Section 77 NI Act: Liability of banker for negligently dealing with bill presented for payment

Negotiable Instruments Act, 1881

Section 77 NI Act at a Glance

Section 77 NI Act requires a banker to compensate the holder for loss if a bill of exchange, accepted payable at that specified bank, is duly presented and dishonoured, and the banker negligently or improperly keeps, deals with, or returns it.

Section 77 NI Act Bare Act Text

77. Liability of banker for negligently dealing with bill presented for payment.

When a bill of exchange, accepted payable at a specified bank, has been duly presented there for payment and dishonoured, if the banker so negligently or improperly keeps, deals with or delivers back such bill as to cause loss to the holder, he must compensate the holder for such loss.

Section 77 NI Act in Simple Words

Section 77 NI Act sets out the liability of a banker who mishandles a dishonoured bill of exchange that was presented at that bank for payment.

For Section 77 NI Act to apply, three events must take place first. A bill of exchange must be accepted payable at a specified bank, the bill must be duly presented at that specified bank for payment, and the bill must be dishonoured.

Once the bill has been duly presented and dishonoured, if the banker keeps, deals with, or delivers back the bill in a negligent or improper manner, and that conduct causes loss to the holder, the banker must compensate the holder for that loss.

When Section 77 NI Act Applies

  • A bill of exchange is accepted payable at a specified bank.
  • The bill of exchange is duly presented at that specified bank for payment.
  • The bill of exchange is dishonoured.
  • The banker negligently or improperly keeps, deals with, or delivers back the bill.
  • The banker's negligent or improper conduct causes loss to the holder.

Example of Section 77 NI Act

Rajiv is the holder of a bill of exchange for ₹1,00,000 that Faisal accepted payable at a specified bank in Salem. Rajiv duly presents the bill at that Salem bank for payment, and the bill is dishonoured. Instead of returning the dishonoured bill to Rajiv, the banker negligently delivers the bill back to an unauthorised person, causing a loss of ₹1,00,000 to Rajiv. Under Section 77 NI Act, the banker must compensate Rajiv for the loss caused by negligently delivering back the dishonoured bill.

FAQs on Section 77 NI Act

What is Section 77 NI Act?▼

Section 77 NI Act makes a banker liable to compensate the holder of a dishonoured bill of exchange when the bill was accepted payable at that specified bank, duly presented there for payment, and mishandled by the banker. If the banker negligently or improperly keeps, deals with, or delivers back the dishonoured bill so as to cause loss to the holder, the banker must compensate the holder for that loss.

Who is entitled to compensation under Section 77 NI Act?▼

The holder of the dishonoured bill of exchange. Under Section 77 NI Act, the banker must compensate the holder when the banker's negligent or improper handling of the bill causes loss to the holder.

What acts by a banker trigger liability under Section 77 NI Act?▼

Negligently or improperly keeping, dealing with, or delivering back the dishonoured bill of exchange. Liability arises when any of these acts by the banker at the specified bank where the bill was duly presented and dishonoured causes loss to the holder.

Does Section 77 NI Act apply if the holder suffers no loss?▼

No. Under Section 77 NI Act, the banker is required to compensate the holder only when the banker keeps, deals with, or delivers back the bill so negligently or improperly as to cause loss to the holder.

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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) ·