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Course Title: Law & Practice of Banking

Course Code: F-309

Submitted to:

Md. Mukhlesur Rahman

Lecturer

Department of Finance

University of Dhaka.

Submitted by:

Name RollFarhana Rahman 16-004Farha Farzana 16-006Md. Rasel Miah 16-068Sadia Kamal 16-070

Marufa Akhter 16-132

Date of submission: 23.01.2013

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AcknowledgementThe group expresses their gratitude to our honorable courseteacher, Md. Mukhlesur Rahman, Lecturer, Department ofFinance, University of Dhaka, who has given us the option ofchoosing a topic related to “Law and Practice of Banking” and assignedus to work on it.

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LETTER OF TRANSMITTAL

January 23, 2013Md. Mukhlesur RahmanLecturerDepartment of FinanceUniversity of Dhaka.

Dear Sir,It is an immense pleasure for us to submit the term report on“Negotiable Instrument in Bangladesh”, which is prepared as apartial fulfillment of the requirement of course - “Law andPractice of Banking” of BBA program under Department ofFinance of the Faculty of Business Studies, University ofDhaka.

This study has given us the opportunity to learn theusefulness of negotiable instrument and its practices inBangladesh, indeed.

We would like to convey our special thanks and gratitude toyou for patronizing our effort & giving us proper guidance. Wehave tried our best to cover all the relevant fields. Weearnestly request you to call us if you think any further workshould be done on the topic of the report.

Sincerely yours,

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Name RollFARHANA RAHMAN 16-004FARHA FARZANA 16-006MD. RASEL MIAH 16-068

SADIA KAMAL SANCHITA 16-070MARUFA AKHTAR 16-132

16th Batch, Sec: BDepartment of Finance, Faculty of Business Studies,

University of Dhaka.

NO.

TOPIC TITLE PAGENO.

Executive Summary 1.

Introduction

2.

Meaning of Negotiable Instrument

3.

Definition of Negotiable Instrument

4.

Types of Negotiable Instruments

5.

Types of Negotiable Instrument in Bangladesh

6.

Presentment of Negotiable Instrument

Table of Contents

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7.

Laws regarding payment and interest

8.Laws Laws regarding discharge from

liabilities 9 Laws regarding notice of

dishonor 10 Laws regarding noting and

protesting11 Some Related Issues12 Bibliography

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Executive Summary

What the purpose of our report is to analyze the importanceand practices of negotiable instruments in our country.Negotiable instrument is a written instrument that is signedby the maker or drawer that includes an unconditional promiseor order to pay a specific sum of money and is payable toorder or to bearer on demand or at a definite time. NegotiableInstrument is guided by the Act 1881 which section 13 providesthat a “negotiable instrument” means a promissory note, billof exchange or cheque payable either to order or to bearer. InBangladesh these three types of instruments are available. Abill of exchange is an unconditional order to pay money to anotherperson on demand or at a fixed date and includes threeparties- drawer, acceptor and payee. It may be in variousforms like Inland bill, Foreign bill, Time bill, Demand bill,Trade bill, Accommodation bill, clean bill, Documentary bill,domicile Bill, Maturity or Due date of bill. On the other handcheque is an instrument in writing containing an unconditionalorder, addressed to a banker, sign by the person who has

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deposited money with the banker, requiring him to pay ondemand a certain sum of money only to or to the order ofcertain person or to the bearer of instrument. There aredifferent types of cheques depending on their features, dateof issue, negotiability etc. such as open cheque, crossedcheque, bearer cheque, order cheque, post dated cheque, antidated cheque and stale cheque. Like bill of exchange; chequealso includes three parties- drawer, drawee and payee. Whereasa promissory note is an instrument in writing containing anunconditional undertaking signed by the maker to pay a certainsum of money only to a certain person or the bearer of theinstrument. Promissory note involves three parties alsoincluding maker, payee and holder.

