118. Presumptions as to negotiable.

pratik (Querist) 10 September 2010 This query is : Resolved
118. Presumptions as to negotiable instruments of consideration

(f) as to stamps-that a lost promissory note, bill of exchange or cheque was duly stamped;

Query : What does the clause (f) says pls if possible with the help of a example.

Section 7

"Acceptor for honour": 1[When a bill of exchange has been noted or protested for non-acceptance or for better security], and any person accepts it supra protest for honour of the drawer or of any one of the endorser, such person is called an "acceptor for honour".

Query : what is the meaning of the above one with the help of a example because i am confused that what does this term means " noted, protested for non-acceptance , it supra protest for honour . so pls explain me pls.

Thanks In Advance.

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R.Ramachandran (Expert) 11 September 2010
Dear Pratik, I am giving below my comments to both your queries.
Answer to query 1.

118. Presumptions as to negotiable instruments of consideration

(f) as to stamps-that a lost promissory note, bill of exchange or cheque was duly stamped;

Query : What does the clause (f) says pls if possible with the help of a example.

Answer to Query 2.
Section 7

"Acceptor for honour": 1[When a bill of exchange has been noted or protested for non-acceptance or for better security], and any person accepts it supra protest for honour of the drawer or of any one of the endorser, such person is called an "acceptor for honour".

Query : what is the meaning of the above one with the help of a example because i am confused that what does this term means " noted, protested for non-acceptance , it supra protest for honour . so pls explain me pls.

Thanks In Advance.

Presumption as to Consideration:
First let us understand the meaning of clause (a) of section 118. In the case of an ordinary contract, the law does not presume consideration, and the party seeking to enforce it must aver and prove that the contract was made for a valid consideration. A different rule applies to negotiable instruments, which are presumed to be supported by consideration until the contrary is provided. It is presumed that every negotiable instrument is made, drawn, accepted, indorsed, negotiated, or transferred for consideration.

Similarly, clause (f) of Section 118 provides that “unless the contrary is proved, a lost promissory note, bill of exchange or cheque is presumed to have been duly stamped. A similar presumption will also arise when a negotiable instrument has been destroyed.

Section 7 of N.I. Act and the term “Acceptor for Honour”.

According to Section 33 of the N.I. Act, only drawee can be acceptor. However there is an exception to this provision. According to Section 33 itself, in the case of ‘acceptor in need’ and ‘acceptor for honour’ the acceptor can be anyone other than the drawee.

A bill of exchange, as a general rule, can only be accepted by the person or persons to whom it is addressed. In other words, the person or persons who is/are ordered to pay by the drawer only can accept the bill of exchange. In other words, a stranger to the bill of exchange cannot accept a bill.

However, a stranger (i.e. a person who is not a drawee – i.e. the person(s) ordered to pay) can accept a bill only as ‘an acceptor for honour’ or as ‘an acceptor in need’.

A stranger to a bill can accept it for the honour of any party already liable on the bill. For instance if X has drawn a bill of exchange addressed to Y, Y being the drawee of the bill is liable to accept it. If, “Y” refuses to accept it for any reason whatsoever, then Z (who is a stranger to the bill of exchange) can accept the bill, in order to honour “Y”. In such a case Z is called the acceptor for honour.

Section 108 of N.I. Act, provides for Acceptance for honour.

A bill must be accepted by the person upon whom it is drawn. Otherwise the bill is dishonoured by non-acceptance.

When the original drawee refuses to accept the bill, or refuses to give better security when demanded by a notary, a stranger can step in and accept the bill as an acceptor for honour or acceptor supra protest. Section 108 permits this.
According to Section 109, a person desiring to accept for honour must, by writing on the bill under his hand, declare that he accepts under protest and protested bill for the honour of the drawer or of a particular indorser whom he names, or generally for honour.

According to Section 110, where the acceptance does not express for whose honour it is made, it shall be deemed to be made for the honour of the drawer.

Section 111 fastens liability on the acceptor for honour. By accepting a bill, an acceptor for honour binds himself to pay the amount of the bill, if the drawee does not.

N.I. Act also clearly provides how the acceptor for honour will get his money back, which he first pays as acceptor for honour.