Section 85 NI Act: Cheque payable to order

Negotiable Instruments Act, 1881

Section 85 NI Act at a Glance

Section 85 NI Act states when a drawee is discharged from liability on a cheque payable to order and on a cheque originally expressed to be payable to bearer. In both cases, the drawee is discharged by making payment in due course.

Section 85 NI Act Bare Act Text

85. Cheque payable to order.

(1) Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course.

(2) Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer thereof, notwithstanding any endorsement whether in full or in blank appearing thereon, and notwithstanding that any such endorsement purports to restrict or exclude further negotiation.

Amendments to this section
  • S. 85 re-numbered as sub-section (1) thereof by Act 17 of 1934, s. 2.
  • Ins. by Act 17 of 1934, s. 2.

Section 85 NI Act in Simple Words

Section 85 NI Act sets out when the drawee of a cheque is discharged from liability by making payment in due course.

Under Section 85(1) NI Act, where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course. The section requires that the order cheque purports to carry the endorsement of the payee or someone acting on the payee's behalf, and that the drawee pays it in due course.

Under Section 85(2) NI Act, where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer of the cheque. This discharge takes effect notwithstanding any endorsement, whether in full or in blank, appearing on the cheque, and notwithstanding that any such endorsement purports to restrict or exclude further negotiation. Act 17 of 1934 renumbered the section as sub-section (1) and inserted sub-section (2).

When Section 85 NI Act Applies

  • For an order cheque under Section 85(1) NI Act, the cheque is payable to order and purports to be endorsed by or on behalf of the payee.
  • The drawee makes payment in due course on the order cheque.
  • For a bearer cheque under Section 85(2) NI Act, the cheque is originally expressed to be payable to bearer and the drawee makes payment in due course to the bearer.
  • On a cheque originally expressed to be payable to bearer, the drawee is discharged despite any endorsement in full or in blank, even if that endorsement purports to restrict or exclude further negotiation.

Example of Section 85 NI Act

Varun draws a cheque in Nagpur on a drawee bank for ₹50,000 payable to Kusum or order. The cheque is presented with an endorsement that purports to be signed by Kusum, and the drawee bank pays ₹50,000 in due course. Under Section 85(1) NI Act, the drawee bank is discharged from liability on the cheque. In a separate transaction in Surat, Ajay draws a cheque for ₹25,000 originally expressed to be payable to bearer and hands it to Mohan, who writes an endorsement on it purporting to restrict further negotiation before Fatima presents it as the bearer. When the drawee bank pays ₹25,000 in due course to Fatima as the bearer, Section 85(2) NI Act discharges the drawee bank despite Mohan's endorsement.

FAQs on Section 85 NI Act

What is Section 85 NI Act?▼

Section 85 NI Act states when a drawee bank is discharged from liability on a cheque payable to order and on a cheque originally expressed to be payable to bearer. The drawee is discharged by payment in due course when an order cheque purports to be endorsed by or on behalf of the payee, or when a cheque originally payable to bearer is paid in due course to the bearer.

When is the drawee discharged on a cheque payable to order under Section 85(1) NI Act?▼

Under Section 85(1) NI Act, the drawee is discharged by payment in due course when a cheque payable to order purports to be endorsed by or on behalf of the payee.

Does an endorsement on a cheque originally payable to bearer prevent the drawee's discharge under Section 85(2) NI Act?▼

No. Under Section 85(2) NI Act, where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer notwithstanding any endorsement in full or in blank appearing on the cheque.

What happens under Section 85(2) NI Act if an endorsement on a cheque originally payable to bearer purports to restrict further negotiation?▼

The drawee is still discharged by payment in due course to the bearer. Section 85(2) NI Act states that the discharge operates notwithstanding that any endorsement appearing on the cheque purports to restrict or exclude further negotiation.

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