The Negotiable Instruments Act Compared with the English Bills of Exchange Act, 1882

The Indian Act and the English Bills of Exchange Act, 1882 were drafted within a year of each other from the same body of mercantile law, and Indian courts often refer to English decisions. Yet the two statutes differ in important respects, and India has since added features with no English counterpart, above all the criminal offence of cheque dishonour. This note compares the two.

1. Common Origins

• Dates: the Indian Act was passed on 9 December 1881 and came into force on 1 March 1882; the English Act, drafted by Sir Mackenzie Chalmers, received assent in August 1882.
• Shared source: both codify the law merchant as developed by English courts, so the basic concepts of bill, note, cheque, acceptance, indorsement, holder in due course, dishonour and protest are the same.
• Structure: the English Act has separate parts for bills (Part II), cheques (Part III) and notes (Part IV); the Indian Act treats the three instruments together, chapter by chapter.

2. Differences in the Civil Law

• Holder in due course, standard of care: India requires that the holder took without sufficient cause to believe in a defect (Section 9), a test of reasonable care; England requires good faith and no notice of a defect, and that the bill be complete and regular on its face (Section 29, BOEA).
• Payee as holder in due course: India includes the payee (Section 9); in England the original payee is generally not a holder in due course (R.E. Jones Ltd. v. Waring and Gillow Ltd., House of Lords, 1926).
• Fictitious payee: England treats a bill payable to a fictitious or non-existing payee as payable to bearer (Section 7(3), BOEA; Vagliano, 1891); the Indian Act has no such rule (Topic 20).
• Forgery: the English Act states expressly that a forged signature is wholly inoperative (Section 24, BOEA); the Indian Act reaches the same result through general principles and specific sections.
• Days of grace and holidays: India retains three days of grace and moves maturity on a holiday to the preceding business day (Sections 22 and 25). English law abolished days of grace in 1971, and maturity on a non-business day moves to the succeeding business day.
• Interest: India fixes 18 per cent where no rate is stated (Section 80); in England, interest as damages is in the court's discretion (Section 57, BOEA).
• Local usage: India saves hundi usages (Section 1); England has no equivalent.

3. Differences Concerning Cheques and Banks

• Account payee cheques: in England, a cheque crossed "account payee" is not transferable by statute (Section 81A, BOEA, inserted by the Cheques Act, 1992); in India the effect rests on banking practice and RBI instructions (Topic 34).
• Collecting banker: the English Cheques Act, 1957 (Section 4) protects a collecting bank for crossed and uncrossed cheques; Section 131 of the Indian Act covers only crossed cheques and drafts (Topic 36).
• Paying banker: both systems protect a bank that pays in good faith on a forged indorsement (Section 60, BOEA; Section 85, NI Act), but neither protects payment on a forged drawer's signature.
• Electronic presentment: India recognised truncated cheques and electronic cheques in 2002; English law was amended in 2015 to allow presentment of cheque images.

4. The Criminal Law: India's Distinctive Feature

The largest difference is Chapter XVII. In England, a bounced cheque gives only a civil claim, unless the drawer committed fraud, which is prosecuted under the general law of fraud. India has made dishonour for want of funds a specific offence (Section 138), with presumptions of debt (Section 139), vicarious liability of directors (Section 141), special procedure (Sections 142 to 147), and interim compensation and appeal deposits (Sections 143A and 148). This reflects the Indian choice to use criminal law to strengthen confidence in cheques (Parts J and K).

5. Using English Authority in India

Indian courts treat English decisions on the law merchant as persuasive, particularly where the two statutes are in similar terms. But where the Indian Act departs from the English one, as on the standard of care for a holder in due course, the payee, fictitious payees, days of grace and the statutory interest rate, the Indian text governs and English cases must be used with caution.

6. Related Topics and Provisions

• History of negotiable instruments law (Topic 2)
• Holder in due course (Topic 13)