Negotiable Instrument involves two important activities-presentment of negotiable instrument & noting and protesting. Presentmentof a negotiable instrument means that it is placed before thedrawee / acceptor of a bill or cheque or the maker of apromissory note for- Acceptance, Sight or Payment. A bill ofexchange payable after sight must, if no time or place isspecified therein for presentment, be presented to the draweethereof for acceptance, if he can, after reasonable search, befound, by a person entitled to demand acceptance, within areasonable time after it is drawn, and in business hours on abusiness day. If the bill is directed to the drawee at aparticular place, it must be presented at that place. Apromissory note, payable at a certain period after sight, mustbe presented to the maker thereof for sight (if he can, afterreasonable search, be found) by a person entitled to demandpayment, within a reasonable time after it is made and inbusiness hours on a business day. In default of suchpresentment, no party thereto is liable thereon to the personmaking such default. promissory notes, bills of exchange andcheques must be presented for payment to the maker, acceptoror drawee thereof respectively, by or on behalf of the holderas hereinafter provided. In default of such presentment, theother parties thereto are not liable thereon to such holder.A

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negotiable instrument is dishonored by Non-Acceptance or Non-Payment. A bill of exchange is said to be dishonoured by non-acceptance when the drawee makes default in acceptance uponbeing duly required to accept the bill, or where presentmentis excused and the bill is not accepted. 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 ordrawee of the cheque makes default in payment upon being dulyrequired to pay the same. When a promissory note or bill ofexchange has been dishonoured by non-acceptance or non-payment, the holder may cause such dishonor to be noted by anotary public upon the instrument, or upon a paper attachedthereto, or partly upon each. When dishonoured by non-acceptance or non-payment, the holder may, within a reasonabletime, cause such dishonour to be noted and certified by anotary public and such certificate is called protest.

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Introduction

Origin of the Report

As a partial requirement of our B.B.A. program for the abovementioned course we are told to choose a topic on our own andthen prepare and submit the report to the honorable courseteacher.

Objective

The main purpose of this report is to gain knowledge onnegotiable instrument. In this regard this report includes theuses and features of negotiable instruments and theirpresentation and dishonoring.

Methodology

To prepare the report we have used both the primary andsecondary data. The primary data has been collected fromdifferent reference books of banking and law. And the

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secondary data has been collected from the Different websitesfrom internet.

Limitation

The laws regarding negotiable instrument in Bangladesh isa vast one, here we could not discuss all the provisionsof the act due to some constraints.

The report is prepared within a short time frame.

Negotiable Instruments – Meaning

To understand the meaning of negotiable instruments let ustake a few examples of day-to-day business transactions.Suppose Mr. Rahman, a book publisher has sold books to Mr.Kibria for Tk 10,000/- on three months credit. To be sure thatMr. Kibria will pay the money after three months, Mr. Rahmanmay write an order addressed to Mr. Kibria that he is to payafter three months, for value of goods received by him,Tk.10,000/- to Mr. Rahman or anyone holding the order andpresenting it before him (Mr. Kibria) for payment. Thiswritten document has to be signed by Mr. Kibria to show hisacceptance of the order. Now, Mr. Rahman can hold the documentwith him for three months and on the due date can collect themoney from Mr. Kibria. He can also use it for meetingdifferent business transactions.

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For instance, after a month, if required, he can borrow moneyfrom Sumon for a period of two months and pass on thisdocument to Sumon. He has to write on the back of the documentan instruction to Mr. Kibria to pay money to Sumon, and signit. Now Sumon becomes the owner of this document and he canclaim money from Mr. Kibria on the due date. Sumon, ifrequired, can further pass on the document to Amin afterinstructing and signing on the back of the document. Thispassing on process may continue further till the final paymentis made.

In the above example, Mr. Kibria who has bought books worthTk. 10,000/- can also give anundertaking stating that after three month he will pay theamount to Mr. Rahman. Now Mr. Rahman can retain that documentwith himself till the end of three months or pass it on toothers for meeting certain business obligation (like withSumon, as discussed above) before the expiry of that threemonths time period. You must have heard about a cheque. Whatis it? It is a document issued to a bank that entitles theperson whose name it beaTk to claim the amount mentioned inthe cheque. If he wants, he can transfer it in favour ofanother person. For example, if Akash issues a cheque worthTk. 5,000/ - in favour of Bidhan, then Bidhan can claim Tk.5,000/- from the bank, or he can transfer it to Chander tomeet any business obligation, like paying back a loan that hemight have taken from Chander. Once he does it, Chander gets aright to Tk. 5,000/- and he can transfer it to Dayanand, ifrequired. Such transfers may continue till the payment isfinally made to somebody.

In the above examples, we find that there are certaindocuments used for payment in businesstransactions and are transferred freely from one person toanother. Such documents are calledNegotiable Instruments. Thus, we can say negotiable instrumentis a transferable document,where negotiable means transferable and instrument meansdocument. To elaborate it further, an instrument, as mentionedhere, is a document used as a means for making some paymentand it is negotiable i.e., its ownership can be easilytransferred.

