THE NEGOTIABLE INSTRUMENTS ACT, 1881
(XXVI OF 1881)
(9th December, 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:-
For Statement of Objects and Reasons, see Gaz. of India, 1876, p. 1886; for the
Reports of the Select Committee, see lbid 1877, Pt. V,p 1878., Pt. V, p. 145, 1879,
Pt. V, p.75; 1881, Pt. V.p. 85.
1. Short title:- This Act may be called the Negotiable Instruments Act, 1881.
Local extent. Saving of usages relating to hundis, etc.
Commencement:- It extends to the whole of Pakistan, but nothing herein
contained affects [the provisions of Sections 24 and 35 of the State Bank of
Pakistan Act, 1956]; and it shall come into force on the first day of March, 1882.
1A. Application of the Act:- Every negotiable instrument shall be governed by
the provisions of this Act, and no usage or custom at variance with any
such provision shall apply to any such instrument.
2. Repeal of enactments:- Rep by the Amending Act, 1891 (XII of 1891)
3. Interpretation clause:- In this Act, unless there is anything repugnant in
the subject or context:-
(a) “accommodation party” means a person who has signed a
negotiable instrument as a marker, drawer acceptor or endorser
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 purpose of lending or investment, of or deposits of money from
the public, repayable on demand otherwise withdrawable by
cheque, draft, order, or otherwise, and includes any Post Office
Savings Bank;. (c) “bearer” means a person who by negotiable 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 notice, bill of
exchange of cheque complete in form to a person’ who takes it as
(f) “material alteration” in relation to a Promissory note, bill, of
exchange or cheque includes an alteration of the date, the sum
payable, the time of payment, the 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 Central
Government to perform the functions of notary public under this
Act and a notary appointed under the Notaries Ordinance, 1961.
OF NOTES, BILLS AND CHEQUES
4. “Promissory note.” A “promissory note” is in 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.
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.”
(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 there out 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
5. 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 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
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 installment thereof being expressed to be on the lapse of a certain
period after the occurrence of a specified event 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 further interest or is payable at an indicated
rate of exchange, or is 5 at the current rate of exchange, and although it is
to be paid in stated installments and contains a provision that on default
of payment of one or more installments or interest, the whole or the
unpaid 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
(b) a statement of the transaction which gives rise to the note or bill, is
Where the payee is a fictitious or non-existing person the bill of exchange may be
treated as payable to bearer.
6. “Cheque”. A “cheque” is a bill of exchange drawn on a specified banker
and not expressed payable otherwise than on demand.
(*) By one of his many customers.
7. “Drawer” “Drawee” The marker of a bill of exchange or cheque is called
the “drawer;” the person thereby directed to pay is called the “drawee.”
“Drawee in case of need,” When in the bill or in any endorsement thereon
the name of any person is given in addition to the drawee to be resorted to
in case of need such person is called a “drawee in case of need”.
“Acceptor” 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.”
“Acceptor for honour.”— When a bill of exchange has been noted or
protested for non-acceptance or for better security, and any person accepts
is supra protest for honour of the drawer or of any one of the endorsers,
such person is called an “acceptor for honour.”
“Payee.”—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
8. “Holder”— The “holder” of a promissory note, bill of exchange or cheque
means the payee or endorsee who is in possession of it or the bearer
thereof but does not include a beneficial owner darning through a
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
9. “Holder in due course.”— “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 endorsee 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.
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
10. “Payment in due course.”— “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.
11. Inland instrument– A promissory note, bill of exchange or cheque drawn
or made in Pakistan and made payable in, or drawn upon any person
resident in, Pakistan shall be deemed to be an inland instrument.
12. Foreign Instrument— Any such instrument not so drawn, made or made
payable shall be deemed to be foreign instrument.
13. “Negotiable instrument”.(l) A negotiable instrument means a promissory
note, bill of exchange 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
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
endorsement is an endorsement in blank.
Explanation (III), A promissory note, bill of exchange or cheque, either
originally or by endorsement, 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 more payees jointly,
or it may be made payable in the alternative to one of two, or one or some
of several payees
14. Negotiation.— 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 negotiable.
15. Endorsement.— When the maker or holder of a negotiable instrument
signs the same, otherwise than as such maker, for the purpose of
negotiable, 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 endorse the same, and
is called the “endorser”.
16. Endorsement “in blank” and “in full”.—(l) If the endorser signs his name
only, the endorsement is said to be “in blank”, and if he adds a direction to
pay the amount mentioned in the instrument to, or to the order of, a
specified person, the endorsement is said to be ‘in full”, and the person so
specified is called the “endorsee” of the instrument.
(2) The provisions of this Act relating to a payee shall apply with the
necessary modifications to an endorsee.
17. Ambiguous instruments—– Where an instrument may be construed
either as a promissory note or bill of exchange, the holder may at his
election treat it as either and the instrument shall be then certificate
reforward treated accordingly.
18. Where amount is stated differently in figures and words.—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.
Provided that if the words, are ambiguous or uncertain, the amount may
be ascertained by referring to the figures. 19. Instruments payable on demand.— A promissory note or bill of exchange
is payable on demand,—
(a) where it is expressed to be so, or to be payable at sight or on
(b) where no time for payment is specified in it; or
(c) where the note or bill accepted or endorsed after it is overdue, as
regards the person accepting or indorsing it
20. Inchoate stamped instruments.—(1) Where one person signs and delivers
to another a paper stamped in accordance with the law relating to stamp
duty chargeable on negotiable instruments, either wholly blank or having
written thereon an incomplete negotiable instrument, in order that it may
be made, or completed in to a negotiable instrument he thereby gives
prima facie authority to the person whoo 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 upon 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 corn 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
Provided that if any such instrument after completion is negotiable 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 reachable time and strictly in
accordance with the authority given.
21. “At sight,” “On presentment”. “After sight”.— The expressions “at sight”
and “on presentment” means on demand. The expression “after sight”
means, in a promissory note, after presentment for sight, and, in a bill of exchange, after acceptance, or noting for non- acceptance, or protest for
21A. When note or bill payable on demand is overdue.-A promissory note or
bill of exchange payable on demand shall be, deemed to be overdue when
it appears on the face of it to have in circulation for an unreasonable
length of time.
21B. A note or bill payable at a determinable future time:- A promissory note
or bill of exchange is payable at a determinable future time within the
meaning of this Act if it is expressed to be payable—
(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
21C. Anti-dating and post-dating.– A promissory note, bill of exchange or
cheque is not invalid by reason only that i; is anti-dated or post-dated;
Provided that the anti-dating or post-dating does not involve any illegal or
fraudulent purpose or transaction.
22. “Maturity”.—- The maturity of a promissory note or bill of exchange is the
date at which it falls due.
Days of 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.
