Section 111 NI Act: Liability of acceptor for honour

Negotiable Instruments Act, 1881

Section 111 NI Act at a Glance

Section 111 NI Act sets the liability and rights of an acceptor for honour. The acceptor must pay subsequent parties if the drawee does not, provided the bill is presented or forwarded for presentment no later than the day after maturity.

Section 111 NI Act Bare Act Text

111. Liability of acceptor for honour.
An acceptor for honour binds himself to all parties subsequent to the party for whose honour he accepts to pay the amount of the bill if the drawee do not; and such party and all prior parties are liable in their respective capacities to compensate the acceptor for honour for all loss or damage sustained by him in consequence of such acceptance.
But an acceptor for honour is not liable to the holder of the bill unless it is presented, or (in case the address given by such acceptor on the bill is a place other than the place where the bill is made payable) forwarded for presentment, not later than the day next after the day of its maturity.

Section 111 NI Act in Simple Words

Section 111 NI Act defines who an acceptor for honour is bound to pay, who must compensate the acceptor for honour, and the time limit within which the holder must present or forward the bill.

Under the first paragraph of Section 111 NI Act, an acceptor for honour is bound to all parties subsequent to the party for whose honour the acceptance is made, to pay the amount of the bill if the drawee does not pay. At the same time, the party for whose honour the bill is accepted and all prior parties are liable in their respective capacities to compensate the acceptor for honour for all loss or damage sustained by the acceptor in consequence of that acceptance.

Under the second paragraph of Section 111 NI Act, an acceptor for honour is not liable to the holder of the bill unless the bill is presented not later than the day next after the day of its maturity. If the address given by the acceptor for honour on the bill is a place other than the place where the bill is made payable, the bill must instead be forwarded for presentment not later than the day next after the day of its maturity.

When Section 111 NI Act Applies

An acceptor for honour binds the acceptor to all parties subsequent to the party for whose honour the bill is accepted, to pay the amount of the bill if the drawee does not.
The party for whose honour the bill is accepted and all prior parties are liable in their respective capacities to compensate the acceptor for honour for all loss or damage sustained in consequence of the acceptance.
To hold the acceptor for honour liable, the bill must be presented to the acceptor not later than the day next after the day of its maturity.
If the address given by the acceptor on the bill is a place other than the place where the bill is made payable, the bill must be forwarded for presentment not later than the day next after the day of its maturity.

Example of Section 111 NI Act

Kunal draws a bill of exchange for ₹2,00,000 in Tiruchirappalli, payable in Tiruchirappalli to Bilal, who indorses it to Shabnam, who indorses it to Revathi. After the bill is protested for non-acceptance, Deepak accepts the bill for the honour of Bilal, giving a Tiruchirappalli address on the bill. At maturity, the drawee does not pay, and Revathi presents the bill to Deepak on the day next after the day of maturity. Under Section 111 NI Act, Deepak is bound to pay Shabnam and Revathi (the parties subsequent to Bilal), and Bilal and Kunal (the honoured party and prior party) are liable to compensate Deepak for all loss or damage sustained in consequence of the acceptance.

FAQs on Section 111 NI Act

What is Section 111 NI Act?▼

Section 111 NI Act sets out the liability and compensation rights of an acceptor for honour on a bill of exchange. It binds the acceptor to pay all parties subsequent to the honoured party if the drawee does not pay, provided the bill is presented or forwarded for presentment no later than the day next after the day of maturity.

To which parties is an acceptor for honour bound to pay under Section 111 NI Act?▼

All parties subsequent to the party for whose honour the bill is accepted. Under Section 111 NI Act, the acceptor for honour binds the acceptor to those subsequent parties to pay the amount of the bill if the drawee does not.

Who must compensate the acceptor for honour under Section 111 NI Act?▼

The party for whose honour the bill was accepted and all prior parties. Under Section 111 NI Act, those parties are liable in their respective capacities to compensate the acceptor for honour for all loss or damage sustained in consequence of the acceptance.

By when must the bill be presented to hold the acceptor for honour liable under Section 111 NI Act?▼

Not later than the day next after the day of the bill's maturity. If the bill is not presented within that time, the acceptor for honour is not liable to the holder under Section 111 NI Act.

What if the acceptor for honour's address on the bill is different from the place where the bill is payable under Section 111 NI Act?▼

The bill must be forwarded for presentment not later than the day next after the day of maturity. Section 111 NI Act allows forwarding for presentment by that day when the address given by the acceptor on the bill is a place other than the place where the bill is made payable.

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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) ·