Negotiation back Where an indorser negotiates an instrument and again becomes its holder, the instrument is said to be negotiated

back. The holder by negotiation back, i.e. A cannot sue the intermediate indorsers, i.e. B, C and D, a) Because to make them liable would involve a circuitry of actions, he having ultimately to sue himself. If A was allowed to sue D, D could sue C, C could sue B and B could sue A and the law prohibits this circuitry of suits. Because the holder by negotiation back, being a prior party, is liable to all the intermediate indorsers, i.e. to B, C and D.

b)

This rule, i.e. the holder by negotiation back cannot sue intermediate indorsers, is an exception to the general rule that the holder in due course may sue all prior parties. Section 52, however, provides that where an indorser excludes his liability by sans recourse indorsement and afterwards becomes the holder of the instrument, all intermediate indorsers are liable to him and he is liable to none. In that case, A can sue and recover the amount from D, C or B. MATURITY OF NEGOTIABLE INSTRUMENT (SECTIN 22-25) Maturity means the date on which the payment of an instrument falls due. An instrument payable on demand or at sight, e.g. a cheque, becomes payable immediately on the date of its execution, the question of its maturity does not arise at all. Its payment falls due at once on the date of issue. The question of maturity, therefore, arises only in the case of a bill of exchange or a promissory note which is expressed to be payable otherwise than on demand. Section 22 of the Negotiable Instrument Act, 1881 provides that every promissory note or bill of exchange expressed to be payable on a specified day, or at a certain period after date or after sight or at a certain period after happening of an event which is certain to happen is at maturity on the third day after the day on which it is expressed to be payable. Time bill or note is as such entitled to three days of grace and matures or falls due on the last day of the grace, and not on the date on which it is expressed to be payable. For example, a bill dated 1 st January 07 is made payable one month after date, i.e. 1st February07. The bill is at maturity on. 1st February + 3 days grace = 4th February 07. Such bill must be presented for payment on or after the last day of grace. Any presentment for payment earlier to the third day of grace is invalid. Where an instrument is made payable a stated number of months after date or after sight, or after a certain event, it matures three days after the corresponding date of the month after the stated number of months. The term month means Gregorian calendar month. For instance, a bill dated 30th January 07 is made payable three months after date, i.e. 30th April. The bill is at maturity on, 30th April + 3 days grace = 3rd May 07. Where the month in which the period would terminate has no corresponding date, the period shall be held to terminate on the last day of such month. For instance, a bill dated 30 th January 07 is made payable one month after date, i.e. 28th February since that is the last day of that month. The bill is at maturity on, 28 th February + 3 days grace = 3rd March 07. Where an instrument is payable a certain number of days after date or after sight, or after a certain event, the maturity is calculated by excluding the days on which the instrument is drawn or presented for acceptance or sight or on which the event happens. For instance, a bill dated 1 st March is made payable twenty days after date. The period of twenty days will be counted from 2nd March and twenty days expires on 21st March. So the bill is at maturity on, 21st March + 3 days grace = 24th March.
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Again, a bill dated 1st March 07 is made payable twenty days after sight. The bill is presented for acceptance on 5th March. The period of twenty days will be counted from 6 th March and twenty days expires on 25th March. So the bill is at maturity on 25th March + 3 days grace =28th March. Where the date on which an instrument is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day. The expression public holiday includes Fridays and any other day declared by the government by the notification in the official Gazette to be a public holiday. Thus where maturity of an instrument falls on 16th December, it shall be declared to be due on 15th December. Where an instrument is payable by installments, three days are to be allowed on each installment (Section67). CAPACITY TO MAKE, DRAW, ACCEPT, NEGOTIATE OR INDORSE AN INSTRUMENT The capacity to make, draw, accept, negotiate or indorse an instrument depends on the capacity to enter into contract. But a minor or a person of unsoundmind , though can not enter into a contract, can make, draw, accept, negotiate or indorse an instrument, so as to bind all parties except himself: (section-26) But an insolvent cannot make, draw, accept, negotiate or indorse an instrument after adjudication. An instrument executed by a person before his insolvency may be presented after adjudication to the official assignee. While, an instrument executed after insolvency in favour of the insolvent vest in the official assignee. An agent can make, draw, accept, negotiate or indorse an instrument on behalf of the principal, provided that he has authority to that effect. The agent must indicate that he is signing as agent by using the words for and on behalf of. The legal representatives, heirs or executor can make, draw, accept, negotiate or indorse an instrument. He must indicate in the instrument that he is signing as legal representative, heir, or executor.