23. Calculating maturity of bill of note payable so many months after date or
sight.–In calculating the date at which a promissory note or bill of
exchange, made payable a stated number of months after date or after
sight, or after a certain event, is at maturity, the period stated shall be held
to terminate on the day of the month which corresponds with the day on
which the instrument is dated, or presented for acceptance or sight, or
noted for non-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 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. That instrument is at maturity on the 3rd
(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.
24. Calculating maturity of bill of note payable so many days after date or
sight —In calculating the date at which a promissory note or bill of
exchange made payable a certain number of days after date or after sight
or after certain event is at maturity, the day of the date, or of presentment
for acceptance of sight, or of protest for non-acceptance, or on which the
event happens, shall be excluded.
25. When day of maturity is a holiday.—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.
Explanation:- The expression “public holiday” shall mean the day or days
declared by the Federal Government, by notification in the official Gazette
to be public holidays.
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, endorsement, 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 negotiating entitles the holder to receive
payment of such instrument and to enforce it against any party thereto
other than the minor. 27. Agency 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 authorized 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 endorse.
27A. Authority of partners.— A partner acting in the firm name may bind the
firm by the making, drawing, acceptance or :negotiation of a negotiable
instrument to the extent authorized by law relating to partnership for the
time being in force.
28. Liability of agent signing.—(l) Where a person signs a promissory note, of
exchange or cheque without adding to his signature words indicating that
he signs it as an agent 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.
28A. Transferor by delivery and transferee. (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”.
(2) A transferor by delivery is not liable on the instrument.
(3) A transferor by delivery who negotiates a negotiable instrument thereby
warrants to is 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
29. Liability of legal representative signing—A legal representative of a
deceased person who signs his name to a promissory note, bill of exchange or cheque is liable personally thereon Unless he expressly limits
his liability to the extent of the assets received by him as such.
29A. Signature essential to liability.—No person is liable as maker, drawer,
endorser or acceptor of a promissory note, bill of exchange or cheque who
has not signed it as such:
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.
29B. Forged or unauthorized signature.— Subject to the provisions of this Act,
where a signature on a promissory note, bill of exchange or cheque is
forged or placed thereon without the authority of the person whose
signature it purports to be, the forged, or unauthorized 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
unauthorized signature not mounting to a forgery.
129C. Stranger signing instrument presumed to be endorser.—A person placing
his signature upon a negotiable instrument otherwise than as maker,
drawer or acceptor is presumed to be an endorser unless he clearly
indicates by appropriate words his intention to be bound in some other
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 it be dishonoured, he will compensate the
holder or any endorser 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 drawer 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 toss or
damage caused by such default.
32. Liability of maker of note and acceptor of bill.—(1) In the absence of a
contract to the contrary, the maker of a promissory note, by making it, the
acceptor before maturity of a. of exchange by accepting it, engages that he
will pay it according to the tenor of the note or 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.
33. Only drawee can be acceptor except in need or for honour.—No person
except the drawee of a bill of exchange, or all or some of several drawees,
or a person named therein as a drawee in case of need, or an acceptor for
honour, can bind himself by an acceptance.
34. Honour Acceptance by several drawees not partners.—Where there are
several drawees of a bill of exchange who are not partners, each of them
can accept it for himself, but none of them can accept it for another
without his authority.
35. Liability of endorser.—In the absence of a contract to the contrary, the
endorser 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 endorser
who is compelled to pay it for any loss or damage caused to him by such
Every endorser after dishonour is liable as upon an instrument payable on
36. Liability of prior parties to holder .in due course.–. Every prior party to a
negotiable instrument is liable thereon to a holder in due course until the
instrument is duly satisfied.
37. Maker, drawer and acceptor principals.—- The maker of a promissory
note or cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in the absence or a contract to the contrary, respectively
liable thereon as principal debtors, and the other parties thereto re liable
thereon as sureties for the maker, drawer or acceptor, as the case may be.
38. Prior party a principal in respect of each subsequent party.—As between
the parties so liable as sureties, such prior party is, in the absence of a
contract to the contrary, also liable thereon as a principal debtor in respect
of each subsequent arty.
A draws a bill payable to his own order of B who accepts, A afterwards endorses
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.
38A. Liability of accommodation and position of accommodation party.—(1)
An accommodation party is liable on a negotiable instrument to a holder
in due course, notwithstanding that when such holder took the instrument
he knew such party to be an 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
39. Suretyship.—When the holder of an accepted bill of exchange enters into
any contract with the acceptor which, under Section 134 or 135 of the
Indian Contract Act, 1872, would discharge, the other parties, the holder
may expressly reserve his right to charge in other parties, and in such case
they are not discharged.
40. Discharge of endorser’s liability.—Where the holder of a negotiable
instrument, without the consent of the endorser, destroys or impairs the
endorser’s remedy against a prior party, the endorser is discharged from
liability to the holder to the safe extent as if the instrument had been paid
A is the holder of a bill of exchange made payable to the order of B, which
contains the following endorsements in blank–
First endorsement, “B” Second endorsement, “Peter Williams.”
Third endorsement, “Wright & Co.”
Fourth endorsement, “John Rozario.”
This bill A puts in suit against John Rozario and strikes out, without John
Rozario’s consent, the endorsements by Peter Williams and Wright & Co. A is not
entitled to recover anything from John Razario.
41. Acceptor bound, although, endorsement forged.—An acceptor of a bill of
exchange already endorsed is not relieved from liability by reason that
such endorsement is forged, if he knew or had reason to believe the
endorsement to be forged when he accepted the bill.
42. Acceptance of bill drawn in fictitious name. An acceptor of a bill of
exchange drawn in a fictitious name and payable to the drawer’s order is
not, by reason that such name is fictitious, relieved from liability to an
holder in due course darning under an endorsement by the same hand as
the, drawer’s signature, and purporting to be made by the drawer.
43. Negotiable instrument made etc., without consideration.—- A negotiable
instrument made, drawn, accepted, endorsed or transferred without
consideration, or for a consideration which fails, creates no obligation of
payment between the parties to the transaction. But if any such party has
transferred the instrument with or without endorsement 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 negotiable instrument has
been made, drawn accepted or endorsed can, if he has 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, accept, endorse 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.
44. Partial absence or failure of money consideration.– When the
consideration for which. a person signed a promissory note, bill of
exchange or cheque consisted of money and was originally absent in part
or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him to
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 endorser with his endorsee.
Other signers may. by agreement stand in immediate relation with a holder.
A draws a bill on B for Rs. 500 payable to the order of A. B accepts the Bill, but
subsequently dishonors it by non-payment. A Sues B on the bill. B proves that it
was acc for value as to Rs. 400, and. as an accommodation to the plaintiff as to
the residue. A can only recover Rs. 400.
