Lost Instruments and Duplicate Bills (Section 45A)

Paper can be lost, stolen or destroyed. When that happens, two questions arise: can the true holder still enforce payment, and what rights does the finder or thief, or someone who takes the instrument from them, acquire? The Act answers these in several places: Section 8 keeps the holder's status alive after loss, Section 45A lets the holder of a lost bill demand a duplicate, and Section 58 denies title to those claiming through the finder. Procedural law fills in the rest.

1. The Holder's Status Survives Loss (Section 8)

Under the second paragraph of Section 8, where a note, bill or cheque is lost or destroyed, its holder is the person entitled at the time of the loss or destruction. The loss of the paper does not extinguish the debt it represents, or the holder's rights against the parties liable.

2. Duplicate of a Lost Bill (Section 45A)

Section 45A, Negotiable Instruments Act, 1881

Where a bill of exchange has been lost before it is overdue, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again.

If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.

Bill of exchange: the section speaks of bills; the same practice is followed for lost cheques and drafts, where the drawer or issuing bank issues a fresh instrument against an indemnity.
Before it is overdue: the right arises only for a bill lost before maturity.
Same tenor: the duplicate must be on the same terms as the original.
Security: the drawer may require indemnity against claims by anyone who later produces the original, in particular a holder in due course.
Compulsion: if the drawer refuses, he may be compelled by suit to issue the duplicate.

3. The Finder and Those Claiming Through Him (Section 58)

Under Section 58, when an instrument has been lost, no possessor or indorsee claiming through the finder is entitled to receive the amount from the maker, acceptor or holder, or any prior party, unless he, or someone through whom he claims, was a holder in due course. The consequences differ with the form of the instrument:

Bearer instrument: transferable by delivery, so a person who takes it from the finder for value, before maturity and without cause for suspicion, becomes a holder in due course and can enforce it. The true owner's remedy is against the finder.
Order instrument: the finder can transfer it only by forging the payee's or indorsee's indorsement. A forged indorsement passes no title, so no transferee can be a holder in due course, and the true owner retains his rights (Topic 20).

⚠ Note

This is why bearer instruments are risky to send or carry, and why cheques are usually drawn to order and crossed "account payee": a crossed order cheque is very difficult to convert into cash by a finder (Topic 34).

4. Suing on a Lost Instrument

Order VII, Rule 16 of the Code of Civil Procedure, 1908: where a suit is founded on a negotiable instrument and it is proved that the instrument is lost, the court may pass a decree as if the instrument had been produced, provided the plaintiff gives an indemnity, to the court's satisfaction, against the claims of any other person on it.
Secondary evidence: the contents of a lost or destroyed instrument may be proved by secondary evidence, such as a copy or oral evidence, under the rules on secondary evidence (formerly Section 65 of the Indian Evidence Act, 1872, now the corresponding provision of the Bharatiya Sakshya Adhiniyam, 2023).
Proof of loss: the plaintiff must prove the instrument's existence, its terms, his title at the time of loss, and the loss itself.

5. Practical Steps on Losing a Cheque or Draft

Drawer's stop payment: the drawer of a lost cheque should instruct his bank to stop payment at once. A bank that pays after a valid countermand is liable to its customer.
Bank's protection before notice: a bank that pays a lost bearer cheque in due course, in good faith and without negligence, before receiving notice, is discharged (Sections 10 and 85(2); Topic 35).
Lost drafts: the issuing bank will usually issue a duplicate draft against an indemnity from the purchaser or payee, after confirming that the original has not been paid.
Reporting theft: where the instrument was stolen, a police report supports the claim of loss and helps trace any fraudulent encashment.

A related device is the drawing of bills in sets. Foreign bills are often drawn in two or three parts, sent by different routes; payment of one discharges the others, so the loss of one part does not defeat payment (Sections 132 and 133; Topic 39).

⚠ Key point

When an instrument is lost or destroyed, the holder is the person entitled at that time (Section 8). The holder of a bill lost before it is overdue may require the drawer to give a duplicate of the same tenor, on giving security if required, and the drawer can be compelled to do so (Section 45A). A person claiming through the finder recovers nothing unless he or a prior holder was a holder in due course (Section 58), which is possible for bearer instruments but not for order instruments transferred by forged indorsement. A suit on a lost instrument succeeds on proof of loss and an indemnity (Order VII, Rule 16 CPC).

6. Related Topics and Provisions

Holder (Topic 12)
Holder in due course (Topic 13)
Forgery and fictitious payees (Topic 20)
Bills in sets (Topic 39)