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Thus, negotiable instruments are documents meant for makingpayments, the ownership of which can be transferred from oneperson to another many times before the final payment is made.

Negotiable Instruments – Definition

“Negotiable” means transferable by delivery and “instrument”means a written document by which a right is created in favourof some person. Thus, etymologically negotiable instrument isa document transferable by delivery by which a sort of rightis created in favour of some person. Section 13 of theNegotiable Instruments Act, 1881 provides that a “negotiableinstrument” means a promissory note, bill of exchange orcheque payable either to order or to bearer.

Justice K. C. Willis says, “one the property in which isacquired by anyone who takes it bonafide and for valuenotwithstanding any defect in title in the person from whom hetook it.”  

Thomas defines it in his book “Commerce, Its theory andPractice  “A negotiable instrument is one which is, by alegally recognized custom of trade or by law, transferable bydelivery in such circumstances that (a) the holder of it forthe time being may sue on it in his own name and (b) theproperty in it passes, free from equities, to a bona-fidetransferee for value, notwithstanding any defect in the titleof the transferor.”

Some words expressing negotiability are-

I. Pay to XII. Pay to X or order

III. Pay to X or bearer/orderIV. Pay to X only

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V. An instrument Crossed, “Account payee only”

But the said definitions do not reflect the true nature of anegotiable instrument. In order to have a concrete idea aboutnegotiable instrument, we may quote the following definitionfrom the Black’s Law Dictionary:

“ Negotiable instrument is a written instrument that-

Þ    is signed by the maker or drawer,

Þ    includes an unconditional promise or order to pay aspecific sum of money,

Þ    is payable on demand or at a definite time, and

Þ    is payable to order or to bearer.”

 Negotiable instrument is also termed as negotiable paper ornegotiable note.        

Types of Negotiable Instruments

There are mainly three types of Negotiable Instruments:

Promissory Notes: A promissory note is an instrument in writingcontaining an unconditional undertaking signed by the maker topay a certain sum of money only to a certain person or thebearer of the instrument.

Bill of Exchange: A bill of exchange is an instrument in writingcontaining an unconditional order, signed by the maker,directing a certain person to pay another person a certain sumof money.

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Generally, there are four types of Bills of Exchange:-

I. Inland and Foreign Bills,II. Time and Demand Bills,

III. Trade Bills and Accommodation Bills,IV. Clean Bills and Documentary Bills.

Cheque: A cheque is a bill of exchange on a specified bankerand not expressed to be payable otherwise than on demand.

Types of Negotiable Instruments in BANGLADESH

The law relating to Negotiable Instrument in Bangladesh iscontained in the Negotiable Instrument Act,1881.

The types of Negotiable Instruments used in Bangladesh, theirfetures, specimen and all other details are discussed below:

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Promissory Note

Definition: A promissory note is a written document containing anunconditional promise, signed by the maker, to pay a certainsum of money only to, or to the order of certain person, or tothe bearer of the instrument.

Parties involved in a Promissory Note: The parties involved in apromissory note are-

Maker: The individual who promises to pay.

Payee: The person to whom payment is promised.

Holder: The person who holds the instrument at the time ofpayment. If the payee holds the instrument till the time ofpayment, then s/he is the holder also.

Features: The essential features that make a promissory note avalid one is stated below-

1. The promissory note must be in writing2. It must contain an express promise or clear undertaking

to pay3. The promise to pay must be definite and unconditional4. The maker of the pro-note must be certain5. It should be signed by the maker6. The amount must be certain7. The promise should be to pay money8. The payee must be certain9. It should bear the required stamping10. It should be dated11. A certain rate of interest

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Specimen of a Promissory Note:

Bill of Exchange

Definition: A written order from one person (the payer) toanother, signed by the person giving it, requiring the personto whom it is addressed to pay on demand or at some fixedfuture date, a certain sum of money, to either the personidentified as payee or to any person presenting the bill ofexchange.

Types of Bill of Exchange: In Bangladesh the following types ofBills of Exchange are widely used:-

Inland bill: As per section 11 of N.I. Act, “A promissory noteor bill of exchange or cheque drawn or made in Bangladesh andmade payable in or drawn upon any person resident inBangladesh shall be deemed to be an inland instrument.