45. Partial failure of consideration not consisting of money. — Where a part of
the consideration for which a person, signed a promissory note, bill of
exchange or cheque, though not consisting of money, is ascertainable in
money without collateral enquiry, and there has been a failure of that part,
the sum which a holder standing in immediate relation with such signer is
entitled to receive from him is proportionally reduced:
45A. Holder’s right to duplicate of lost bill.—Where a bill of exchange has been
lost before it is over-due, 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.
If the drawer on request as aforesaid refuses to give such duplicate bill, he may
be compelled to do so.
46. Delivery.—The making, acceptance or endorsement of 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 authorized by him in that behalf.
As between such parties and any holder of the instrument other than a holder in
due course, it my be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the
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 endorsement and delivery thereof.
47. Negotiation by delivery.—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 or 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
(a) A, the holder of a negotiable instrument payable o bearer, delivers,
it to B’s agent to keep for B. The instrument ha 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, an accordingly now
possesses the instrument as B’s agent. The instrument has been
negotiated, and B has become the holder of it.
48. Negotiation by endorsement..—- Subject to the provisions of section 58 a
promissory note, bill of exchange or cheque payable to order in negotiable
by the holder by endorsement and delivery thereof.
49. Conversion of endorsement in blank into endorsement in full—When a
negotiable instrument has been endorsed in blank, any holder may
without signing his own name, convert the blank endorsement in to an
endorsement in full by writing above the endorser’s signature a direction
to pay the amount to or the order of himself or some other person; and the
holder endorsement in full by writing above the endorser’s signature a
direction to pay the amount to or the order of himself or some other person; and the holder ..may without signing hi own name, convert does
not thereby incur the. responsibility of an. endorser.
50. Effect of endorsement.—(1) Subject to the provisions of this Act relating to
restrictive, conditional and qualified endorsement, the endorsement of a
negotiable in followed by delivery transfers to the endorsee the property
therein’ with the right of further negotiation.
(2) An endorsement is restrictive which either–
(a) restricts or excludes the right to further negotiate the instrument, or
(b) constitutes the endorsee an agent of the endorser to endorse the
instrument or to receive its contents for the endorser or for some
other specified person.
Provided that the mere absence of words implying, right to negotiate does not
make the endorsement restrictive.
B signs the following endorsements on different negotiable instruments payable
(a) “Pay the contents to C only.”
(b) “Pay C for any use.”
(c) “Pay C or order for the account of B.”
(d) “The within just be credited to C.”
These endorsements 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 endorser and others.
These endorsements do not exclude the right of further negotiation by C.
51. Who may negotiate.—Every sole-maker, drawer, payee or endorsee, or all
of several joint makers, drawers, payees or endorsees, of a negotiable
instrument may, if the negotiability of such instrument has not been
restricted or excluded as mentioned in Section 50, endorse and negotiate
Explanation. — Nothing in this section enables a maker or drawer to endorse or
negotiable an instrument, unless he is in lawful possession or is holder thereof or enables a payee or endorsee to endorse or negotiate an instrument, unless he is
A bill is drawn payable to A or order, A endorses it to B, the endorsement not
containing the words “or order” or any equivalent words. B may negotiate the
52. Endorser who excludes his own liability or makes it conditional—The
endorser of a negotiable instrument may, by express words in the
endorsement, exclude his own liability thereon, or make such liability or
the right of the endorsee to receive the amount due thereon defend upon
the happening of a specified event, although such event may never
When an endorser so excludes his liability and afterwards becomes the
holder of the instrument, all intermediate endorsers are liable to him.
Where the right of an endorsee to receive the amount due on the
negotiable instrument is made dependent in the aforesaid manner the
condition is valid only as between the endorser and the endorsee.
Where the endorsement of a negotiable instrument purports to be
conditional, the payer may disregard the condition and payment .o the
endorsee is valid whether the condition has been fulfilled or not.
(a) The endorser of a negotiable instrument “signs his name adding the
words “Without recourse”.
Upon this endorsement he incurs no liability.
(b) A is the payee and holder of a negotiable instrument. Excluding
personal liability by an endorsement “without. recourse,” he
transfers the instrument to B, and B endorses it to C, who endorses
it to A. A is. not only reinstated in his former rights, but has the
rights of an endorsee against B and C.
53. Holder claiming through holder in due course.—(1) A holder who derives
his title through a holder in due course, and who, is not himself a party to
any fraud or illegality affecting in the negotiable instrument, has all the rights therein of that holder in due course as regards the acceptor and all
parties to the instrument prior to that holder.
(2) Where the title of the holder is defective.–
(a) if he negotiates the instrument to a holder in due course,, that
holder obtains a good and complete title to the instrument; and
(b) if he obtains payment of the instrument, the person who says him
in due course gets a valid discharge for the instrument.
53A. Rights of holder in due course.—A holder in due course holds the
negotiable instrument free from any defect of title of prior parties, and free
from defences available to prior parties among themselves, and may
enforce, payment of the instrument for the full amount thereof against all
parties liable thereon.
54. Instrument endorsed in blank.–Subject to the provisions hereinafter
contained as to crossed cheques, a negotiable instrument endorsed in
blank is payable to the bearer thereof even although originally payable to
55. Conversion of endorsement in blank into endorsement in full.—If a
negotiable instrument, after having been endorsed in blank, if endorsed in
full, the amount of it cannot be claimed from the endorser in full, except
by the person to whom it has been endorsed in full,’ or by one who
derives title through such person.
56. Requisites of endorsement.— (1) Negotiation by endorsement must be of
the entire instrument.
(2) An endorsement which purports to transfer to the endorsee only a part of
the amount payable, or which purports to transfer the instrument to two
or more endorsees severally, is not valid as a negotiable of the instrument;
but where such amount has been paid in part, a note to that effect may be
endorsed on the instrument, which may then be endorsed for the balance.
157. Legal representative cannot by delivery only negotiate instrument
endorsed by deceased.—The legal representative of a deceased person
cannot negotiate by delivery only a promissory note, bill of exchange or
cheque payable to order and endorsed by the deceased but not delivered. 57A. Negotiation of instrument to party already liable thereon.— Where a
negotiable instrument is negotiated back before authority to the maker or
drawer or a prior endorser or to the acceptor, such party may, subject to
the provisions of this Act, re-issue and further negotiate the instrument,
but he is not entitled to enforce payment of the instrument against any
intervening party to whom he was previously liable.
57B. Rights of holder.—A holder may receive payment in due course under a
negotiable instrument and further r in the manner provided by this Act;
he may also sue on such instrument in his own name.
58. Defective title.—When a promissory note, bill of exchange or cheque has
been lost or has been obtained from any maker, drawer, acceptor or
holder thereof by means of an offence or fraud, or for an unlawful
consideration, neither the person who finds or so obtains the instrument
nor any possessor or endorsee who claims through such person is entitled
to receive the amount due thereon from such maker, drawer, acceptor or
holder, unless such possessor or endorsee is, or some person through
whom he claims was, a holder thereof in due course.
