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Report No. 11

Chapter XI

Compensation

101. Rule as to compensation.-

(1) The compensation payable in case of dishonour of an instrument by any party liable to the holder, drawer or any indorser shall be determined by the following rules:-

(a) the holder is entitled to recover from any party liable on the instrument the amount due upon the instrument (principal and interest), together with expenses properly incurred in presenting, noting and protesting it;

[Section 117(a)]

(b) the drawer, who has been compelled to pay the amount due on a bill is entitled to recover from the acceptor the amount so paid (principal and interest), with interest at six per centum per annum from the date of payment until tender or realisation thereof;1

1. Section 57(1), BEA.

(c) an indorser who, being liable, has paid the amount due on the same is entitled to recover from the acceptor or from the maker or drawer or from any prior indorser the amount so paid (principal and interest), with interest at six per centum per annum from the date of payment until tender or realisation thereof, together with all expenses caused by the dishonour and payment;

[Section 117(c)]

(d) the sum mentioned in clause (a), (b) or (c) shall, in so far as it represents the amount due on the instrument (principal and interest), be paid to the holder, drawer or indorser, as the case may be, in the following manner:-

(i) where such sum is due to him in Indian currency, the payment shall be made in that currency;

(ii) where such sum is due to him in the currency of any foreign country, the payment shall be made in Indian currency at the current rate of exchange between India and that country as on the date on which such sum became payable to him;

(Section 117(b) and (d), modified]

(e) the expenses referred to in clause (a) or (c) shall be paid to the holder or indorser as the case may be, in Indian currency, or, where the expenses were incurred in the currency of any foreign country, then, in Indian currency at the current rate of exchange between India and that country as on the date on which they were incurred by the holder or indorser, as the case 'may be.

(2) The party entitled to compensation may draw a bill upon the party liable to compensate him, payable at sight or on demand, for the amount due to him, together with all expenses properly incurred by him. Such bill must be accompanied by the instrument dishonoured and the protest thereof, if any.

(Section 117(e), earlier half]]

(3) If a bill drawn under sub-section (2) is dishonoured, the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill.

[Section 117(e), latter half]]



Negotiable Instruments Act, 1881 Back




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