LIABILITY OF THE PARTIES a. Maker, acceptor or drawee The maker of a note or drawee of a bill or cheque is primarily responsible for payment under the instrument (Section-32) b. Drawer The drawer is secondarily responsible for payment under the instrument, i.e. he is liable to when the instrument has been dishonoured by the drawee (Section 30) PRESENTMENT FOR PAYMENT To whom the instrument must be presented for payment a. The instrument must be presented to the maker, acceptor or drawee thereof. (Sec. 62, 64). b. The instrument may be presented: 1. To a duly authorized agent; 2. To the legal representative, where the maker, acceptor or drawee has died; 3. To the official assignee, where the maker, acceptor or drawee has been adjudicated as insolvent (Sec. 75).
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 Place of presentment for payment a. Where a place has been specified in the instrument, it must be presented at that place (Sec. 68, 69) b. Where no place has been specified, it must be presented at the usual place of business or usual place of residence of the maker, acceptor or drawee, (Sec. 70) c. Where no place has been specified and the place of business or residence is also unknown, it may be presented to the maker, acceptor or drawee in person, whenever he can be found. (Sec. 71) Time of presentment for payment a. date or sight must be presented at maturity. (Sec. 66) b. c. d. e. f. A note payable by installment must be presented on the third day after the day fixed for payment of each installment. (Sec. 67) The presentment must be made during usual business hours, e.g. a cheque must be presented within banking hours. (Sec. 65) A cheque must, in order to charge the drawer, be presented before the relation between the drawer and the banker has been altered to the prejudice of the drawer (Sec. 72) A cheque must, in order to charge any person except the drawer, be presented within a reasonable time. (Sec. 73) An installment payable on demand must be presented within a reasonable time. (Sec. 74) DISCHARGE The term discharge in relation to negotiable instrument has two connotations: a. Discharge of instrument: An instrument is said to be discharged when it becomes completely useless. b. Discharge of parties: A party is said to be discharged from his liability, when his liability under the instrument comes to an end. a. Modes of discharge of instrument 1. By payment (Sec 78) When the primary party, i.e. the maker of a note or the drawee of a bill or cheque, makes payment in due course to the holder, at or after maturity. 2. 3. 4. 5. 6. By primary party becoming holder (Sec 78) By acceptor becoming holder (Sec. 78) By insolvency By renunciation By cancellation (Sec 87)
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A note or bill payable at a specified period after

When the primary party lawfully becomes the holder of the instrument in his own right, at or after maturity. When the acceptor holds a bill in his own right, at or after maturity. When the primary party becomes insolvent. When the holder renounces or gives up his right against all the parties to the instrument.

When the holder cancels the instrument with the intention to release the party primarily liable thereon from his liability. 7. Discharge as a simple contract for money An instrument may be discharged in the same way as a simple contract for payment of money, e.g. by a covenant not to sue, by rescission, or substitution or another instrument or obligation etc. b. Modes of discharge of parties 1. 2. 3. 4. By cancellation (Sec 82[a]) When the holder cancels the name of the maker, acceptor or indorser with the intent to discharge him. By release (Sec 82 [b]) By payment (Sec 82 [c]) By operation of law When the holder discharge the maker, acceptor or indorser by giving notice of discharge. When the maker, acceptor or indorser makes payment in due course of the amount due on the instrument. Discharge from liability takes place by operation of law, e.g. by insolvency of the party. 5. By allowing drawee more than 48 hours (Sec 83)

If the holder of a bill allows the drawee more than 48 hours, exclusive of public holiday, to consider whether he will accept the same, all the previous parties not consenting to such allowance are thereby discharged from liability. 6. By delay in presenting cheque (Sec. 84)

When a cheque not presented for payment within a reasonable time of its issue, i.e. normally six months, and the bank fails, and drawer suffers actual loss through the delay, the drawer is discharged from liability. 7. By paying a cheque payable to bearer In the case of a cheque payable to bearer, the banker is discharged by paying in due course to the bearer thereof. 8. By taking qualified acceptance (Sec. 86) If the holder of a bill takes a qualified acceptance, all the previous parties not consenting to such acceptance are discharged from liability. 9. 10. By not giving notice of dishonor By materials alteration The prior parties to whom notice of dishonor is not given by the holder are discharged from liability. Material alteration renders an instrument void. There is a material alteration where it is an alternation: I. II. III. IV. V. VI. Of the date of the instrument. Of the sum payable In the time of payment. Of the place of payment. Of the rate of interest. In the date of indorsement, etc.

But there is no materials alternation in the following cases: I. Correction of a mistake.

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II. 11.

To carry out the common intention of the parties. By acceptor becoming holder (Sec 90)

If a bill negotiated at or after maturity is held by the acceptor in his own right, all right of action there on are extinguished.

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