Section 135 NI Act: Law of place of payment governs dishonour

Negotiable Instruments Act, 1881

Section 135 NI Act at a Glance

Section 135 NI Act provides that where a promissory note, bill of exchange or cheque is payable in a different place from where it is made or indorsed, the law of the place of payment determines dishonour and sufficient notice of dishonour.

Section 135 NI Act Bare Act Text

135. Law of place of payment governs dishonour.

Where a promissory note, bill of exchange or cheque is made payable in a different place from that in which it is made or indorsed, the law of the place where it is made payable determines what constitutes dishonour and what notice of dishonour is sufficient.

Illustration

A bill of exchange drawn and indorsed in India, but accepted payable in France, is dishonoured. The indorsee causes it to be protested for such dishonour, and gives notice thereof in accordance with the law of France, though not in accordance with the rules herein contained in respect of bills which are not foreign. The notice is sufficient.

Amendments to this section
  • Subs. by Act 3 of 1951, s. 3 and the Schedule for "the States".

Section 135 NI Act in Simple Words

Section 135 NI Act identifies which law governs dishonour and notice of dishonour when an instrument crosses jurisdictions between its making or indorsement and its payment. Under Section 135 NI Act, where a promissory note, bill of exchange or cheque is made payable in a different place from the place in which the instrument is made or indorsed, the law of the place where the instrument is made payable determines two things: what constitutes dishonour, and what notice of dishonour is sufficient.

The Illustration to Section 135 NI Act demonstrates this rule. A bill of exchange is drawn and indorsed in India, but accepted payable in France, and is dishonoured. The indorsee causes the bill to be protested for such dishonour and gives notice of dishonour in accordance with the law of France, even though the notice is not in accordance with the rules contained in the NI Act in respect of bills which are not foreign. Section 135 NI Act states that the notice is sufficient. Act 3 of 1951 put "India" in place of "the States" in the Illustration.

When Section 135 NI Act Applies

  • The instrument is a promissory note, bill of exchange or cheque.
  • The instrument is made payable in a different place from the place in which it is made or indorsed.
  • The law of the place where the instrument is made payable determines what constitutes dishonour.
  • The law of the place where the instrument is made payable determines what notice of dishonour is sufficient.

Example of Section 135 NI Act

Leela draws a bill of exchange for ₹1,50,000 in Shimla and indorses the bill in Shimla to Harish, while the bill is accepted payable in Paris, France. When the bill is presented in Paris, the bill is dishonoured. Harish causes the bill to be protested for dishonour and gives notice of dishonour to Leela in accordance with the law of France, even though the notice does not follow the NI Act rules for bills which are not foreign. Under Section 135 NI Act, because the bill was made payable in France, the law of France governs what constitutes dishonour and what notice of dishonour is sufficient, so Harish's notice is sufficient.

FAQs on Section 135 NI Act

What is Section 135 NI Act?▼

Section 135 NI Act governs dishonour when a promissory note, bill of exchange or cheque is made payable in a place different from where it is made or indorsed. In that situation, the law of the place where the instrument is made payable determines what constitutes dishonour and what notice of dishonour is sufficient.

Is a notice of dishonour sufficient under Section 135 NI Act if it follows the law of the foreign place of payment rather than Indian rules for bills that are not foreign?▼

Yes. As shown in the Illustration to Section 135 NI Act, when a bill drawn and indorsed in India is accepted payable in France and dishonoured, a notice of dishonour given in accordance with the law of France is sufficient even though it does not follow the rules in the NI Act for bills that are not foreign.

What two questions does the law of the place of payment decide under Section 135 NI Act?▼

What constitutes dishonour and what notice of dishonour is sufficient. Both questions are governed by the law of the place where the promissory note, bill of exchange or cheque is made payable.

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