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,
indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.
Minor.—A minor may draw, indorse, deliver and negotiate such instrument so as to bind all parties
except himself.
Nothing herein contained shall be deemed to empower a corporation to make, indorse or accept such
instruments except in cases in which, under the law for the time being in force, they are so empowered.
27. Agency.— Every person capable of binding himself or of being bound, as mentioned in section
26, 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 indorse.
28. Liability of agent signing.—An agent who signs his name to a promissory note, bill of exchange
or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur
personal responsibility, is liable personally on the instrument, except to those who induced him to sign
upon the belief that the principal only would be held liable.
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.
30. Liability of drawer.—The drawer of a bill of exchange or cheque is bound, in case of dishonour
by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been
given to, or received by, the drawer as hereinafter provided.
31. Liability of drawee of cheque.—The drawee 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 loss or damage caused by such default.
32. Liability of maker of note and acceptor of bill.—In the absence of a contract to the contrary, the
maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the
amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the
acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand.
In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to
the note or bill for any loss or damage sustained by him and caused by such default.
1. The words “New Year's day, Christmas day: if either of such days falls on a Sunday, the next following Monday: GoodFriday:” omitted by Act 37 of 1955, s. 3 (w.e.f. 1-4-1956).
2. Subs by the A.O. 1937, for “L.G”.
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33. Only drawee can be acceptor except in need or for honour.—No person except the drawee of
a bill 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. 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 indorser.—In the absence of a contract to the contrary, whoever indorses and delivers a
negotiable instrument before maturity without, in such it indorsement, expressly excluding or making
conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the
drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such
dishonour, provided due notice of dishonour has been given to, or received by, such indorser as hereinafter
provided.
Every indorser after dishonour is liable as upon an instrument payable on demand.
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 of a contract to the contrary,
respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for
the maker, drawer or acceptor, as the case may be.
38. Prior party a principal in respect of each subsequent party.—As between the parties so liable
as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a
principal debtor in respect of each subsequent party.
Illustration
A draws a bill payable to his own order on B, who accepts. A afterwards indorses the bill to C, C to D, and D to E. As
between E and B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C
and D are his sureties. As between E and C, C is the principal debtor and D is his surety.
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 (9 of 1872), would discharge
the other parties, the holder may expressly reserve his right to charge the other parties, and in such case
they are not discharged.
40. Discharge of indorser's liability.—Where the holder of a negotiable instrument, without the
consent of the indorser, destroys or impairs the indorser’s remedy against a prior party, the indorser is
discharged from liability to the holder to the same extent as if the instrument had been paid at maturity.
Illustration
A is the holder of a bill of exchange made payable to the order of B, which contains the following indorsements in
blank:—
First indorsement, “B”.
Second indorsement, “Peter Williams”.
Third indorsement, “Wright & Co.”
Fourth indorsement. “John Rozario”.
This bill A puts in suit against John Rozario and strikes out, without John Rozario's consent, the indorsements by Peter
Williams and Wright & Co. A is not entitled to recover anything from John Rozario.
41. Acceptor bound, although, indorsement forged.—An acceptor of a bill of exchange already
indorsed is not relieved from liability by reason that such indorsement is forged, if he knew or had reason
to believe the indorsement 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 any holder in due course claiming under an indorsement by the same hand as the drawer's
signature, and purporting to be made by the drawer.
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43. Negotiable instrument made, etc., without consideration.—A negotiable instrument made,
drawn, accepted, indorsed 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 indorsement to a holder for consideration, such holder, and every subsequent
holder deriving title from him, may recover the amount due on such instrument from the transferor for
consideration or any prior party thereto.
Exception I.—No party for whose accommodation a negotiable instrument has been made, drawn,
accepted or indorsed can, if he have paid the amount thereof, recover thereon such amount from any
person who became a party to such instrument for his accommodation.
Exception II.—No party to the instrument who has induced any other party to make, draw, accept, indorse
or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover
thereon an amount exceeding the value of the consideration (if any) which he has actually paid or performed.
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 is proportionally reduced.
Explanation.—The drawer of a bill of exchange stands in immediate relation with the acceptor. The
maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and
the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder.
Illustration
A draws a bill on B for Rs. 500 payable to the order of A, B accepts the bill, but subsequently dishonours, it by
non-payment. A sues B on the bill, B proves that it was accepted for value as to 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.
1
[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.]