Section 117 NI Act: Rules as to compensation
Negotiable Instruments Act, 1881
Section 117 NI Act at a Glance
Section 117 NI Act sets the rules for calculating compensation payable to a holder or an indorser when a promissory note, bill of exchange, or cheque is dishonoured, including interest at 18% per annum for an indorser who pays.
Section 117 NI Act Bare Act Text
117. Rules as to compensation.
The compensation payable in case of dishonour of a promissory note, bill of exchange or cheque, by any party liable to the holder or any indorsee, shall *** be determined by the following rules:—
(a) the holder is entitled to the amount due upon the instrument together with the expenses properly incurred in presenting, noting and protesting it;
(b) when the person charged resides at a place different from that at which the instrument was payable, the holder is entitled to receive such sum at the current rate of exchange between the two places;
(c) an indorser who, being liable, has paid the amount due on the same is entitled to the amount so paid with interest at eighteen per centum per annum from the date of payment until tender or realization thereof, together with all expenses caused by the dishonour and payment;
(d) when the person charged and such indorser reside at different places, the indorser is entitled to receive such sum at the current rate of exchange between the two places;
(e) the party entitled to compensation may draw a bill upon the party liable to compensate him, payable at sight or on demand, for the amount due to him, together with all expenses properly incurred by him. Such bill must be accompanied by the instrument dishonoured and the protest thereof (if any). If such bill is dishonoured, the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill.
Amendments to this section
- The brackets, words and figures "(except in cases provided for by the Code of Civil Procedure, s. 532)" omitted by Act 30 of 1926, s. 3.
- Subs. by Act 66 of 1988, s. 3, for "six per centum" (w.e.f. 30-12-1988).
Section 117 NI Act in Simple Words
Section 117 NI Act lays down the rules for determining the compensation payable by any party liable to the holder or any indorsee when a promissory note, bill of exchange, or cheque is dishonoured.
Under Section 117(a) NI Act, the holder is entitled to the amount due on the instrument along with the expenses properly incurred in presenting, noting, and protesting it. Under Section 117(b) NI Act, when the person charged resides at a place different from the place where the instrument was payable, the holder is entitled to receive that sum at the current rate of exchange between the two places.
Under Section 117(c) NI Act, an indorser who is liable and has paid the amount due on the instrument is entitled to the amount paid with interest at 18% per annum from the date of payment until tender or realization, together with all expenses caused by the dishonour and payment. Under Section 117(d) NI Act, when the person charged and that indorser reside at different places, the indorser is entitled to receive that sum at the current rate of exchange between the two places.
Under Section 117(e) NI Act, the party entitled to compensation may draw a bill on the liable party, payable at sight or on demand, for the amount due together with all expenses properly incurred. That newly drawn bill must be accompanied by the dishonoured instrument and its protest, if any. If the newly drawn bill is dishonoured, the party dishonouring it is liable to pay compensation in the same manner as for the original bill.
Act 30 of 1926 omitted the words "(except in cases provided for by the Code of Civil Procedure, s. 532)" from the opening words. Act 66 of 1988 put "eighteen per centum" in place of "six per centum" in clause (c) from 30 December 1988.
When Section 117 NI Act Applies
- A promissory note, bill of exchange, or cheque is dishonoured and a party is liable to the holder or any indorsee.
- Under clause (a), the holder is entitled to the amount due on the instrument plus expenses properly incurred in presenting, noting, and protesting it.
- Under clause (b), if the person charged resides at a place different from where the instrument was payable, the holder receives the sum at the current rate of exchange between the two places.
- Under clause (c), a liable indorser who has paid the amount due is entitled to that amount with interest at 18% per annum from the date of payment until tender or realization, plus all expenses caused by the dishonour and payment.
- Under clause (d), if the person charged and that indorser reside at different places, the indorser receives the sum at the current rate of exchange between the two places.
- Under clause (e), the party entitled to compensation may draw a bill payable at sight or on demand on the liable party for the amount due and expenses properly incurred, accompanied by the dishonoured instrument and any protest.
Example of Section 117 NI Act
FAQs on Section 117 NI Act
What is Section 117 NI Act?▼
Section 117 NI Act sets out the rules for determining the compensation payable when a promissory note, bill of exchange, or cheque is dishonoured. It specifies what a holder or a liable indorser who has paid the instrument can recover from a liable party, including expenses, interest, and exchange rates.
What rate of interest can an indorser recover under Section 117(c) NI Act?▼
18% per annum. Under Section 117(c) NI Act, a liable indorser who has paid the amount due on the dishonoured instrument is entitled to the amount paid with interest at 18% per annum from the date of payment until tender or realization, along with all expenses caused by the dishonour and payment.
What can a holder recover under Section 117(a) NI Act upon dishonour of an instrument?▼
The amount due on the instrument and proper expenses. Under Section 117(a) NI Act, the holder is entitled to the amount due upon the instrument together with the expenses properly incurred in presenting, noting, and protesting it.
Can a party entitled to compensation under Section 117(e) NI Act draw a new bill on the liable party?▼
Yes. Under Section 117(e) NI Act, the party entitled to compensation may draw a bill payable at sight or on demand on the liable party for the amount due and expenses properly incurred, accompanied by the dishonoured instrument and any protest.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·