Foreign bill: As per section 12 of N.I. Act, “Any such

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instrument not so drawn, made or made payable shall be deemedto be a foreign instrument.” For example, a bill drawn inBangladesh but accepted in England or vice versa is a foreignbill.

Time bill: A bill is said to be time bill which is payable ata determinable future time. It is also termed as Documentagainst acceptance (D.A bill). Time bill also called Usancebill.

Demand bill: A bill is said to be demand bill which is payableon demand or at sight or on presentation and when no time forpayment is specified in it. Demand bill also termed as Sightbill.

Trade bill: A bill drawn and accepted for a genuine tradetransaction is termed as trade bill.

Accommodation bill: A bill drawn and accepted not for agenuine trade transaction but only to provide financial helpto some party is termed as an accommodation bill.

Clean bill: A bill which has no documents attached is calledclean bill.

Documentary bill: A bill which has documents attached iscalled Documentary bill.

Domicile Bill: A domicile bill is one which is payable at aplace other than the acceptors usual residence or businessplace.

Maturity or Due date of bill: Maturity date is the date on

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which a Bill of Exchange is payable. In calculating the duedate of a bill calendar months are reckoned.

Parties involved in a Bill of Exchange: Here is the list of parties to abill of exchange-

Drawer – It is the person who is the maker of the bill ofexchange. It is the person who has sold the goods and forreceiving the payment from the debtor he draws a bill ofexchange.

Drawee or Acceptor – It is the person on whom the bill ofexchange is drawn and he has to make the payment to thesupplier of goods.

Payee – It is the person to whom the payment has to be made.It may be the drawer himself if he has not discounted the billwith any third party.

Indorser - When the holder transfers or indorses theinstrument to anyone else, the holder becomes the ‘indorser’.

Indorsee - The person to whom the bill is indorsed is calledan ‘indorsee’.

Holder - A person who is legally entitled to the possessionof the negotiable instrument in his own name and to receivethe amount thereof, is called a ‘holder’. He is either theoriginal payee, or the indorsee. In case the bill is payableto the bearer, the person in possession of the negotiableinstrument is called the ‘holder’.

Drawee in case of need - When in the bill or in anyendorsement, the name of any person is given, in addition tothe drawee, to be resorted to in case of need, such a personis called ‘drawee in case of need’. In such a case it isobligatory on the part of the holder topresent the bill to such a drawee in case the original draweerefuses to accept the bill. The bill is taken to bedishonoured by non-acceptance or for nonpayment, only whensuch a

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drawee refuses to accept or pay the bill.

Acceptor for honour - In case the original drawee refuses toaccept the bill or to furnish better security when demanded bythe notary, any person who is not liable on the bill, mayaccept it with the consent of the holder, for the honour ofany party liable on the bill. Such an acceptor is called‘acceptor for honour’.

Features of a Bill of Exchange: The essential characteristics of apromissory note may be summarized as follows:

1. It must be in writing

2. It must certain a promise or undertaking to pay

3. The promise to pay must be unconditional

4. It must be signed by the maker

5. The maker must be a certain person

6. The payee must be certain

7. The sum payable must be certain

Specimen:

Time bill of exchange:

Tk.10,000/- Dhaka

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28.8.2007Three months after date pay to Mr. Karim a sum of Taka Ten thousand only, Value received.

ToMr. XStampAddress                      

Demand bill of exchange:

Tk.10,000/- Dhaka 28.8.2007On demand pay to Mr. Karim or order a sum of Taka Ten thousand only, value received.

ToMr. XStampAddressSd/-Mr. Y

Cheque

Definition: According to the negotiable instruments act 1881,section 6,“ a cheque is a bill of exchange drawn on a

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specified banker and not expressed to be payable otherwisethan on demand.”

In other words, Cheque is an instrument in writing containingan unconditional order, addressed to a banker, sign by theperson who has deposited money with the banker, requiring himto pay on demand a certain sum of money only to or to theorder of certain person or to the bearer of instrument. It isan important document for any transaction in the businessworld.

Types of Cheques: There are different types of cheques dependingon their features, date of issue, negotiability etc. They are,namely-

1. Bearer Cheque: When the words "or bearer" appearing on theface of the cheque are not cancelled, the cheque is called abearer cheque. The bearer cheque is payable to the personspecified therein or to any other else who presents it to thebank for payment. However, such cheques are risky, this isbecause if such cheques are lost, the finder of the cheque cancollect payment from the bank.