59. Instrument acquired, after dishonour or when overdue.- The holder of
negotiable in who has acquired it after dishonour, whether by nonacceptance or non-payment, with n thereof, or after maturity, has only as
against the other parties, the rights thereon of his transferor and is subject
to the equities to which the transferor was subject at the time of
acquisition by such holder.
Accommodation note or bill — Provided that any person who, in good
faith and for consideration, becoming the holder, after maturity of a
promissory note or bill of exchange made, drawn or accepted without
consideration for the purpose of enabling some party thereto to raise
money thereon, may recover the amount of the note or bill from any prior
The acceptor of a bill of exchange, when he accepted it, deposited with the
drawer certain goods as a collateral security for the payment of the bill, with
power to the drawer to sell the goods and apply the proceeds in discharge of the
bill if it were not paid at maturity. The bill not having been paid at maturity, the
drawer sold the goods and retained the proceeds, but endorsed the bill to A.A’s
title is subject to the same objection as the drawer’s title. 60. Instrument negotiable till payment or satisfaction.— A negotiable
instrument may be negotiated (except by the maker, drawer or acceptor
after maturity) until payment or satisfaction thereof by the maker, drawer
or accept at or after maturity, but not after such payment or satisfaction.
61. Presentment for acceptance. —- A bill of exchange payable after sight
must, if no time or place is specified therein for presentment, be presented
to the drawee thereof for acceptance, if he can, after reasonable search, be
found, by a person entitled to demand at within a reasonable time after it
is drawn and in business hours on a business day. In default of such
presentment, no party thereto is liable thereon to the person making such
62. Presentment of promissory note for sight. — A promissory note payable at
a certain period after sight, must be pre to the maker thereof for sight (if
he can after reasonable search be found) by a person entitled to demand
payment, within a reasonable time after it is made and in business hours
on a business day. In default ‘of such presentment, no party thereto is
liable thereon to ‘the person making such default.
63. Drawee’s time for deliberation. — The holder must, if so required by the
drawee of a bill of exchange presented to for acceptance, allow the drawee
forty eight hours (exclusive of public holidays) to consider whether he will
64. 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
Exception. —Where a promissory not is payable on demand and is not payable
at a specified place, no presentment is necessary in order to charge the maker
thereof [ is presentment necessary to charge the acceptor of a bill of exchange.
The provisions of this section are without prejudice to the provisions relating to
presentment for acceptance in the case of a bill of exchange. Explanation. — Where there are several persons, not being partners liable on the
negotiable, instrument, as makers, acceptors or drawees, as the case may be, and
no place of payment is specified, presentment must be made to them all.
65. Hours for presentment. — Presentment for payment must be made during
the usual hours of business, and, if at a banker’s within banking hours.
66. Presentment for payment of instrument payable after date or sight.— A
promissory note or bill of exchange, made payable at a specified period
after date or sight thereof, must be presented for payment at maturity.
67. Presentment for payment of promissory note payable by installments. —
A promissory note payable by installments must be presented for
payment on the third day after the date fixed for payment of such
installment; and non-payment on such presentment has the same effect as
non-payment of a note at maturity.
68. Presentment for payment of instrument payable at specified place and not
elsewhere — A promissory note, bill of exchange or cheque made, drawn
or accepted payable at a specified place arid not elsewhere must, in order
to charge any party thereto, be presented for payment at that place.
69. Instrument payable at specified place. – A promissory note or bill of
exchange made, drawn or accepted payable at a specified place must, in
order to charge the maker or drawer thereof, be presented for payment at
70. Presentment where no exclusive place specified. — A promissory note or
bill of exchange, not made payable as mentioned in sections 68 and 69,
must be presented for payment at the address of the maker, acceptor or
drawee given in the instrument, and if no such address is given to the
place of business [if known), or at the ordinary residence [if known), of the
maker, drawer or acceptor thereof, as the case may be.
71. Presentment when maker etc., has no known place of business or
residence.—If the maker, drawee or acceptor of a negotiable instrument
has no known place of business or
residence, and no place is specified in the instrument for presentment for
acceptance or payment, such presentment may be made to him in person
wherever he can be found. Explanation: In this section and sections 68 and 69, “specified place” means a
place sufficiently described so as to enable the person presenting the instrument
to locate it.
71A. What constitutes valid presentment and mode of presentment.—(1) To
constitute a valid presentment it shall be sufficient if instead of the
original negotiable instrument copy thereof certified to be true by the
holder is delivered to the person liable thereon, either personally or by
registered post or by other effective means.
(2) If, after such delivery, the person liable to pay so demands, the holder
shall allow him to inspect the original negotiable instrument during the
hours of business of the holder, and if the holder fails to do so within a
reasonable time, the presentment shall be deemed to be invalid.
72. Presentment of cheque to charge drawer. — Subject to the provisions of
section 84, a cheque must, in order to charge drawer, be presented at the
bank upon which it is drawn before the relation between the drawer and
his banker has been altered to the prejudice of the drawer.
73. Presentment of cheque to charge any other person. A cheque must, in
order to charge any person except the drawer, be presented within
reasonable time after delivery thereof by such person.
74. Presentment of instrument payable on demand. Subject to the provisions
of section 31, a negotiable instrument payable on demand must be
presented for payment within a reasonable time after it is received by the
75. Presentment by or to agent, representative of deceased or assignee of
insolvent.–Presentment for acceptance or payment may be made to the
duly authorized agent of the 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 a insolvent, to his assignee.
75A. Excuse for delay in presentment for acceptance or payment.—Delay in
presentment for acceptance or payment is excused if the delay is caused
by circumstances beyond the control of the holder, and not imputable to
his default, misconduct or negligence. When the cause of delay ceases to
operate, presentment must be made within a reasonable time. 76. When presentment unnecessary.—No presentment for payment is
necessary, and the instrument shall be deemed to be dishonoured at the
due date for presentment in any of the following cases:-
(a) if the maker, drawee or acceptor intentionally prevents the
presentment of the instrument, or,
if the instrument being payable at his place of business, he closes
such place on a business day during the usual business hours, or,
if the instrument being payable at some other specified place,
neither he nor any person authorized to pay it attends at such place
during the usual business hours, or
if the instrument not being payable at any specified place, he
cannot after due search be found;
(b) as against any party sought to be charged therewith, if he has
engaged to pay notwithstanding non-presentment;
(c) as against any party. if, after maturity, with knowledge that the
instrument has not been presented–
he makes a part payment on account of the amount due on the
instrument, or promises to pay the amount due thereon in whole or
or otherwise waives his right to take advantage of any default in
presentment for payment;
(d) as against the drawer, if the drawer could not suffer damage from
the want of such presentment;
(e) where the drawee is a fictitious person;
(f) as regards an endorser, where the negotiable instrument was made,
drawn or accepted for the accommodation of that endorser and he
had to expect, that the instrument would not be paid if presented:;
(g) where, after the exercise of reasonable diligence, presentment is
required by this Act cannot be effected.
