Presentment
of Negotiable Instrument
By
Asok Nadhani
4.1
Presentment of Negotiable Instrument
Presentment
means showing an instrument to the drawee, acceptor or maker for acceptance,
sight or payment.
4.2
Kinds of Presentment
-
Presentment of bills of exchange for
acceptance.
-
Presentment of promissory notes for
sight.
-
Presentment for payment.
4.3
Presentment for Acceptance
Certain
instruments require acceptance. The drawee puts his signature signifying his assent
and the bill is considered to be accepted. Sometimes, the word 'accepted'
is also added (though not mandatory).The drawee accepting bill is now known Acceptor.
4.3.1
Essentials of a valid acceptance
i. Signed: The instrument
is validly accepted only when it is signed by the drawee or by a duly
authorised agent. In case of a bill drawn in set, the-acceptance should be put
on one part only, otherwise he becomes liable to all the parts.
ii. Delivery: The acceptance
comes into effect when the accepted bill is delivered to the holder.
iii.
Acceptance: Acceptance must be appeard on the bill that is it
not important that the acceptance not be on the face of the bill. The assent of
acceptance, written on the back of a bill, is also a sufficient acceptance in
law.
iv.
Time: A bill, if no time is given therein for
presentment be presented for acceptance within a reasonable time after it is
drawn.
v.
Place: The bill should be presented for acceptance at the
placed mentioned therein. If no place is mentioned the bill should be presented
at the drawees place of business.
vi.
Bills in set: Where a bill is drawn in sets, the acceptance
should be put on one part only.
vii. Way of making: Acceptance may
be absolute or conditional.
4.3.2
When presentation for acceptance is not necessary
The
following type of Bills need not be presented for acceptance unless it is
specifically mentioned:
-
Bill payable on demand
-
Bill payable after specified number of
days
-
Bill payable on specified fixed date.
4.3.3
When a bill must be presented
a.
In the following cases, the must be presented to
make the party liable:
i.
Bill payable at specified days after
sight, or after presentment (Sec. 61)
ii.
Where there is an express stipulation
for presentment for acceptance before it is presented for payment.
b.
Even if the presentment is not
mandatory, it is always desirable to get a bill accepted as soon as possible,
because it provides:
i.
additional security of the acceptor's
name on the bill
ii.
immediate right of recourse against the
drawer and the other parties on dishonour.
c.
Presentment for acceptance must be made
at a reasonable hour on a business day and before the bill is overdue (Sec.
61).
4.3.4 Types of Acceptance
An
acceptance may be:
General
Qualified
4.3.4.1
General Acceptance
Where
the drawee accepts the bill without attaching any qualification or condition,
it is called as general acceptance.
4.3.4.2
Qualified Acceptance
If
the drawee writes some conditions while giving his acceptance, it is called
qualified acceptance
An
acceptance is qualified in the following cases –
i. Conditional
: If drawee puts a condition that payment depends on the happening
of an event (e.g when a cargo consigned is sold).
ii. Partial
: If the drawee accepts the bill only for the part of the sum
stated in the bill (bill drawn for Rs.5000 accepted for Rs.2000 only).
iii. Qualified
as to place : If the drawee places a condition that the bill will be paid
at a specified place (eg.’Payable at Bank of Baroda, Calcutta
iv. Qualified
as to time : A condition to pay at a time other than that specified in
the Bill (e.g. A bill drawn payable
three months after date but accepted as payable after six months from date).
v. Joint
Drawees: Where the bill is not accepted by all the named drawees (e.g.
Bill drawn on E, F and G but accepted by
E only).
4.3.5
Presentment for acceptance to whom
Presentment
for acceptance may be made to—
a.
the drawee
b.
all or some of several drawees
c.
drawee in case of need (Sec 33)
d.
all the drawees, if there are several
drawees, unless they are partners or agents (Sec. 34)
e.
the duly authorised agent of the drawee
f.
legal representative if the drawee has
died
g.
Official Receiver or Assignee, if the
drawee is declared insolvent (Sec. 75).
4.3.6
Presentment to multiple Drawees
When
a Bill is drawn on several drawess, the following rules apply:
a. Where Drawees are Partners: If a bill is
addressed to several partners of a trading firm, it may be accepted by in the
name of the firm for its usual business, by any partner having an implied
authority to accept the bill.
b.
