Presentment of Negotiable Instrument
- Kinds of Presentment
- Presentment for acceptance
- Presentment of promissory notes for sight
- Presentment for payment
- Case Law
Presentment is a demand by which the holder of a negotiable instrument is required to do something as per the directives of the instrument. It is the showing of the instrument to the drawee, acceptor or maker for acceptance, sight or payment.
The Negotiable instruments Act 1881, (hereinafter referred to as the Act) has exhaustively and elaborately dealt with this aspect. A whole procedure has been outlined as to how the negotiable instrument has to be presented.
Kinds of Presentment
There are different modes in which presentment can happen. They are:
- Presentment for acceptance
- Presentment of promissory notes for sight
- Presentment for payment
Presentment for acceptance
There are only certain types of bills of exchange which require acceptance. A bill gets accepted when the drawee affixes his signature on the instrument signifying his consent to the order of the drawer that he will pay the bill when it becomes due. The drawee is not liable until he accepts the bill. He signifies his acceptance by signing his name on the bill.
A drawee may also write accepted but it is not necessary. Once the drawee accepts the bill he comes to be known as the acceptor.
The following are the essentials of a valid acceptance:
- It must be in written form on the bill. A drawee inserts the words accepted either across the bill’s face or its back and then affixes his signature below the words.
- The drawee must sign the bill on his own or his authorised agent must do it. The drawee becomes only liable when he accepts the bill and not before. He cannot be made liable before acceptance since he is not a party to the instrument.
- Once the bill is accepted it must be delivered to the holder. Acceptance will be of no use until the bill has been delivered to the holder.
If a bill is drawn in sets then the acceptance must be put on part only. In case he puts his acceptance on more than one part then he will become liable for all the parts.
A bill which is payable on demand or after a number of days from the date or on a certain fixed date may not be presented for acceptance unless it is expressly mentioned in the instrument that needs to be presented for acceptance. But in certain cases a bill needs to be presented for acceptance; which are:
- A bill which stipulates that it must be presented for acceptance before it is presented for payment;
- A bill payable after sight or after presentment in order to fix its maturity.
One should get a bill presented for acceptance even if it’s optional to do so. This helps in getting extra security and also makes a right to take recourse in case it gets dishonoured.
A bill may be accepted by:
- General Acceptance
An acceptance is general or absolute where the drawee, when he accepts the bill, does not attach any condition or qualification to it. If the acceptance is not absolute, the holder may treat the bill as dishonoured due to non acceptance.
- Qualified Acceptance:
When a condition is imposed to in order to accept the presentment then it is called a qualified acceptance. A qualified acceptance in express terms varies the effect of a bill. In such cases the holder may refuse to accept the condition and treat the bill as dishonoured by way of non acceptance.
However, if he accepts then he does that at his risk and he discharges all the previous parties unless he obtains the consent of those parties.
Thus a qualified acceptance is:
Conditional, eg: Accepted payment when goods consigned to me are sold;
Partial, i.e., only for a part of the bill. Eg: the bill was for 500 and it is accepted for only 200.
Qualified as to place i.e., it is only payable at a certain place. Eg: accepted payable at Royal Bank of Scotland only.
Qualified as to time i.e., to pay at a time other than the stipulated time in the bill. Eg: the bill was payable after a certain date. Accepted payable after six months from date.
Acceptance by some of the drawees but not all. Eg A bill drawn on Z,C and Y but accepted by Z only.
Presentment for acceptance is made to:
- All or some of several drawees;
- Drawee in case of need;
- All the drawees, if there are several drawees unless they are partners or agents of one another;
- Duly authorised agent of the drawee;
- Legal representative if the drawee has dies;
- His official receiver or assignee it the drawee has been declared insolvent.
Presentment to be made when and where
- If a time is specified in a bill then it must be presented for acceptance at any time before payment. If the bill is payable at sight then presentment is obligatory within a reasonable time after the same has been drawn.
- The bill should be presented for acceptance at the place which is specified in the bill for presentment. If no place has been specified then the bill is to be presented at the place where drawee has his business or residence.
- As per sec 63 of the Act, the holder must provide at least 48 hours for acceptance of the bill.
- If the bill is not presented for acceptance then all the endorsers and the drawer is absolved of liability.