2. Order Cheque: When the word "bearer" appearing on the faceof a cheque is cancelled and when in its place the word "ororder" is written on the face of the cheque, the cheque iscalled an order cheque. Such a cheque is payable to the personspecified therein as the payee, or to any one else to whom itis endorsed (transferred).

3. Uncrossed / Open Cheque: When a cheque is not crossed, itis known as an "Open Cheque" or an "Uncrossed Cheque". Thepayment of such a cheque can be obtained at the counter of thebank. An open cheque may be a bearer cheque or an order one.

4. Crossed Cheque: Crossing of cheque means drawing twoparallel lines on the face of the cheque with or withoutadditional words like "& CO." or "Account Payee" or "NotNegotiable". A crossed cheque cannot be encashed at the cash

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counter of a bank but it can only be credited to the payee'saccount.

5. Anti-Dated Cheque: If a cheque bears a date earlier thanthe date on which it is presented to the bank, it is called as"anti-dated cheque". Such a cheque is valid upto six monthsfrom the date of the cheque.

6. Post-Dated Cheque: If a cheque bears a date which is yet tocome (future date) then it is known as post-dated cheque. Apost dated cheque cannot be honoured earlier than the date onthe cheque.

7. Stale Cheque: If a cheque is presented for payment aftersix months from the date of the cheque it is called stalecheque. A stale cheque is not honoured by the bank.

Parties involved in a cheque: There are three parties involved in acheque. They are as follows-

Drawer: Drawer is the party who draws the cheque upon asoecified banker. He is the maker of the cheque. He is theaccount holder who draws the cheque for drawing money from hisbank account.

Drawee: Drawee is the party upon whom the cheque is drawn.Drawee is the bank. It is the party to whom the drawer givesorder to pay the amount to the person named on the cheque orhis order to the bearer.

Payee: Payee is the party who presents the cheque for payment.He is the person who receives money from bank. He is the partyin favor of whom cheque is issued. The payee is the personwhose name is mentioned on the cheque. If the cheque is madepayable to self, the drawer himself becomes the payee.

Features of a cheque: As a negotiable instrument, cheque has somany features. But, apart from those features, cheque has two

Dutch-Bangla Bank Limited Current Account No.

Uttara Branch, Dhaka

Date 06/06/2007

Tk. 25,000/=

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distinctive features that has made it different from othernegotiable instruments. These distinctive features are-

1) It is always drawn on a bank2) It is always payable on demand

Other essential features of a cheque are as follows-

1) A cheque is printed paper

2) On the printed paper it specifies the bank and branch

address

3) It must be in writing

4) A cheque is always drawn on a banker

5) A cheque can only be drawn payable on demand

6) It must have a date

7) Cheque no is also exist

8) It must contain an order to pay

9) It includes an account no of owner of the account holder

10) The order to pay must be unconditional

11) The sun payable must be certain

12) A cheque must contain an order to pay money only

Specimen of a Cheque:

1 1 7 . 1 0 2 . 1 2 3 4 5

Pay to Abdullah Al-Mahmud or bearer

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The sum of Taka Twenty five only

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Presentment of Negotiable Instruments

Presentment of a negotiable instrument means that it is placedbefore the drawee / acceptor of a bill or cheque or the makerof a promissory note for- 1) Acceptance, 2) Sight or 3)Payment.

According to the law of Bangladesh (Negotiable Instrument Act,1881), the provisions for acceptance, sight and payment arestated below-

Presentment for Acceptance

According to Section 61, the laws regarding presentment foracceptance are as follows-

When no time/place is specified: A bill of exchange payableafter sight must, if no time or place is specified therein forpresentment, be presented to the drawee thereof foracceptance, if he can, after reasonable search, be found, by aperson entitled to demand acceptance, within a reasonable timeafter it is drawn, and in business hours on a business day. Indefault of such presentment, no party thereto is liablethereon to the person making such default.

If the drawee cannot, after reasonable search, be found, thebill is dishonoured.

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When time/place is specified: If the bill is directed to thedrawee at a particular place, it must be presented at thatplace; and if at the due date for presentment he cannot, afterreasonable search, be found there, the bill is dishonoured.

Where authorized by agreement or usage, a presentment throughthe post office by means of a registered letter is sufficient.

Presentment for Sight

Section 62: A promissory note, payable at a certain periodafter sight, must be presented to the maker thereof for sight(if he can, after reasonable search, be found) by a personentitled to demand payment, within a reasonable time after itis made and in business hours on a business day. In default ofsuch presentment, no party thereto is liable thereon to theperson making such default.

