Section 81 NI Act: Delivery of instrument on payment or indemnity in case of loss

Negotiable Instruments Act, 1881

Section 81 NI Act at a Glance

Section 81 NI Act entitles a person paying a promissory note, bill of exchange, or cheque to see it before payment, receive it upon payment, or be indemnified if it is lost. It also covers retention and proof of payment for truncated cheques.

Section 81 NI Act Bare Act Text

81. Delivery of instrument on payment or indemnity in case of loss.

(1) Any person liable to pay, and called upon by the holder thereof to pay, the amount due on a promissory note, bill of exchange or cheque is before payment entitled to have it shown, and is on payment entitled to have it delivered up, to him, or if the instrument is lost or cannot be produced, to be indemnified against any further claim thereon against him.

(2) Where the cheque is an electronic image of a truncated cheque, even after the payment the banker who received the payment shall be entitled to retain the truncated cheque.

(3) A certificate issued on the foot of the printout of the electronic image of a truncated cheque by the banker who paid the instrument, shall be prima facie proof of such payment.

Amendments to this section
  • Section 81 re-numbered as sub-section (1) thereof by Act 55 of 2002, s. 4 (w.e.f. 6-2-2003).
  • Ins. by Act 55 of 2002, s. 4 (w.e.f. 6-2-2003).

Section 81 NI Act in Simple Words

Section 81 NI Act sets out the rights of a person who is liable to pay, and is called upon by the holder to pay, the amount due on a promissory note, bill of exchange, or cheque, along with special rules for truncated cheques.

Under Section 81(1) NI Act, any person liable to pay and called upon by the holder to pay the amount due on a promissory note, bill of exchange, or cheque is entitled, before making payment, to have the instrument shown to that person. On making payment, that person is entitled to have the instrument delivered up to that person, or, if the instrument is lost or cannot be produced, to be indemnified against any further claim on the instrument against that person.

Section 81(2) NI Act applies where the cheque is an electronic image of a truncated cheque. Even after payment, the banker who received the payment is entitled to retain the truncated cheque.

Under Section 81(3) NI Act, a certificate issued on the foot of the printout of the electronic image of a truncated cheque by the banker who paid the instrument is prima facie proof of that payment. Act 55 of 2002 renumbered the section as sub-section (1) and inserted sub-sections (2) and (3), from 6 February 2003.

When Section 81 NI Act Applies

  • A person is liable to pay, and is called upon by the holder to pay, the amount due on a promissory note, bill of exchange, or cheque.
  • Before payment, the person paying is entitled to have the instrument shown to that person.
  • On payment, the person paying is entitled to have the instrument delivered up, or if it is lost or cannot be produced, to be indemnified against any further claim on it.
  • Where the cheque is an electronic image of a truncated cheque, the banker who received payment is entitled to retain the truncated cheque even after payment.
  • A certificate issued on the foot of the printout of the electronic image of a truncated cheque by the paying banker is prima facie proof of payment.

Example of Section 81 NI Act

Leela is the maker of a promissory note for ₹75,000 held by Iqbal. When Iqbal calls upon Leela in Gorakhpur to pay the ₹75,000 due on the note, Iqbal informs Leela that the original promissory note has been lost and cannot be produced. Under Section 81(1) NI Act, upon paying the ₹75,000, Leela is entitled to be indemnified against any further claim on that promissory note against Leela. Had the original promissory note not been lost, Leela would have been entitled to have it shown before payment and delivered up on payment.

FAQs on Section 81 NI Act

What is Section 81 NI Act?▼

Section 81 NI Act entitles a person who is liable and called upon by the holder to pay a promissory note, bill of exchange, or cheque to have the instrument shown before payment and delivered up upon payment, or to be indemnified if the instrument is lost or cannot be produced. For an electronic image of a truncated cheque, it entitles the banker who received payment to retain the truncated cheque and makes the paying banker's certificate on the printout prima facie proof of payment.

What right does the payer have if the instrument is lost or cannot be produced?▼

The right to be indemnified against any further claim on the instrument. Under Section 81(1) NI Act, if the promissory note, bill of exchange, or cheque is lost or cannot be produced, the person paying is entitled to an indemnity against any further claim on it.

Does the banker have to return a truncated cheque after payment under Section 81(2) NI Act?▼

No. Under Section 81(2) NI Act, where the cheque is an electronic image of a truncated cheque, the banker who received the payment is entitled to retain the truncated cheque even after payment.

What serves as prima facie proof of payment for a truncated cheque under Section 81(3) NI Act?▼

A certificate issued by the banker who paid the instrument. Under Section 81(3) NI Act, that certificate, issued on the foot of the printout of the electronic image of the truncated cheque, is prima facie proof of the payment.

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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) ·