Cases where presentment for acceptance is excused
Presentment for acceptance is excused when:
- The drawee cannot be found after a reasonable search;
- Where the drawee is dead or insolvent. Sec 75 of the act contemplates that the instrument may be presented to the legal representatives of the deceased drawee or assignee of the insolvent however it is not compulsory;
- The drawee is a fictitious person or one incapable of contracting;
- Where, although presentment has been irregular, acceptance has been refused due to some other ground.
Presentment for Sight
Sec 62 of the act contemplates that in cases of promissory notes no question of acceptance arises since the maker is himself liable for it. However, a note which is payable at a certain period after sight must be presented to the maker for sight in order to get its maturity fixed. If the maker is not found presentment is excused and the instrument may be treated as dishonoured.
Presentment for Payment
Sec 64 of the act contemplates that promissory notes, bills of exchange and cheque must be presented to the maker, acceptor or drawee on behalf of the holder. If the same is not done then the parties to the instrument are not liable to the holder. If authorised by agreement or usage, a presentment by way of post is sufficient.
Presentment for payment when not necessary
Sec 76 contemplates as to when presentment is not necessary:
- The maker, drawee, or acceptor intentionally prevents presentment of the instrument;
- The instrument is payable at a certain place of business and this place of business is closed during the usual business hours thereby not letting the presentment to go through. It will be presumed that the person liable to pay is evading payment;
- The instrument is payable at a certain place and neither the maker, acceptor or drawee or any authorised person to pay is present during the usual business hours;
- The instrument is not payable at a certain place and the payer cannot be found;
- There is a promise to pay without presentment;
- Presentment for payment has been waived either expressly or impliedly before or after maturity by the party entitled to presentment;
- Presentment becomes impossible;
- Drawee and drawer is the same person;
- Bill gets dishonoured for non-accepatnce;
- Drawer is a fictitious person;
In all the above the instrument is deemed to be dishonoured on the due date of presentment.
Presentment of cheque to charge drawee bank
A cheque must be presented for payment during the banking hours and at the bank upon which it has been drawn and also within a reasonable time after it is received by the holder.
Presentment of truncated cheque
Sec 64 (2) of the act contemplates that if an electronic image of a truncated cheque has been presented for payment then the bank can ask for information regarding the truncated cheque from the bank holding the truncated cheque if there is suspicion about such a cheque. It can also demand verification of such a cheque.
A truncated cheque which is so demanded by the drawee bank shall be retained by it if the payment gets made.
- In the case of Nenu Ram v Shivkishen AIR 1950 Raj 55, it was held that sec 64 of the contemplates that promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee either by the holder or by someone else on his behalf in the manner provided in the act.
- In case of default of presentment the other parties are not liable to the holder. Once the bill is accepted it has to be presented for payment.
- In the case of Pachkauri Lal v Mulchand March, 1922 66 Ind Cas 503,it was held that the drawer and drawee were one and same therefore no presentment was required in this case.
- In the case of Kanhyalal v Ramkumar AIR 1956 Raj 129, it was held that a contract which is embodied in a bill of exchange is that the drawer says to the payee that on the bill being presented to the drawee at the due time, that is, on maturity, the latter shall honour it. Therefore presentment for payment by the holder of an instrument is an essential step for fixing liability for non-payment on the drawer.
- It was further held that presentment for acceptance is a requirement which is not to be insisted upon however, presentment for payment must be done.
- In the case of Phul Chand v Ganga Ghulam (1899) ILR 21 All 450, it was held that as per sec 64 if there is default in presentment then the other parties are not liable to such holder. It is clear that that section only exempts from liability to the holder in default of presentment parties other than the maker, acceptor or drawee of a promissory note, bill of exchange and cheque, respectively.
Thus it can be concluded that presentment is a demand by which the holder of a negotiable instrument is required to do something as per the directives of the instrument. Once the same is done it becomes payable
There are only certain types of bills of exchange which require acceptance. A bill gets accepted when the drawee affixes his signature on the instrument signifying his consent to the order of the drawer that he will pay the bill when it becomes due. The drawee is not liable until he accepts the bill.
A note which is payable at a certain period after sight must be presented to the maker for sight in order to get its maturity fixed and promissory notes, bills of exchange and cheque must be presented to the maker, acceptor or drawee on behalf of the holder for presentment.