( ACT NO. 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:-
CHAPTER I
PRELIMINARY
Short title1. This Act may be called the Negotiable Instruments Act, 1881.
CommencementIt 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 of the Act3[1A. 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.]
[Repealed]2. [Repealed by the Amending Act, 1891 (Act No. XII of 1891).]
Interpretation-clause.3. 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 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 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 note”4. A “promissory note” is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay 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.”
(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 exchange”5. A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay 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 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” “Drawee” “Drawee in case of need” “Acceptor” “Acceptor for honour” “Payee”7. The maker of a bill of exchange or cheque is called the “drawer;” the person thereby directed to pay is called the “drawee.”
When in the bill or in any indorsement thereon the name of any person is given in additional to the drawee to be resorted to in case of need, such person is called a “drawee in case of need.”
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 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”
- 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 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 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 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.
Inland instrument11. A promissory note, bill of exchange or cheque drawn or made in Bangladesh, and made payable in, or drawn upon any person resident in, Bangladesh shall be deemed to be an inland instrument.
Foreign instrument12. Any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.
“Negotiable instrument”13.(1) 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 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.
Negotiation14. 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.
Indorsement15. When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same, and is called the “indorser”.
Indorsement “in blank” and “in full” “Indorsee”16. (1) If the indorser signs his name only, the indorsement 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 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 instruments17. 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 thenceforward treated accordingly.
Where amount is stated differently in figures and words18. 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.
Instruments payable on demand.19. 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 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 stamped instruments20.(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 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” “On presentment” “After sight”21. 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 non-acceptance.
When note or bill payable on demand is overdue4[21A. 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 been in circulation for an unreasonable length of time.
A note or bill payable at a determinable future time21B. 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 uncertain.
Anti-dating and post-dating21C. A promissory note, bill of exchange or cheque is not invalid by reason only that it is anti-dated or post-dated:
Provided that anti-dating or post-dating does not involve any illegal or fraudulent purpose or transaction.]
“Maturity” Days of grace22. The maturity of a promissory note or bill of exchange is the date at which it falls due.
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 maturity of bill or note payable so many months after date or sight23. 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. 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 maturity of bill or note payable so many days after date or sight24. 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 a certain event is at maturity, the day of the date, or of presentment for acceptance or sight, or of protest for non-acceptance, or on which the event happens, shall be excluded.
When day of maturity is a holiday25. 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” includes Sundays and the days declared by the Government, by notification in the official Gazette, to be public holidays.