Section 89 NI Act: Payment of instrument on which alteration is not apparent
Negotiable Instruments Act, 1881
Section 89 NI Act at a Glance
Section 89 NI Act discharges a person or banker who pays in due course an instrument with a non-apparent alteration or crossing according to its apparent tenor. It also sets rules and verification duties for electronic images of truncated cheques.
Section 89 NI Act Bare Act Text
89. Payment of instrument on which alteration is not apparent.
(1) Where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered, or where a cheque is presented for payment which does not at the time of presentation appear to be crossed or to have had a crossing which has been obliterated, payment thereof by a person or banker liable to pay, and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due course, shall discharge such person or banker from all liability thereon; and such payment shall not be questioned by reason of the instrument having been altered or the cheque crossed.
(2) Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor of such electronic image and the truncated cheque shall be a material alteration and it shall be the duty of the bank or the clearing house, as the case may be, to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image.
(3) Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, shall verify from the party who transmitted the image to it, that the image so transmitted to it and received by it, is exactly the same.
Amendments to this section
- Section 89 re-numbered as sub-section (1) thereof by Act 55 of 2002, s. 5 (w.e.f. 6-2-2003).
- Ins. by Act 55 of 2002, s. 5 (w.e.f. 6-2-2003).
Section 89 NI Act in Simple Words
Section 89 NI Act protects a person or banker paying an instrument on which a material alteration or a cheque crossing is not apparent, and sets duties for banks and clearing houses dealing with electronic images of truncated cheques.
Under Section 89(1) NI Act, where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered, or where a cheque presented for payment does not at the time of presentation appear to be crossed or to have had a crossing that has been obliterated, payment by a person or banker liable to pay discharges that person or banker from all liability on the instrument if paid according to its apparent tenor at the time of payment and otherwise in due course. Furthermore, such a payment cannot be questioned by reason of the instrument having been altered or the cheque crossed.
Under Section 89(2) NI Act, where a cheque is an electronic image of a truncated cheque, any difference in the apparent tenor between that electronic image and the truncated cheque is a material alteration. Section 89(2) NI Act places a duty on the bank or the clearing house, as the case may be, to ensure the exactness of the apparent tenor of the electronic image of the truncated cheque while truncating and transmitting the image.
Under Section 89(3) NI Act, any bank or clearing house that receives a transmitted electronic image of a truncated cheque must verify from the party that transmitted the image that the image transmitted to it and received by it is exactly the same.
Act 55 of 2002 renumbered the section as sub-section (1) and inserted sub-sections (2) and (3), from 6 February 2003.
When Section 89 NI Act Applies
- A promissory note, bill of exchange or cheque has been materially altered without appearing to have been so altered, or a cheque presented for payment does not at presentation appear to be crossed or to have had an obliterated crossing.
- A person or banker liable to pay pays the instrument according to its apparent tenor at the time of payment and otherwise in due course, which discharges that person or banker from all liability on the instrument.
- Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor between the electronic image and the truncated cheque is a material alteration.
- The bank or clearing house truncating and transmitting the electronic image has a duty to ensure the exactness of its apparent tenor, and the receiving bank or clearing house must verify from the transmitting party that the transmitted and received image is the exact same image.
Example of Section 89 NI Act
FAQs on Section 89 NI Act
What is Section 89 NI Act?▼
Section 89 NI Act discharges a person or banker liable to pay when they pay an instrument with a non-apparent material alteration, or a cheque with a non-apparent or obliterated crossing, according to its apparent tenor at the time of payment and otherwise in due course. It also treats any difference in apparent tenor between an electronic image and a truncated cheque as a material alteration and sets verification duties for banks and clearing houses.
Can a payment made in compliance with Section 89(1) NI Act be questioned because the instrument was altered or the cheque was crossed?▼
No. Section 89(1) NI Act expressly states that when such a payment is made according to the apparent tenor at the time of payment and otherwise in due course, the payment cannot be questioned by reason of the instrument having been altered or the cheque crossed.
When is a discrepancy in an electronic image of a truncated cheque a material alteration under Section 89(2) NI Act?▼
Under Section 89(2) NI Act, any difference in the apparent tenor of the electronic image of a truncated cheque and the truncated cheque itself is a material alteration.
What duties do banks and clearing houses have for truncated cheques under Sections 89(2) and 89(3) NI Act?▼
Under Section 89(2) NI Act, the bank or clearing house truncating and transmitting the image has a duty to ensure the exactness of the apparent tenor of the electronic image. Under Section 89(3) NI Act, the bank or clearing house receiving the transmitted electronic image must verify from the transmitting party that the image transmitted and received is the exact same image.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·