Report No. 11
74. Section 26.-
We are of the opinion that not much purpose is being served by the first paragraph of section 26.
Where there is no codified law relating to contract it may be necessary in an Act relating to negotiable instruments to enumerate the general principles of the law of contract which are applicable to negotiable instruments. The Bills of Exchange Act, therefore, enacted provisions dealing with capacity and authority of parties, consideration and other matters which are governed by the law of contract. Similar provisions were reproduced in our Negotiable Instruments Act, even though we had our law of contract codified prior to that Act.
In our opinion, it is necessary to include in our Act provisions relating to matters such as what constitutes good consideration or when consideration is illegal or capacity of parties and so on. It is, however, necessary to include in this Act such of the provisions as modify the law under the Contract Act, as for example, section 39. To make this provision clear we have proposed1 that the provisions of the Contract Act save in so far as they are not inconsistent with the provisions of this Act should apply to all negotiable instruments. Such a provision, though unnecessary,2 is not uncommon in Indian legislation (vide Transfer of Property Act, section 4 and Sale of Goods Act, section 3).
1. Section 5 of App I.
2. Cf. Subbanarayana v. Ramaswami, 28 Mad 244.
75. As regards minors, the existing provision puts forth a proposition which is directly contradictory to the principle laid down in section 11 of the Contract Act. We think the import of the second .paragraph of section 26 would be better conveyed if modified, as we have done,1 in the light of sub-section (2) of section 22 of the Bills of Exchange Act.
1. Section 6 of App I.
76. The third paragraph of section 26 has been taken out to form a separate section,1 with verbal changes making it clear that a corporation's power to draw, indorse or accept an instrument is limited to the extent of its authority recognised by the law for the time being in force relating to corporations. Thus, section 47 of the Companies Act, 1956, prescribes the extent and limits of the power of companies registered under that Act.
1. Section 7 of App I.
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