Section 46 NI Act: Delivery
Negotiable Instruments Act, 1881
Section 46 NI Act at a Glance
Section 46 NI Act states that delivery, actual or constructive, completes the making, acceptance, or indorsement of a promissory note, bill of exchange, or cheque. Section 46 NI Act also sets the rules on who must deliver the instrument, conditional delivery, and negotiation.
Section 46 NI Act Bare Act Text
46. Delivery.
The making, acceptance or indorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive.
As between parties standing in immediate relation, delivery to be effectual must be made by the party making, accepting or indorsing the instrument, or by a person authorized by him in that behalf.
As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein.
A promissory note, bill of exchange or cheque payable to bearer is negotiable by the delivery thereof.
A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof.
Section 46 NI Act in Simple Words
Section 46 NI Act explains how delivery completes the making, acceptance, or indorsement of a promissory note, bill of exchange, or cheque, and how delivery affects negotiation. Under Section 46 NI Act, the making, acceptance, or indorsement of the instrument is completed by delivery, whether that delivery is actual or constructive.
Between parties who stand in immediate relation to one another, delivery is effectual only if the party who makes, accepts, or indorses the instrument makes the delivery, or if a person authorised by that party in that behalf makes it.
Between parties standing in immediate relation, and as against any holder of the instrument other than a holder in due course, a party may show that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring the property in the instrument absolutely.
Section 46 NI Act also states how instruments are negotiated according to how they are payable. A promissory note, bill of exchange, or cheque payable to bearer is negotiable by delivery of the instrument. A promissory note, bill of exchange, or cheque payable to order is negotiable by the holder through indorsement and delivery of the instrument.
When Section 46 NI Act Applies
- The making, acceptance, or indorsement of a promissory note, bill of exchange, or cheque is completed by actual or constructive delivery.
- Between parties standing in immediate relation, effectual delivery must be made by the party making, accepting, or indorsing the instrument, or by a person authorised by that party in that behalf.
- Between immediate parties and against any holder other than a holder in due course, it may be shown that delivery was conditional or for a special purpose only, and not to transfer the property in the instrument absolutely.
- A promissory note, bill of exchange, or cheque payable to bearer is negotiable by delivery.
- A promissory note, bill of exchange, or cheque payable to order is negotiable by the holder by indorsement and delivery.
Example of Section 46 NI Act
When Section 46 NI Act Does Not Apply
- Under Section 46 NI Act, a plea that the instrument was delivered conditionally or for a special purpose only, and not to transfer the property in the instrument absolutely, cannot be set up against a holder in due course.
FAQs on Section 46 NI Act
What is Section 46 NI Act?▼
Section 46 NI Act provides that the making, acceptance, or indorsement of a promissory note, bill of exchange, or cheque is completed by actual or constructive delivery. Section 46 NI Act also sets the rules on who must make the delivery between immediate parties, when conditional or special-purpose delivery may be shown, and how bearer and order instruments are negotiated.
Who must deliver an instrument for delivery to be effectual between immediate parties under Section 46 NI Act?▼
The party making, accepting, or indorsing the instrument, or an authorised person. Under Section 46 NI Act, as between parties standing in immediate relation, delivery must be made by the party making, accepting, or indorsing the instrument, or by a person authorised by that party in that behalf.
Can a party show under Section 46 NI Act that an instrument was delivered conditionally or for a special purpose only?▼
Yes, as between immediate parties and against any holder other than a holder in due course. Section 46 NI Act allows it to be shown against those parties that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring the property in the instrument absolutely.
How is an instrument payable to bearer negotiated under Section 46 NI Act?▼
By delivery. Under Section 46 NI Act, a promissory note, bill of exchange, or cheque payable to bearer is negotiable by the delivery of the instrument.
How is an instrument payable to order negotiated under Section 46 NI Act?▼
By indorsement and delivery by the holder. Under Section 46 NI Act, a promissory note, bill of exchange, or cheque payable to order is negotiable by the holder through indorsement and delivery of the instrument.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·