Explanation: The fact that the holder has reason to believe that the
negotiable instrument will, on presentment, be dishonoured does not
dispense with the necessity for presentment. 77. Liability of banker for negligently dealing with bill presented for
payment.—When a bill of exchange accepted payable at a specified bank
has been duly presented therefor payment and dishonoured, if the banker
so negligently or improperly keeps, deals with or delivers back such bill as
to cause loss to the holder, he must compensate the holder for such loss.
OF PAYMENT AND INTEREST
78. To whom payment could be made.—Subject to the., provisions of section
82, clause (c), payment of the amount due on a promissory note, bill of
exchange or cheque must, in order to discharge the maker or acceptor, be
made to the holder of the instrument.
79. Interest when rate specified or not specified.– Subject to the provision of
any law for the time being in force relating to the relief of debtors, and
without prejudice to the provisions of section 34 of the Code of Civil
(a) when interest at a specified rate is expressly made payable on a
promissory note or bill of exchange and no date is fixed from which
interest is to be paid, interest shall be calculated at the rate
specified, on the amount of the principal money due thereon, from
the date of the note, or, in the case of a bill, from the date on which
the amount becomes payable, until tender or realization of such
amount, or until the date of the institution of a suit to recover such
(b) where a promissory note or bill of exchange is silent as, regards
interest or does not specify the rate of interest, interest on the
amount of the principal money due, thereon shall, notwithstanding
any collateral agreement relating to interest between any parties to
the instrument, be allowed and calculated the rate of six per
centum per annum from the date of the note, or, in the case of a bill,
from the date on which the amount becomes payable, amount due
thereon, or until the date of the institution of a suit to recover such
80. Interest when no rate specified.—When no rate of interest is specified in
the instrument, interest on the amount due thereon shall, notwithstanding
any agreement relating to interest between any parties to the instrument,
be calculated at the rate of six per centum per annum, from the date at
which the same ought to. have been paid by the part charged, until tender or realization of the amount due thereon, or until such date after the
institution of a suit to recover such amount as the Court directs.
Explanation. — When the party charged is the endorser of an instrument
dishonoured by non-payment, he is liable to pay interest only from time that he
receives notice of the dishonour.
81. Delivery of instrument on payment, or indemnity in case of loss. — Any
person liable to pay, and called upon by the holder thereof to pay, the
amount due on a promissory note, bill of exchange or cheque is before
payment entitled to have it shown, and is on payment entitled to have it
delivered up, to him, or, further claim thereon against him.
OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND
82. Discharge from liability.—The maker, acceptor or endorser respectively of
a negotiable instrument is discharged from liability thereon—-
(a) by cancellation; to a holder thereof who cancels such acceptor’s or
endorser’s name with intent to discharge him, and to all parties
claiming under such holder;
(b) by release; to a holder thereof who otherwise discharges such
maker, acceptor or endorser, and to all parties deriving title under
such holder after notice of such discharge; and
(c) to all parties thereto, if the instrument is payable to bearer, or has
been endorsed in blank, and such maker, acceptor or endorser
makes payment in due course of the amount due thereon.
83. Discharge by allowing drawee more than forty-eight hours to accept. —If
the holder of a bill of exchange allows the drawee more than forty eight
hours, exclusive of public holidays, to consider whether – he will accept
the same, all previous parties not consenting to such allowance are
thereby discharged from liability to such holder.
84. When cheque not duly presented and drawer damaged thereby.—(1)
Where a cheques is not presented for payment within a reasonable time of
its issue, and he drawer or person on whose account it is drawn had the
right, at the time when presentment ought to have been made, as between himself and the banker, to have the cheque paid and suffers actual
damage through the delay, he is discharged the extent of such damage,
that is to say, to the extent to which such drawer or person is a creditor of
the banker to a larger amount than he would have been if such cheque
had been paid.
(2) In determining what is a reasonable time, regard shall be had to the nature
of the instrument, the usage of trade and of bankers, and the facts of the
(3) The holder of the cheque as to which such drawer or person is so
discharged shall be a creditor, in lieu of such drawer or person, of such
banker to the extent of such discharge and entitled to recover the amount
(a) A draws a cheque for Rs. 1,000 and when the cheque ought to be
presented, has funds at the bank to meet it. The bank fails before the
cheque is presented. The drawer is discharged, but the holder can prove
against the bank for the amount of the cheque.
(b) A draws a cheque at Sialkot on a Bank in Karachi. The Bank fails before
the cheque could be presented in ordinary course. A is not discharged, for
he has not suffered actual damage through any delay in presenting the
Substituted for the original section by the Negotiable Instruments (Amendment)
Act, 1897 (VI of 1897), S. 3.
85. Cheque payable to order. (1) Where a cheque payable to order purports to
be endorsed 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 to the bearer thereof, notwithstanding
any endorsement whether in full or in blank appearing thereon, and
notwithstanding that any such endorsement purports to restrict or
exclude further negotiation.
85A. Drafts drawn by one branch of a bank on another payable to order.—
Where any draft, that is, an order to pay money, drawn by. one office of a
bank upon another office of the same bank for a sum, of money payable to order on demand, purports to be endorsed by or on behalf of the payee,
the bank is discharged by payment in due course.
86. Parties not consenting discharged by qualified or limited acceptance.—If
the holder of a bill of exchange acquiesces in a qualified acceptance, or one
limited to part of the sum mentioned in the bill or which substitutes a
different place or time for payment, or which, where the drawees are not
partners, is not signed by all the drawees, all previous parties whose
consent is not obtained to such acceptance are discharged as against the
holder and those claiming under him, unless on notice given by the holder
they assent to such acceptance.
Explanation: An acceptance is qualified—
(a) where it is conditional, declaring the payment to be dependent on
the happening of an event therein stated;
(b) where it undertakes the payment of part only of the sum ordered to
(c) where, no place of payment being specified on the order it
undertakes the payment at a specified place, and not otherwise or
elsewhere; or where, a place of payment being specified in the
order, it undertakes the payment at some other place and not
otherwise or elsewhere;
(d) where it undertakes the payment at a time other than that at which
under is order it would be legally due.
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
Alteration by endorsee and any such alteration, if made by an endorsee,
discharges his endorser from all liability to him in respect of the consideration
The provisions of this section are subject to those of sections 20, 49, 86 and 125.