Drawee’s time for deliberation (section 63): The holder must,if so required by the drawee of a bill of exchange presentedto him for acceptance, allow the drawee forty-eight hours(exclusive of public holydays) to consider whether he willaccept it.

Presentment for Payment

Subject to the provisions of section 76, promissory notes,bills of exchange and cheques must be presented for payment tothe maker, acceptor or drawee thereof respectively, by or onbehalf of the holder as hereinafter provided. In default ofsuch presentment, the other parties thereto are not liablethereon to such holder.

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Exception- Where a promissory note is payable on demand and isnot payable at a specified place, no presentment is necessaryin order to charge the maker thereof nor is presentmentnecessary to charge the acceptor of a bill of exchange.

Hours of presentment (section 65): Presentment for paymentmust be made during the usual hours of business, and, if at abanker’s within banking hours.

Presentment for payment after date/sight (section 66): Apromissory note or bill of exchange, made payable at aspecified period after date or sight thereof, must bepresented for payment at maturity.

Presentment for payment of promissory note payable byinstallments (section 67): A promissory note payable byinstallments must be presented for payment on the third dayafter the date fixed for payment of each installment; and non-payment of such presentment has the same effect as non-paymentof a note at maturity.

Presentment for payment when payable at a specified place andnot elsewhere (section 68): A promissory note, bill ofexchange or cheque made, drawn or accepted payable at aspecified place and not elsewhere must, in order to charge anyparty thereto, be presented for payment at that place.

Instrument payable at specified place (section 69): Apromissory note or bill of exchange made, drawn or acceptedpayable at a specified place must, in order to charge themaker or drawer thereof, be presented for payment at thatplace.

Presentment where no exclusive place specified (section 70): Apromissory note or bill of exchange, not made payable asmentioned in sections 68 and 69, must be presented for paymentat the address of the maker, acceptor or drawee given in theinstrument, and if no such address is given at the place ofbusiness if known, or at the ordinary residence (if known), ofthe maker, drawee or acceptor thereof, as the case may be.

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Presentment when maker, etc., has no known place of businessor residence (section 71): If the maker, drawee or acceptor ofa negotiable instrument has no known place of business orresidence, and no place is specified in the instrument forpresentment for acceptance or payment, such presentment may bemade to him in person wherever he can be found.

Presentment of cheque to charge drawer (section 72): Subjectto the provisions of section 84, a cheque must, in order tocharge the drawer, be presented at the bank upon which it isdrawn before the relation between the drawer and his bankerhas been altered to the prejudice of the drawer.

Presentment of cheque to charge any other person (section 73):A cheque must, in order to charge any person except thedrawer, be presented within a reasonable time after deliverythereof by such person.

Presentment of instrument payable on demand (section 74):Subject to the provisions of section 31, a negotiableinstrument payable on demand must be presented for paymentwithin a reasonable time after it is received by the holder.

Presentment by or to agent, representative of deceased orassignee of insolvent (section 75): Presentment for acceptanceor payment may be made to the duly authorized agent of thedrawee, maker or acceptor, as the case may be, or, where thedrawee, maker or acceptor has died, to his legalrepresentative, or, where he has been declared an insolvent,to his assignee.

What constitutes valid Presentment and mode of presentment

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Section 71A(1) and 71A(2) specifies what is meant to be validpresentment and what should be the proper mode of presentment-

Section 71A(1): To constitute a valid presentment it shall besufficient if instead of the original negotiable instrument acopy thereof certified to be true by the holder is deliveredto the person liable thereon, either personally or byregistered post or by other effective means.

Section 71A(2): If, after such delivery, the person liable topay so demands, the holder shall allow him to inspect theoriginal negotiable instrument during the hours of business ofthe holder, and if the holder fails to do so within areasonable time, the presentment shall be deemed to beinvalid.

Excuse for delay in Presentment for acceptance/payment

Section 75A describes, “ Delay in presentment for acceptanceor payment is excused if the delay is caused by circumstancesbeyond the control of the holder, and not imputable to hisdefault, misconduct or negligence. When the cause of delayceases to operate, presentment must be made within areasonable time.