Where
drawees are not Partners :
Where there are several drawees of a bill who are not partners, each of them
can accept it for himself but none of them can accept it for another without
his authority (Sec. 34).
4.3.7
Place and Time for Presentment for acceptance
a.
Time
of Presentment:
i. If
the presentment of acceptance time is specified, It must be presented accordingly
ii. If
the bill is payable after sight, it must
be presented within a reasonable time after it is drawn
iii. In
other cases, it may be presented at any time before payment.
iv. It must be
presented before maturity.
v. The bill should
be presented on a business day and within business hour.
vi. The
holder must allow the drawee forty-eight hours (exclusive of public holidays)
to decide for acceptance of the bill (Sec. 63).
b.
Place
of Presentment:
i. The
bill should be presented at the place specified
ii. If
no place for presentment is specified, the bill should be presented at the
drawee's place of business or residence.
4.3.8
Effect of non-presentment
If an Instrument is not presented where
the presentment is obligatory, the
drawer and all the indorsers are discharged from liability to him.
4.3.9
When presentment for acceptance is excused
a.
Presentment for acceptance is excused :
i. When
the drawee cannot, after reasonable search, be found, the bill is dishonoured
(Sec. 61).
ii. Where
the drawee is dead or insolvent (but must be presented to legal representative
or assignee)
iii. When
the drawee is a fictitious person
iv. Where,
though presentment has been irregular, acceptance has been refused on some
other ground.
v. For
a dishonoured bill, presentment for acceptance is excused.
b.
When presentment for acceptance is
excused, the bill is treated as dishonoured.
4.3.10
Acceptor for honour
A
person who accepts the bill for honour of any person is called 'acceptor for
honour' (Sec. 7, para 4).
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 indorser whom he names, or generally for honour (Sec. 109).
4.3.10.1
Conditions for valid acceptance for honour
i.
The bill must have been noted or
protested for non-acceptance or for better security.
ii.
The acceptance for honour must be made
with the consent of the holder.
iii.
It must clearly be stated on the Bill
that it is an acceptance for the honour of party who is already liable on the
bill.
iv.
It must be signed by the acceptor for
honour who must not already be liable on the bill (s.108).
Where
the acceptance does not state the Party for whose honour it is made, it is
deemed to be made for the honour of the drawer (Sec. 110).
4.3.10.2
Rights and Obligations of an acceptor for honour (Sec 111 and 112)
The
rights and obligations of an acceptor are as follows:
i. Rights of Acceptor for Honour (sec.111)
On paying the
bill, the acceptor for honour can sue the party for whose honour the bill is
accepted. Such party and all prior parties are liable to compensate the
acceptor for honour for any loss or damage caused to him
ii. Obligations of Acceptor for Honour (sec.112)
a.
An acceptor for honour binds himself to
pay the amount of the bill if the drawee does not pay the bill at maturity.
Thus the liability of ‘accept of honour ‘is conditional.
b.
An acceptor for honour is liable only
to the parties subsequent to the party for whose honour he accepts.
c.
An acceptor for honour is liable if :
i. On
maturity, the bill is presented to the drawee for payment.
ii.
The bill is dishonoured by non-payment
and noted or protested for such dishonour.
iii.
The bill is presented to the ‘acceptor
for honour’ for payment of the bill by the next working day of maturity.
4.4
Presentment for sight
a.
Presentment for sight is applicable to
Promissory Note as Acceptance is not applicable. The maker himself is
primarily liable for the note.
i. A
note payable at certain period after sight must be presented to the maker to
determine the maturity date.
ii. In
case of a note which is not payable at a certain period after sight, is not
needed to be presented.
b.
Presentment should be made during
business hours on a business day and in default of such presentment, no party
thereto is liable thereon to the person making such default (Sec. 62).
4.5
Presentment for Payment
i. Presentment
for payment means placing the negotiable instrument for payment to the person
liable to pay and delivery of the instrument when it is paid.
ii. Presentment
through post by registered letter is valid if authorised by agreement or usage
(Sec. 64).
iii. Where
a promissory note is payable on demand and is not payable at a specified place,
no presentment is necessary.
iv. If
an electronic image of a truncated cheque is presented for payment, the drawere
bank is entitled to demand the truncated cheque itself or any further information
in case of suspicion. [Ghania Lal vs. Karam Chand], [Srinivasa
Gownder vs Kannu Gownder]
4.5.1
Presentment for payment not necessary (Sec. 76)
a.