88. Acceptor or endorser bound notwithstanding previous alteration: — An
acceptor or endorser of a negotiable instrument is bound by his acceptance or endorsement notwithstanding any previous alteration of the
89. Payment of instrument on which alteration is not apparent.—Where a
promissory note, bill of exchange or cheque has been materially altered
but does not appear to have been so altered,
or where a cheque is presented for payment which does not at the time of
presentation appear to be crossed or to have had a crossing which has
been obliterated, payment thereof by a person or banker liable to pay, and
paying the safe according to the apparent tenor thereof at the time of
payment and otherwise in due course, shall discharge such person at
banker from. all liability thereon; and such payment shall not be
questioned b reason of the instrument having been altered or the cheque
90. Extinguish of rights of action on bill in acceptor’s lands. The makes,
drawer, acceptor or endorser of a negotiable instrument is discharged
from liability thereon when the person liable thereon on principal debtor,
becomes the holder thereof at or after its
(2) When the holder of an accepted bill of exchange enter in to any contract
with the acceptor of the nature referred to in Section 39 the other parties
are discharged, unless the hold has expressly reserved his right to charge.
OF NOTICE OF D1SHONOUR
91. Dishonour by non-acceptance.—A bill of exchange, is said to be
dishonoured by non-acceptance when the drawee or one of several,
drawees not being partners, makes default in acceptance upon being duly
required to accept the bill, or where presentment is excused and the bill is
Where the drawee is incompetent to contract, or the acceptance is qualified, the
bill may be treated as dishonoured.
92. Dishonour by non-payment. — A promissory note, bill of exchange or
cheque is said to be dishonoured by non-payment when the maker of the
note, acceptor of the bill or drawee of the cheque makes default in
payment upon being duly required to pay the same. 93. By and to whom notice should be given.—When a promissory note, bill or
exchange of cheque is dishonoured by non-acceptance or non-payment,
the holder thereof; or some party thereto who remains liable thereon,
must give notice that the instrument has been so dishonoured to all other
parties to whom the holder seeks to make severally liable thereon, and to
some one of several parties whom he seeks to make jointly. liable thereon.
When a bill of exchange is dishonoured by non-acceptance the drawer or
any endorser to whom such notice is not given is discharged; hut the
rights of a holder in due course subsequent to the omission to give notice
shall not be prejudiced by that omission.
When a bill of exchange is dishonoured by non-acceptance and due notice
of dishonour is given, it shall not be necessary to give notice of a
subsequent dishonour by non-payment, unless the bill shall, in the
meantime, have been accepted.
Nothing in this section renders it necessary to give notice to the maker of
the dishonoured promissory note or the drawee. or acceptor of the
dishonoured bill exchange or cheque.
94. Mode in which notice may be given.—Notice of dishonour may be given
to a duly authorized agent of the person to whom it is required to be
given, or, where he has died, or his legal representative, or, where he had
been declared an insolvent, to his assignee; may be oral or written; may if
written, be sent by post; and may be in any form; but it must inform the
party to whom it is given, either in express terms or by reasonable
intendment, that the instrument has been dishonoured, and in what way,
and that he will be held liable thereon, and it must be given within a
reasonable time after dishonour, at the place of. business or (in case such,
party has no place of business) at the residence of the party for whom it is
If the notice is duly directed and sent by post and miscarries, such miscarriage
does not render the notice invalid.
95. Party receiving must transmit notice of dishonour.– Any party receiving
notice of dishonour in order to render any prior party liable to himself,
give notice of dishonour to such party within a reasonable time, unless
such party otherwise receives due notice as provided by section 93.
96. Agent for presentment.—When the, instrument is deposited with an agent
for presentment, the agent is entitled to the same time to give notice to him principal as if he were the holder giving notice of dishonour, and the
principal is entitled to a further like period to give notice of dishonour.
97. When party to whom notice given is dead.—When the party to whom
notice of dishonour is despatched is dead, but the party despatching the
notice is ignorant, of his death, the notice is sufficient.
98. When notice of dishonour is unnecessary.—No notice of dishonour is
(a) when it is dispensed with by the party entitled thereto;
(b) in order to charge the drawer when he has countermanded
(c) when the party charged could not suffer damage for want of notice.
(d) when the party entitled to notice cannot after due search be found;
or the party bound to give notice is, for any other reason, unable
without any fault of his own to give it;
(e) to charge the drawers when the acceptor is also a drawer;
(f) in the case of a promissory note which is not negotiable;
(g) when the party entitled to notice, knowing the facts, promises
unconditionally to pay the amount due on the instrument.
OF NOTING AND PROTEST
99. Noting.—When a promissory note or bill of exchange has been
dishonoured by non-acceptance or non-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
dishonour, or, if the instrument has to been expressly dishonoured, the
reason why the holder treats it as dishonoured, and the notary’s charges;
100. Protest. When a promissory note or bill of exchange has been dishonoured
by non-acceptance or non-payment, the holder within a reasonable time, cause such dishonour to be noticed and certified by a notary public. Such
certificate is called a protest.
Protest for better security.
When the acceptor of a bill of exchange has become insolvent, or his credit
has been publicly impeached, before the maturity of the bill, the holder
may, within a reasonable time, cause a notary public to demand better
security of the acceptor, and on its being refused may, within a reasonable
time, cause such facts to be noted and certified as aforesaid. Such
certificate is called a protest for better security.
101. Contents of protest.—A protest under 100 must contain–
(a) either the instrument itself, or a literal transcript of the instrument
and of everything written or printed thereupon;
(b) the name of the person for whom and against whom the instrument
has been protested;
(c) a statement that payment or acceptance or better security, as the
case may be, has been demanded of such person by the notary
public; the term of his answer; if any, or a statement that he gave no
answer or that he could not be found;
(d) when the note or bill has been dishonoured, the place and time of
dishonour, and, when better security has been refused, the place
and time of refusal;
(e) the subscription of the notary public making the protest;
(f) in the event of an acceptance for honour or of a payment for
honour, the name of the person by whom, of the person for whom,
and the manner in which, such acceptance or payment was offered
102. Notice of protest —When a promissory note or bill of exchange is required
by law to be protested, notice of such protest must be given instead of
notice of dishonour, in the same manner and subject to the same
conditions; but the notice may be given by the notary public who makes
the protest. 103. Protest for non-payment after dishonour by non-acceptance: All bills of
exchange drawn payable at some other place than the place mentioned as
the residence of the drawer, and which are dishonoured by nonacceptance, may, without further presentment to the drawee, be protested
for non-payment in the place. specified for payment, unless paid before or
104. Protest of foreign bills.— Foreign bills of exchange must be protested from
dishonour when such protest is required by the law of the place where
they are drawn.
104A. When noting equivalent to protest.—For the purposes of this Act, where a
bill or note is required to be protested within a specified time or before
some further proceedings is taken, it is sufficient that the bill has been
noted for protest before the expiration of the specified time or the taking
of the proceeding; and the formal protest may be extended at any time
thereafter as of the date of the noting.
