Negotiable Instruments Act 12 Of Compensation

A 'Bare act' is the actual legislation passed by the Parliament of India. Generally, an act sets out the high level legal and policy principles applicable to the subject matter of the law.

Most acts are accompanied by 'subsidiary legislation' such as rules, regulations, notifications and orders; which address the actual implementation detail of the act.

Negotiable Instruments Act, 1881

Chapter XII – Of Compensation

Section 117 – Rules as to compensation

The compensation payable in case of dishonour of a promissory note, bill of exchange or cheque, by any party liable to the holder or any indorsee, shall be determined by the following rules:

1. the holder is entitled to the amount due upon the instrument, together with the expenses properly incurred in presenting, noting and protesting it;
2. when the person charged resides at a place different from that at which the instrument was payable, the holder is entitled to receive such sum at the current rate of exchange between the two places;
3. an indorser who, being liable, has paid the amount due on the same is entitled to the amount so paid with interest at eighteen per centum per annum from the date of payment until tender or realization thereof, together with all expenses caused by the dishonour and payment;
4. when the person charged and such indorser reside at different places, the indorser is entitled to receive such sum at the current rate of exchange between the two places;
5. 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). If such bill 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.

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