What is Presentment | Negotiable Instruments Act, 1881

In this article we made a comprehensive study about Presentment under Negotiable Instruments Act, 1881, embodying its meaning, kinds, time and place of Presentment; and importance

 

1. Presentment:

 

Presentment under the Negotiable Instruments Act refers to the process of presenting a negotiable instrument, such as a promissory note or a bill of exchange, to the party primarily liable for payment. The Negotiable Instruments Act is a legal framework that governs negotiable instruments in various jurisdictions.

 

Section 21 of the Negotiable Instruments Act provides that in a promissory note or bill of exchange the expression “at sight” and “on presentment” means on demand. The expression “after sight” means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non- acceptance, or protest for non-acceptance.

 

The payee or holder of an instrument has certain duties to perform, before he can claim payment. If the bill requires acceptance, it must be presented for acceptance. In some cases, the bill must be presented for payment also.

 

2. Understanding Presentment: A Fundamental Concept

 

Presentment refers to the formal act of presenting a negotiable instrument to the party primarily liable for payment or acceptance. This presentation serves several essential purposes:

 

1. Establishing Liability: Presentment triggers the liability of the parties involved. It acts as a notice to the party who is obligated to pay, informing them that the instrument is due for payment or acceptance.
2. Timely Payment: Presentment ensures that the instrument is presented for payment or acceptance within the stipulated timeframes, preventing delays in financial transactions.
3. Preservation of Legal Rights: A proper presentment is a prerequisite for taking legal action in case of non-payment or dishonor of the instrument.

 

3. kinds of presentments

 

There are two kinds of presentments:

(a) presentment for acceptance, and

(b) presentment for payment.

 

(a) Presentment for Acceptance

 

Section 61 of the Negotiable Instruments Act provides that a bill of exchange payable after sight must, if no time or place is specified therein for presentment, be presented to the drawee thereof for acceptance, if he can, after reasonable search, be found, by a person entitled to demand acceptance, within a reasonable time after it is drawn, and in business hours on a business day. In default of such presentment, no party thereto is liable thereon to the person making such default.

 

In order to constitute the bill a negotiable instrument, it is not absolutely necessary that the bill should be accepted before it is negotiated. However, in the following two cases, the bill must be presented for acceptance before it can be presented for payment-

(i) where a bill is payable after sight, presentment for acceptance is essential in order to fix the maturity of the bill;

(ii) where the bill expressly stipulates that it must be presented for acceptance before it is presented for payment.

 

The presentment for acceptance must be made to-

 

(i) Drawee or his duly authorized agent.

(ii) Where there are several drawees who are not partners, presentment must be made to all of them, unless one drawee has authority to accept for all, in which case presentment must be made to him only.

(iii) If the several drawees are partners, presentment to one partner is sufficient.

(iv) If the drawee is dead, it must be made to his legal representative.

(v) If the drawer is bankrupt, then to his assignee.

 

When authorized by agreement or usage, presentment through post office by means of a registered letter is sufficient. (Section 61)

 

(b) Presentment for Payment

 

Section 64 of the Negotiable Instruments Act lays down that promissory note, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as herein provided. In default of such presentment, the other parties thereto are not liable thereon to such holder.

 

Where authorized by agreement or usage, a presentment through the post office by means of a registered letter is sufficient.

 

Thus, for payment the promissory notes, bills of exchange and cheques must be presented to the maker, acceptor or drawer thereof respectively, by or on behalf of the holder. If it is not so presented, the drawers and endorsers will be discharged.

 

4. Time of Presentment

 

Where a bill or promissory note is payable after sight it must be presented by the holder for the drawee's or maker's acceptance within the specified time or, if no time is specified, within a reasonable time of its issue. Reasonable time is a question of fact that depends upon the means of communication available and usages of a particular trade.

 

Where an instrument is payable after a fixed period of time, it should be presented for payment on its maturity (Section 66). An instrument payable on demand must be presented for payment within reasonable time after it is received by the holder (Section 74). If he does not do so, all parties, except the drawer, will be discharged from liability to the holder (Section 73). As per the provisions of section 65 of the Act, in all cases, presentment should be made during the usual hours of business and, in the case of a cheque, within banking hours.

 

5. Place of Presentment

 

Section 61 of the Act lays down that if the bill is directed to the drawee at a particular place, it must be presented at that place; and if at the due date for presentment he cannot, after reasonable search, be found there the bill is dishonoured.

 

Section 68 of the Act lays down that if a promissory note, bill of exchange or cheque made, drawn or accepted payable at a specified place and not elsewhere must be presented for payment at that place. Section 69 then provides that a promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the maker or drawer thereof, be presented for payment at that place.

 

But if no place for presentment is specified in the note or bill, presentment must be made at the place of business, if any, or at the usual residence of the maker, drawee or acceptor thereof, as the case may be (Section 70). If the maker, drawee or accepter of a negotiable instrument has no known place of business or fixed residence, and no place is specified in the instrument for presentment for acceptance or payment, such presentment may be made to him in person wherever he can be found.

 

If the maker, drawee or accepter cannot be found, presentment in the street or wherever else he can be found would be good [Cross v Smith, (1813) 1 M&S 545].

 

Where a bill has been accepted payable at the acceptor's bank, presentment must be made at the bank, and presentment to the acceptor personally will not be sufficient. Gibb v Mather. (1832) 2 Cr &J 254

 

6. Key Implications and Importance:

 

Proper presentment is essential for maintaining the integrity of negotiable instruments and ensuring fair dealings. Failing to present an instrument within the required timeframes can have significant consequences:

1. Loss of Legal Remedies: If an instrument is not presented for payment or acceptance within the prescribed time, the holder may lose certain legal remedies against the parties primarily liable. This emphasizes the need for timely presentment to protect one's financial interests.
2. Clear Notification: Presentment serves as a formal notice to the obligated party, ensuring that they are aware of their responsibility to pay or accept the instrument.
3. Prevention of Fraud: Timely presentment can help prevent fraud and unauthorized transactions, as it requires parties to adhere to established procedures before transferring funds.

 

7. Conclusion:

 

Presentment under the Negotiable Instruments Act is a foundational concept that ensures the smooth functioning of negotiable instruments in financial transactions. By establishing liability, enabling timely payments, and preserving legal rights, presentment safeguards the interests of parties involved. Whether it's a promissory note, a bill of exchange, or a cheque, the act of presentment forms a crucial link in the chain of financial trust and accountability. As the laws and regulations may vary across jurisdictions, seeking legal guidance is advisable to ensure compliance and effective utilization of negotiable instruments.

 

FAQ (Frequently Asked Questions)

 

1. Who are parties of a bill of exchange?

 

Ans: Drawer, drawee and payee.

 

2. Who are parties to a Promissory Note?

 

Ans: Maker and Payee

 

3. Define – Drawer, Drawee, Acceptor, Payee?

 

Ans: ‘Drawer’, ‘Drawee’ - Section 7 of the Negotiable Instruments Act, 1881. lays down that the maker of a bill of exchange or cheque is called the 'drawer and the person thereby directed to pay is called the 'drawee'.

 

‘Acceptor’ - After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called, the acceptor.

 

‘Payee’ - The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the ‘payee’.