Section 10 NI Act: "Payment in due course"

Negotiable Instruments Act, 1881

Section 10 NI Act at a Glance

Section 10 NI Act defines payment in due course as a payment made according to the apparent tenor of the instrument, in good faith and without negligence, to a person in possession when nothing gives reasonable ground to doubt that person's entitlement.

Section 10 NI Act Bare Act Text

10. "Payment in due course".

“Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.

Section 10 NI Act in Simple Words

Section 10 NI Act defines what constitutes payment in due course on an instrument. First, the payment must be made in accordance with the apparent tenor of the instrument.

Second, the payment must be made in good faith and without negligence to a person who is in possession of the instrument. Third, the circumstances must not afford a reasonable ground for believing that the person in possession is not entitled to receive payment of the amount mentioned in the instrument.

When Section 10 NI Act Applies

  • The payment is made in accordance with the apparent tenor of the instrument.
  • The payment is made in good faith and without negligence.
  • The payment is made to a person in possession of the instrument.
  • The circumstances do not afford a reasonable ground for believing that the person in possession is not entitled to receive payment of the amount mentioned in the instrument.

Example of Section 10 NI Act

Tenzin draws a cheque for ₹40,000 payable to bearer and gives it to Naveen in Dehradun. Naveen presents the cheque at the drawee bank in Dehradun, and nothing on the cheque or in the surrounding circumstances gives any reasonable ground to doubt Naveen's right to receive the ₹40,000. The bank pays ₹40,000 to Naveen in good faith, without negligence, and in accordance with the apparent tenor of the cheque. Under Section 10 NI Act, the bank's payment to Naveen is a payment in due course.

FAQs on Section 10 NI Act

What is Section 10 NI Act?▼

Section 10 NI Act defines payment in due course under the Negotiable Instruments Act, 1881. It means payment according to the apparent tenor of the instrument, in good faith and without negligence, to any person in possession under circumstances that give no reasonable ground to believe that person is not entitled to receive payment.

Does Section 10 NI Act require the payment to be made without negligence?▼

Yes. Section 10 NI Act explicitly requires the payment to be made both in good faith and without negligence.

To whom must a payment in due course be made under Section 10 NI Act?▼

To a person in possession of the instrument. In addition, the circumstances must not afford a reasonable ground for believing that the person in possession is not entitled to receive payment of the amount mentioned in the instrument.

Is a payment that does not match the apparent tenor of the instrument covered by Section 10 NI Act?▼

No. Section 10 NI Act requires that the payment be made in accordance with the apparent tenor of the instrument.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·