Presentment for payment is not
necessary when :
i.
The maker, drawee, or acceptor
intentionally prevents presentment of the instrument.
ii.
The place at which the instrument is
payable is closed on the due date during the usual business hours.
iii.
The instrument is payable at a
specified place, and neither he nor any person authorised to pay it, is present
at the specified place during the usual business hours.
iv.
The instrument is not payable at a
specified place, and the payer cannot after due search be found.
v.
There is a pomise to pay
notwithstanding non-presentment.
vi.
Presentment for payment is waived.
vii. The
bill is dishonoured by non-acceptance.
viii. The
drawer is a fictitious person (or the drawer and the drawee are same).
ix.
Presentment becomes impossible.
b.
In all these cases, the instrument is
deemed to be dishonoured on the due date of presentment for payment.
4.5.2
Rules regarding Presentment for payment
i.
Hours for presentment: The
presentment must be made during the usual hours of business, or during banking
hours in case of a cheque (Sec. 65).
ii.
Payable after date or sight: A
note or bill payable at a specified period after date or sight, must be
presented for payment at maturity (Sec. 66). Ex.4.1
iii.
Payable by instalments: A
note payable by instalments must be presented on third day after the date fixed
for payment of each instalment. In case of default, it has the same effect as
non-payment of a note at maturity (Sec. 67)
iv.
Place of presentment:
(a) Where
the place is specified it must be presented accordingly (Sees. 68 and 69) or
otherwise at the usual residence, as case may be.
(b) if no place is specified, it should be
presented at the place of business (if any), or at the usual residence of the
maker, drawee or acceptor, as the case may be (Sec. 70).
(c) in
any other case (i.e., where no place of business or any fixed residence is
there) the Instrument may be presented to him wherever he can be found.( Sec.
71).
v. Reasonable
time: The instrument must be presented within reasonable time in
the usual course of dealing with similar instrument. Public holidays shall be
excluded (Sec. 105)
vi. Presentment
of cheque: A
cheque must be presented at the bank where upon it is drawn before any
alteration in the relation between the drawer and his banker (Sec. 72). To
charge any other than drawer, the cheque must be presented within a reasonable
time after its delivery by such person (Sec. 73).
vii. Demand
Instrument: An Instrument payable on demand must
be presented for payment within a reasonable time after it is received by the
holder (Sec. 74).
viii. Presentment
to agent: Presentment may be made to the duly authorised agent,
representative, or to a assignee as the
case may be.( Sec. 75)
ix. Delay in
presentment: It is excused if the delay is caused by
circumstances beyond the control of the holder. But when the cause of delay
ceases to operate, presentment must be made within a reasonable time (Sec.
75-A).
x. Banker’s
Responsibility: In case of dishonour of the bill presented for payment, the
bank must take proper care of it and return it to the holder. If he
is negligent, he shall have to compensate the holder for such loss (Sec. 77).
4.5.3
Payment for honour
i. If a
person pays a bill for the honour of any party liable on the bill is called the
‘payment of honour’.
ii. The
Bill due for payment should be noted and protested after being dishonoured for
non-payment (or where drawee has failed to provide better security). It may be
paid by any other person for the Honour of the party liable to pay the Bill.
(Sec. 113)
iii. The payer for honour acquires the rights of the
holder for recovery of any sum paid by him along with interest and all expenses
incurred in relation to the honour. (s.114)
4.5.4 Rules for Delivery of Instrument
i. Any
person liable to pay the amount due on an instrument, is entitled to have it
delivered (in case of loss, be indemnified) before payment.
ii. In
case of electronic image of truncated cheque, the banker receiving payment is
entitled to retain the truncated cheque.
iii. Certificate
issued on foot of the printout of image of a truncated cheque is proof of
payment.
Ex: 4 Examples
Presentment of Bills
Ex.4.1 A bill was
accepted payable at Syndicate Bank. It fell due for payment on October 15 2000 but it was
not presented there till October
16 2004 . Held, the defendant indorser was discharged from liability.
[(Sec. 66)] [Ref. 4.5.2 (ii)]
For more details, refer
to Business & Corporate Laws by Asok Nadhani, BPB Publications, www.bpbonline.com,
bpbpublications@gmail.com
