorsements on different negotiable instruments

payable to bearer:-

(a) "Pay the contents to C only."

(b) "Pay C for my use."

(c) “Pay C or order for the account of B.”

(d) “The within must be credited to C.”

These indorsements exclude the right of further negotiation by C.

(e) “Pay C.”

(f) “Pay C value in account with the Oriental Bank.”

(g) “Pay the contents to C, being part of the consideration in a certain deed

of assignment executed by C to the indorser and others.”

These indorsements do not exclude the right of further negotiation by C.

Who may 51. Every sole maker, drawer, payee or indorsee, or all of several joint
negotiate
makers, drawers, payees or indorsees, of a negotiable instrument may, if the

negotiability of such instrument has not been restricted or excluded as

mentioned in section 50, indorse and negotiate the same.

Explanation - Nothing in this section enables a maker or drawer to indorse or

negotiate an instrument, unless he is in lawful possession or is holder

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thereof; or enables a payee or indorsee to indorse or negotiate an

instrument, unless he is holder thereof.

Illustration

A bill is drawn payable to A or order. A indorses it to B, the indorsement not

containing the words “or order” or any equivalent words. B may negotiate the

instrument.

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