When Presentment for Payment is unnecessary

Section 76 states- No presentment for payment is necessary,and the instrument shall be deemed to be dishounered at thedue date for presentment, in any of the following cases-

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(a) (1). If the maker, drawee or acceptor intentionallyprevents the presentment of the instrument, or,(2). If the instrument being payable at his place ofbusiness, he closes such place on a business day duringthe usual business hours, or,(3). If the instrument being payable at some otherspecified place, neither he nor any person authorized topay it attends at such place during the usual businesshours, or(4). If the instrument not being payable at any specifiedplace, he cannot after due search be found.

(b) As against any party sought to be charged therewith,if he has engaged to pay notwithstandingnon-presentment.

(c) As against any party if, after maturity, withknowledge that the instrument has not been presented-He makes a part payment on account of the amount due onthe instrument, or promises to pay the amount due thereonin whole or in part.Or, otherwise waives his right to take advantage of anydefault in presentment for payment.

(d) As against the drawer, if the drawer could notsuffer damage from the want of such presentment.

(e) Where the drawee is a fictitious person.(f) As regards an indorser, where the negotiable

instrument was made, drawn or accepted for theaccommodation of that indorser and he had reason toexpect that the instrument would not be paid ifpresented; and

(g) Where, after the exercise of reasonable diligence,presentment as required by this Act cannot be effected.

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Negotiable Instruments- Laws regardingPayment and Interest

To whom payment should be maid (section 78): Subject to theprovisions of section82, clause (c), payment of the amount dueon a promissory note, bill of exchange or cheque must, inorder to discharge the maker or acceptor, be made to theholder of the instrument.

Interest when rate specified or not specified (section79):subject to the provisions of any law for the time being inforce relating to the relief of debtors, and without prejudiceto the provisions of section 34 of the code of CivilProcedure, 1908,-

(a) When interest at a specified rate is expressly madepayable on a promissory note or bill of exchange and nodate is fixed from which interest is to be paid, interestshall be calculated at the rate specified, on the amountof the principal money due thereon, from the date of thenote, or, in the case of a bill, from the date on whichthe amount becomes payable, until tender or realizationof such amount, or until the date of the institution of asuit to recover such amount.

Negotiable Instruments- Laws regarding discharge from liabilities

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Section 82 of Negotiable Instrument Act, 1881 specifies, themaker, acceptor or indorser respectively of a negotiableinstrument is discharged from liability thereon-

(a) By Cancellation: To a holder thereof who cancels suchacceptor's or indorser's name with intent to dischargehim, and to all parties claiming under such holder;

(b) By Release: To a holder thereof who otherwisedischarges such maker, acceptor or indorser, and to allparties deriving title under such holder after notice ofsuch discharge;

(c) By Payment: To all parties thereto, if the instrumentis payable to bearer, or has been indorsed in blank, andsuch maker, acceptor or indorser makes payment in duecourse of the amount due thereon.

Discharge by allowing drawee more than forty-eight hours toaccept (section 83): If the holder of a bill of exchangeallows the drawee more than forty-eight hours, exclusive ofpublic holidays, to consider whether he will accept thesame, all previous parties not consenting to such allowanceare thereby discharged from liability to such holder.

Negotiable Instruments- Laws of Notice ofDishonour

Modes of dishonor: A negotiable instrument is dishonoured by,Non-Acceptance, or Non-Payment.

Dishonor by non-acceptance (section 91): A bill of exchange issaid to be dishonoured by non-acceptance when the drawee, orone of several drawees not being partners, makes default inacceptance upon being duly required to accept the bill, orwhere presentment is excused and the bill is not accepted.

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Where the drawee is incompetent to contract, or the acceptanceis qualified, the bill may be treated as dishonoured.

Dishonour by non-payment (section 92): 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 ordrawee of the cheque makes default in payment upon being dulyrequired to pay the same.

By and to whom the notice should be given: When a promissory note, billof exchange or cheque is dishonoured by non-acceptance or non-payment, the holder thereof, or some party thereto who remainsliable thereon, must give notice that the instrument has beenso dishonoured to all other parties whom the holder seeks tomake severally liable thereon, and to some one of severalparties whom he seeks to make jointly liable thereon.

When a bill of exchange is dishonoured by non-acceptance thedrawer or any indorser to whom such notice is not given isdischarged; but the rights of a holder in due coursesubsequent to the omission to give notice shall not beprejudiced by that omission.

When a bill of exchange is dishonoured by non-acceptance anddue notice of dishonour is given, it shall not be necessary togive notice of a subsequent dishonour by non-payment, unlessthe bill shall, in the meantime, have been accepted.