OF REASONABLE TIME
105. Reasonable time.— In determining what is a reasonable time or
presentment for acceptance or payment, for giving notice of dishonour
and for noting, regard shall be had to the nature of the instrument and the
usual course of dealing with respect to similar instrument; and, in
calculating such time, public holidays shall be excluded.
106. Reasonable time of giving notice of dishonour.-If the holder and the party
to whom notice of dishonour is given carry on business or live (as the case
may be) in different places, such notice is given within reasonable time if
it is despatched by the next post or on the day next after the day of
If the said parties carry on business or live in the same place, such notice is
given within a reasonable time if it is despatched in time to reach its
destination on the day next after the day of dishonour
107. Reasonable time for transmitting such notice.- party receiving notice of
dishonour, who seeks to enforce his right against a prior party, transmits
the notice with a reasonable time if he transits it within the same time after
its receipt as he would have had to give notice if he had been the holder. CHAPTER XI
OF ACCEPTANCE AND PAYMENT FOR HONOUR AND
REFERENCE IN CASE OF NEED
108. Acceptance for honour.—When a bill of exchange has been noted or
protested for non-acceptance or for better security, any person not being a
party already liable thereon may, with the consent of the holder, by
writing on the bill, accept the same for the honour of any party thereto;
109. How acceptance for honour must be made. A person desiring to accept for
honour must by writing on the bill under his hand, declare that he accepts
under protest the protested bill for the honour of the drawer or of a
particular endorser whom he names;’ or generally for honour.
110. Acceptance not specifying for whose honour it is made.-Where the
acceptance does not express for whose honour it is made shall be deemed
to be made for the honour of the drawer.
111. Liability of acceptor for honour.–An ‘acceptor’ for honour binds himself to
all parties subsequent to the party for whose honour he accepts to pay the
amount of the bill if the drawee do not; and such party and all prior
parties, are liable in their respective capacities to compensate the acceptor
for honour for all loss or damage sustained by him in consequence of such
But, an acceptor for honour is not liable to the holder tithe bill unless it is
presented, or (in case the address given by such acceptor on the bill is a
place other than the place where the bill is made payable) forwarded for
presentment not later than the day next after the day f its authority.
112. When acceptor for honour may be charged. An acceptor for honour
cannot be charged unless the bill has at its maturity been presented to the
drawee for payment and has been dishonoured by him, and noted or
protested for such dishonour.
113. Payment for honour.—When a bill of exchange has been noted or
protested for non-payment, any person may pay the same for the honour
of any party liable to pay the same, provided that the person so paying or
his agent in that behalf has previously declared before a notary public the
party for whose honour he pays, and that such declaration has been
recorded by such notary public. 114. Right of payer for honour — Any person, so paying is entitled to all the
rights, in respect of the bill, of the holder at the time of such payment, and
may recover from the party for whose honour he pays all sums so paid,
with interest thereon and with all expenses properly incurred in making
115. Drawee in case of need. Where a drawee in case of need is named in a bill
of exchange, or in any endorsement thereon, the bill is not dishonoured
until it has been dishonoured by such drawee.
116. Acceptance and payment without protest — A drawee in case of need
may accept and pay the bill of exchange without previous protest.
117. Rules as to compensation — The compensation payable in case of
dishonour of a promissory, bill of exchange or cheque, by any party liable
to the holder or any endorsee, shall be determined by the following
(a) the holder is entitled to the amount due upon the instrument;
together with the expenses properly incurred in presenting, noting
and protesting it;
(b) when the person charged resides at a place different from that at
which the instrument was payable, the holder is entitled to receive
such sum at the current rate of exchange between the two places;
(c) an endorser who, being liable, has paid the amount due on the
same is entitled to the amount so paid with interest at six per
centum per annum from the date of payment until, tender or
realization thereof, together with
all expenses caused by the dishonour and payment;
(d) when the person charged and such endorser reside at different
places the endorser is entitled to receive such sum at the current
rate of exchange between the two places;
(e) the party entitled to compensation may draw a bill upon the party
liable to compensate him, payable at sight or on demand, for the
amount due to him, together with all expenses properly incurred
by him. Such bill must be accompanied by the instrument dishonoured and the protest thereof (if any). If such bill is
dishonoured, the party dishonouring the same is liable to make
compensation thereof in the same manner as in the case of the
SPECIAL RULES OF EVIDENCE
118. Presumptions as to negotiable instruments—(a) Of consideration; (b) as to
date; (c). as to time of acceptance; (d) as to time of transfer; (e) as to order
of endorsements (1) as to stamp; (g) that holder is a holder in due course. –
–Until the contrary is proved, the following presumptions shall be made,
(a) that every negotiable instrument was made or drawn of
consideration, and that every such instrument, when it has been
accepted, endorsed negotiated or transferred, was accepted,
endorsed negotiated or transferred for consideration:
(b) that every negotiable instrument bearing a date was made or
drawn on such date;
(c) that every accepted bill of exchange was accepted within a
reasonable time after its date and before its maturity;
(d) that every transfer of a negotiable instrument was made before its
that endorsements appearing upon a negotiable.
(e) that endorsements appearing upon a negotiable instrument were
made in the order in which they appear thereon;
(f) that a lost promissory note, bill of exchange or cheque was duly
(g) that the holder of a negotiable instrument is a holder in due course,
provided that, where the instrument has been obtained from its
lawful owner, or from any person in lawful custody thereof, by
means of an offence of fraud,. or has been obtained from the maker
or acceptor thereof by means of an offence or fraud, or for unlawful
consideration, the burden of proving that the holder is a holder in
due course lies upon him. 119. Presumption on proof of protest.–In a suit upon an instrument which has
been dishonoured, the Court shall, on proof of the protest presume the
fact, of dishonour, unless and until such fact is disproved.
120. Estoppels against denying original validity, of instrument- No maker of a
promissory note, and no drawer of a bill of exchange or cheque, and no
acceptor of a bill of exchange for the honour of the drawer shall, in a suit
thereon by a holder in dupe course, be permitted to, deny the validity of
the instrument as originally made or drawn.
121. Estoppels against denying capacity of payee to endorse.-No maker of a
promissory note and no acceptor of a bill of exchange payable to order
shall, in a suit thereto by a holder in due course be, permitted to deny the
payee’s capacity, to the date of the note or bill, to endorse the same.
122. Estoppels against denying signature or capacity of prior party.–No
endorser of a negotiable instrument shall, in a suit thereon by a
subsequent holder, be permitted to deny the signature or capacity to
contract of any prior party to the instrument.
