Section 84 NI Act: When cheque not duly presented and drawer damaged thereby

Negotiable Instruments Act, 1881

Section 84 NI Act at a Glance

Section 84 NI Act discharges a cheque's drawer to the extent of actual damage suffered if the cheque is not presented within a reasonable time when the bank was bound to pay it. The holder then becomes the bank's creditor for that amount.

Section 84 NI Act Bare Act Text

84. When cheque not duly presented and drawer damaged thereby.
(1) Where a cheque is not presented for payment within a reasonable time of its issue, and the drawer or person on whose account it is drawn had the right, at the time when presentment ought to have been made, as between himself and the banker, to have the cheque paid and suffers actual damage through the delay, he is discharged to the extent of such damage, that is to say, to the extent to which such drawer or person is a creditor of the banker to a large amount than he would have been if such cheque had been paid.
(2) In determining what is a reasonble time, regard shall be had to the nature of the instrument, the usage of trade and of bankers, and the facts of the particular case.
(3) The holder of the cheque as to which such drawer of person is so discharged shall be a creditor, in lieu of such drawer or person, of such banker to the extent of such discharge and entitled to recover the amount from him.
Illustrations
(a) A draws a cheque for Rs. 1,000, and, when the cheque ought to be presented, has funds at the bank to meet it. The bank fails before the cheque is presented. The drawer is discharged, but the holder can prove against the bank for the amount of the cheque.
(b) A draws a cheque at Umballa on a bank in Calcutta. The bank fails before the cheque could be presented in ordinary course. A is not discharged, for he has not suffered actual damage through any delay in presenting the cheque.

Amendments to this section

Subs. by Act 6 of 1897, s. 3, for s. 84.

Section 84 NI Act in Simple Words

Section 84 NI Act deals with the legal effect of failing to present a cheque for payment within a reasonable time of its issue when the delay causes actual damage to the drawer or the person on whose account the cheque is drawn.

Under Section 84(1) NI Act, where a cheque is not presented for payment within a reasonable time of its issue, and the drawer (or the person on whose account it is drawn) had the right, at the time when presentment ought to have been made, as between that person and the banker, to have the cheque paid, and suffers actual damage through the delay, that drawer or person is discharged to the extent of that damage. Section 84(1) NI Act defines this extent as the extent to which that drawer or person is a creditor of the banker for a larger amount than would have been the case if the cheque had been paid. The official text prints "a large amount" here, "reasonble" in sub-section (2) and "such drawer of person" in sub-section (3); the sense is "a larger amount", "reasonable" and "such drawer or person".

Under Section 84(2) NI Act, in determining what is a reasonable time, regard must be had to the nature of the instrument, the usage of trade and of bankers, and the facts of the particular case. Under Section 84(3) NI Act, the holder of the cheque as to which the drawer or person is discharged becomes a creditor, in place of that drawer or person, of the banker to the extent of the discharge, and is entitled to recover the amount from the banker.

Section 84 NI Act includes two illustrations. In Illustration (a), A draws a cheque for "Rs. 1,000" and, when the cheque ought to be presented, has funds at the bank to meet it, and the bank fails before the cheque is presented; the drawer is discharged, and the holder can prove against the bank for the amount of the cheque. In Illustration (b), A draws a cheque at "Umballa" (today Ambala) on a bank in "Calcutta" (today Kolkata), and the bank fails before the cheque could be presented in ordinary course; A is not discharged because A has not suffered actual damage through any delay in presenting the cheque. Act 6 of 1897 put the present Section 84 NI Act in place of the original section.

When Section 84 NI Act Applies

A cheque is not presented for payment within a reasonable time of its issue.
At the time when presentment ought to have been made, the drawer or person on whose account the cheque is drawn had the right, as between that person and the banker, to have the cheque paid.
The drawer or person suffers actual damage through the delay, becoming a creditor of the banker for a larger amount than if the cheque had been paid.
Reasonable time is determined by having regard to the nature of the instrument, the usage of trade and of bankers, and the facts of the particular case.
The drawer or person is discharged to the extent of the damage, and the holder becomes a creditor of the banker in place of the drawer or person to that extent and is entitled to recover the amount from the banker.

Example of Section 84 NI Act

Hema draws a cheque in Lucknow for ₹50,000 on a bank where Hema has ₹50,000 in funds and the right to have the cheque paid, and delivers the cheque to Sanjay. Sanjay fails to present the cheque within a reasonable time of its issue, and after the time when presentment ought to have been made, the bank fails before the cheque is presented. Because of the delay, Hema is a creditor of the failed bank for ₹50,000 more than Hema would have been if the cheque had been paid, suffering actual damage of ₹50,000. Under Section 84(1) and Section 84(3) NI Act, Hema is discharged from liability on the cheque to the extent of ₹50,000, and Sanjay becomes a creditor of the bank in place of Hema and is entitled to recover ₹50,000 from the bank.

When Section 84 NI Act Does Not Apply

The drawer or person on whose account the cheque was drawn has not suffered actual damage through any delay in presenting the cheque, as in Illustration (b) where the bank fails before the cheque could be presented in ordinary course.

FAQs on Section 84 NI Act

What is Section 84 NI Act?▼

Section 84 NI Act discharges the drawer of a cheque (or the person on whose account it is drawn) to the extent of actual damage suffered when the cheque is not presented for payment within a reasonable time of its issue and the drawer had the right to have the cheque paid when presentment ought to have been made. To the extent of that discharge, the holder of the cheque becomes a creditor of the banker in place of the drawer and is entitled to recover the amount from the banker.

How does a court determine what is a reasonable time under Section 84(2) NI Act?▼

By looking at three statutory factors. Under Section 84(2) NI Act, regard must be had to the nature of the instrument, the usage of trade and of bankers, and the facts of the particular case.

Is the drawer discharged if the bank fails before the cheque could be presented in ordinary course?▼

No. As shown in Illustration (b) to Section 84 NI Act, when the bank fails before the cheque could be presented in ordinary course, the drawer is not discharged because the drawer has not suffered actual damage through any delay in presenting the cheque.

From whom can the holder recover the money when the drawer is discharged under Section 84 NI Act?▼

From the banker. Under Section 84(3) NI Act, the holder of the cheque becomes a creditor of the banker in place of the discharged drawer to the extent of the discharge and is entitled to recover that amount from the banker.

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