Mode in which notice may be given: Notice of dishonour may be givento a duly authorised agent of the person to whom it isrequired to be given, or, where he has died, to his legalrepresentative, or, where he has been declared an insolvent,to his assignee; may be oral or written; may, if written, besent by post; and may be in any form; but it must inform theparty to whom it is given, either in express terms or byreasonable intendment, that the instrument has been

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dishonoured, and in what way, and that he will be held liablethereon; and it must be given within a reasonable time afterdishonour, at the place of business or (in case such party hasno place of business) at the residence of the party for whomit is intended.

If the notice is duly directed and sent by post andmiscarries, such miscarriage does not render the noticeinvalid.

When notice of dishonor is unnecessary: According to section 98, nonotice of dishonor is necessary, when-

(a) when it is dispensed with by the party entitled thereto;

(b) in order to charge the drawer when he has countermanded payment;

(c) when the party charged could not suffer damage for want ofnotice;

(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.

Laws of Noting and Protesting

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Noting (section 99): When a promissory note or bill of exchange hasbeen dishonoured by non-acceptance or non-payment, the holdermay cause such dishonour to be noted by a notary public uponthe instrument, or upon a paper attached thereto, or partlyupon each.

Such note must be made within a reasonable time afterdishonour, and must specify the date of dishonour, the reason,if any, assigned for such dishonour, or, if the instrument hasnot been expressly dishonoured, the reason why the holdertreats it as dishonoured, and the notary's charges.

Protest (section 100): When a promissory note or bill of exchangehas been dishonoured by non-acceptance or non-payment, theholder may, within a reasonable time, cause such dishonour tobe noted and certified by a notary public. Such certificate iscalled a protest.

Contents of protest (section 101): A protest under section 100 mustcontain-

(a) either the instrument itself, or a literaltranscript of the instrument and of everything written orprinted thereupon; (b) the name of the person for whom and against whom theinstrument has been protested;

(c) a statement that payment or acceptance, or bettersecurity, as the case may be, has been demanded of suchperson by the notary public; the terms of his answer, ifany, or a statement that he gave no answer or that he

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could not be found;

(d) when the note or bill has been dishonoured, the placeand time of dishonour, and, when better security has beenrefused, the place and time of refusal;

(e) the subscription of the notary public making theprotest;

(f) in the event of an acceptance for honour or of apayment for honour, the name of the person by whom, ofthe person for whom, and the manner in which, suchacceptance or payment was offered and effected.

A notary public may make the demand mentioned in clause(c) of this section either in person or by his clerk or,where authorised by agreement or usage, by registeredletter.

When noting equivalent to protest (section 104A): where a bill or noteis required to be protested within a specified time orbefore some further proceeding is taken, it is sufficientthat the bill has been noted for protest before theexpiration of the specified time or the taking of theproceeding; and the formal protest may be extended at anytime thereafter as of the date of the noting.

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Some Related Issues

Holder: The “holder” of a promissory note, bill of exchange orcheque means the payee or indorsee who is in possession of itor the bearer thereof but does not include a beneficial ownerclaiming through a benamidar.

Holder in due course: “Holder” in due course” means any personwho for consideration becomes the possessor of a promissorynote, bill of exchange or cheque if payable to bearer, or thepayee or indorsee thereof, if payable to order, before itbecame overdue, without notice that the title of the personfrom whom he derived his own title was defective.

Payment in due course: Means payment in accordance with theapparent tenor of the instrument in good faith and withoutnegligence to any person in possession thereof undercircumstances which do not afford a reasonable ground forbelieving that he is not entitled to receive payment of theamount therein mentioned.

Indorsement: When the maker or holder of a negotiableinstrument signs the same, otherwise than as such maker, forthe purpose of negotiation, on the back or face thereof or ona slip of paper annexed thereto, or so signs for the samepurpose a stamped paper intended to be completed as anegotiable instrument, he is said to indorse the same, and iscalled the “indorser”.

Holder for value: One who has given a legal consideration fora negotiable instrument is a holder for value. The holder of anegotiable note taken as collateral security for a preexistingdebt is a holder for value in due course of business.Similarly, an endorsee of a negotiable note taken as

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collateral security for a preexisting debt, there being noextension of time of payment or other new consideration exceptsuch as may be deemed to arise from the acceptance of thepaper, is a holder for value.

Bibliography

Web-sites:

http://bdlaws.minlaw.gov.bd http://definitions.uslegal.com http://dictionary.findlaw.com

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