International Law regarding Negotiable Instrument :
In the absence of a contract to the contrary (i.e., unless the parties otherwise agree), the liability of the maker or drawer of a foreign promissory note, bill of exchange or cheque is governed in all essential matters by the law of the place where he made the instrument. The respective liability of the acceptor and endorser, in such cases, will be governed by the law of the place where the instrument is made payable (Section 134). For example, if a bill of exchange was drawn by A in California where the rate of interest was 25% it was accepted by B, payable in Washington, where the rate of interest was 6% and the bill was endorsed in India and was dishonoured. On an action on the bill being brought against B in India, B would be liable to pay interest @ 6% only; but if A was charged as drawer, A would be liable to pay interest @ 25%.
When the foreign instrument made is payable in a place different from that at which it is made or endorsed, the law of the place where the instrument is made payable would determine what constitutes dishonour and what notice of dishonour is sufficient (Section 135). It is to be noted that in this case the proper time for payment and for the notice of dishonor is fixed by the law of the country where the payment is to have been made.
If the instrument is made, drawn, accepted or endorsed abroad, but it is in accordance with the law of India, any subsequent acceptance or endorsement thereon India will not be regarded as invalid, because the agreement as evidenced by such an instrument is invalid according to the law of such foreign country (Section 136)
Courts in India do not take judicial notice of foreign law. Any person relying on such law relating to negotiable instruments must prove it by evidence and in the absence of such evidence, the courts shall presume the law of any foreign country to be the same as that of our country. (Section 137)
Special rules of evidence
(a) Presumption as to negotiable instrument (Section 118): For deciding cases in respect of rights of parties on the basis of a bill of exchange, the Court is entitled to make certain presumptions until the contrary is proved. These are briefly stated as follow:
(i) That the negotiable instrument was made or drawn for consideration and every party who made itself bound in respect thereof did so for consideration;
(ii) That the negotiable instrument was drawn on the date shown on the face of it;
(iii) That the bill of exchange was accepted before its maturity, i.e., before it became overdue;
(iv) That the negotiable instrument was transferred before its maturity;
(v) That the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon.
(vi) That an instrument which has been lost was properly stamped;
(vii) That the holder of a negotiable instrument is the holder in due course, except when the instrument has been obtained from its lawful owner or its lawful custodian. Likewise, if it has been obtained from a maker or acceptor by means of an offence or fraud, it is for the holder to prove that he is the holder in due course.
The presumptions mentioned above do not arise unless there is a proper protest according to Section 99, Section 100 and Section 101 of the Act.
(b) Certain rules of estoppel applicable to instruments: When one person causes another person to believe a thing to be true and to act upon such belief he is not allowed in a suit between him and such person, to deny the truth of that thing. That is, he is not allowed to give evidence in support of his denial. This rule is called the rule of estoppel, by which evidence is excluded. There are certain rules of estoppel applicable to negotiable instruments. These are contained in Sections 120 to 122 of the Act.
The objective of these provisions are: (i) that the original parties to the instrument shall not deny the validity of the instrument; (ii) that the maker of a promissory note or an acceptor of a bill shall not deny the right of the payee to receive the payment therefore; and (iii) that an endorser of a negotiable instrument shall not deny the signature or capacity to contract of any prior party to the instrument.
| Key points
♦ The liability of the maker or drawer of a foreign promissory note, bill of exchange or cheque is governed in all essential matters by the law of the place where he made instrument. The respective liability of the acceptor and indorser, in such cases, will be governed by the law of the place where the instrument is made payable. ♦ In respect to decide the rights of parties on the basis of negotiable instrument, the Court is entitled to make certain presumptions —– of consideration ,as to date, as to time of acceptance, as to time of transfer ,as to order of indorsements, as to stamps and that holder is a holder in due course. ♦ There are certain rules of estoppel applicable to negotiable instruments in order not to effect on the validity of the instrument, right of the payee to receive the payment and so on. |
Hundis: Bills of exchange drawn up in the vernacular are generally known as Hundis. The Negotiable Instruments Act ordinarily is not applicable to Hundis but, the title of the Act conveys the idea that the Act is a comprehensive enactment relating to all kinds of negotiable instruments whether negotiable by law, or by usage or custom. So, the parties to the Hundis may agree to be governed by the Negotiable Instruments Act,1881.