SPECIAL PROVISIONS RELATING TO CHEQUES
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 parallel 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
123A. Cheque crossed “account payee”. (1) Where a cheque crossed generally
bears across its face an addition of the word “account payee” between the
two parallel transverse line constituting the general crossing, the cheque,
besides being crossed generally, is said to be crossed” account payee”. (2) Where 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
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 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 authorized by this Act
is a material part of the cheque; it shall not be lawful for any person to
obliterate, or, except as authorized by this Act, to add to or alter, the
126. Payment of cheque crossed generally.—Where a cheque is-crossed
generally, the banker on whom it is drawn shall to pay it otherwise than
to a banker.
Payment of cheque crossed specially.
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
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. Payment in the course of crossed cheque.–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
Provided that where a cheque is presented for payment which does not at
the time of presentment appear to be crossed, or to have had a crossing
which has been obliterated, added to or altered otherwise than as
authorized by this Act, the banker paying the cheque in good faith and
without negligence shall not be responsible or incur any liability nor shall
the payment be questioned, by reason of the cheque having been crossed,
or of the crossing having been obliterated or having been added to or
altered otherwise than as authorized by this Act, and of payment having
been made otherwise than, to a banker or, to the banker to whom the
cheque is or was crossed, or to is agent for collection, being a banker, as
the case may be.
130. Cheque bearing “not negotiable”.—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. Subject to the provisions of this Act relating to cheque 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. Explanation: A banker receives payment of a crossed cheque for a
customer within the meaning of this section notwithstanding that he
credits his customer’s account with the amount of the cheque before
receiving payment thereof.
131A. Application of Chapter to drafts. — The provision of this Chapter shall
apply to any draft, as defined in section 85A, as if the, draft were a cheque.
131B. Protection to banker crediting cheque crossed “account payee”—Where a
cheque is delivered for collection to a banker 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 be or and of the proceeds of the cheque having been
obliterated or altered and of the proceeds of the cheque having been
credited to a person who is not the payee thereof.
131C. Cheque not operating as assignment of funds. A cheque of itself does not
operate as an assignment of any part of the funds to the credit of the
drawer with the banker.
SPECIAL PROVISIONS RELATING TO BILLS OF EXCHANGE
131D. Several drawees.— A bill of exchange may be addressed to two or more
drawees, whether they are partners or not; but an order addressed to two
drawees in the alternative, or to two or more drawees in succession, is not
a bill of exchange.
131E. In favour a bill may be drawn.— A bill of exchange may be drawn
payable to, or to the order of, the drawer; or it may be drawn payable to,
or to the order of, the drawee.
131F. Presentment for acceptance is necessary.—A bill of exchange, in order to
fix the acceptor with liability, must be present for acceptance before is
presented for payment.
131G. When presentment excused. Presentment for acceptance is excused and a
bill of exchange may be treated as dishonoured by non-acceptance. (a) where the drawee is dead or is in or is a fictitious person or a
person not having capacity to contract by bill of exchange;
(b) where, at the due date for presentment, the drawee can not, after
reasonable search, be found at the place at which the bill is to be
(c) where,. after the exercise’ of reasonable diligence such, presentment
cannot be effected;
(d) where, although the presentment has been irregular acceptance has
been refused on some other ground.
131H. Holder’s right of recourse against drawer and endorsers.—Subject to the
provisions of this Act, when a bill of exchange is dishonoured by nonacceptance, an immediate right of recourse against ;he drawer and
endorsers accrues, to the holder, and no presentment for payment is
131-I. Holder may refuse qualified acceptance. — The holder of a bill of
exchange may refuse to take a qualified acceptance, and if he does not
obtain an unqualified acceptance, may treat the bill as dishonoured by
132. Set of bills. — Bills of exchange. may be drawn in parts, each part being
numbered and containing a provision that it ,shall continue payable only
so long as the others remain unpaid. All the parts together make a set; but
the whole set constitutes only, one bill, and is extinguished when one of
the parts, if a separate bill, would be extinguished. .
Exception. —When a person accepts or endorses different parts of the bill in
favour of diff persons, he and the subsequent. endorsers of each part are liable on
such part as if it were a separate bill.
133. Holder of first acquired part entitled to all. —As between holders in due
course of different parts the same set he who first acquired title to his part
is entitled to the other parts and the money represented by the bill. CHAPTER XVI
OR INTERNATIONAL LAW
134. Law governing liability of parties to a foreign instrument.—In the absence
of a contract to the contrary and subject, to the provisions of section 136, in
the case of a foreign promissory note, bill of exchange or cheque,–
(a) the law of the place where the instrument was made or drawn, or
accepted or negotiated shall determine-
(i) the capacity of the parties: and
(ii) the validity of the instrument or, as the case may be, of its
acceptance or negotiation:
Provided that such instrument shall not be invalid or inadmissible in evidence by
reason only that it was not stamped or not sufficiently stamped according to the
law of the place where it was made or drawn;
(b) the law of the place where such instrument is payable shall
(i) the liability of all parties thereto;
(ii) the duties of the, holder with respect to presentment for acceptance
(iii) the date of maturity of the instrument;
(iv) what constitutes dishonour
(v) the necessity for and sufficiency of a protest or notice of dishonour;
(vi) all questions relating to payment and satisfaction including the
currency in which and the rate of exchange at which he instrument
is to be paid.
A bill of exchange was drawn by A in California, where the rate of interest is 25
per cent., and accepted by B, payable in Washington, where the rate of interest is
6 per cent. The bill is endorsed in 7 and is dishonured. An action on the bill is
brought against B in He is liable to pay interest at the rate of 6 per cent. Only;
but, if A is charged as drawer, A is liable to’ pay interest at the rate of 25 per cent;
135. Law of place of payment governs dishonour.– Omitted, by the Negotiable
Instruments (Amdt) Ordinance, 1962 (XLIX of 1962) S. 53.
136. Instrument made, etc., outside Pakistan, put in accordance with their law. —
– If a negotiable instrument is made, drawn, accepted or endorsed outside
Pakistan but in accordance with the law of Pakistan, the circumstances that any
agreement evidenced by such instrument is invalid according to the law of the country wherein it was entered into does not invalidate h subsequent acceptance
or endorsement made thereon.
137. Presumption as to foreign law. — The law of any foreign country
regarding promissory notes bills of exchange and cheques shall be
presumed to be the same as that of Pakistan unless and until the country
138. Power to appoint notaries public.—The Federal Government may, from
time to time, by notification in the official Gazette, appoint any person, by
name or by virtue of his office, to be a notary public under this Act and to
exercise his functions as such within any local area, any may, by like
notification, remove from office any notary public appointed under this
139. Power to make rules for notaries public. — The Federal Government may,
from time to time, by notification in the official Gazette, make rules
consistent with this Act for the guidance and control of notaries public
appointed under this Act, and may, by such rules (among other matters)
fix the fees payable to such notaries.
SCHEDULE.— Enactments repealed. Rep. By the Amending Act, 1891 (Vu of