Section 117 - Rules as to compensation, Section 118 - Presumptions as to negotiable instruments : Negotiable Instruments Act 1881

What are the Rules as to compensation? What is Presumptions as to negotiable instruments? Rules as to compensation and Presumptions as to negotiable instruments are defined under Section 117 and 118 of Negotiable Instruments Act 1881

Section 117 of Negotiable Instruments Act 1881: "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 :-

(a) The holder is entitled to the amount due upon the instrument, together with the expenses properly incurred in presenting, noting and protesting it;

(b) 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;

(c) 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;

(d) 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;

(e) 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.

Section 118 of Negotiable Instruments Act 1881: "Presumptions as to negotiable instruments"

Until the contrary is proved, the following presumptions shall be made :-
of consideration

(a) that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;

as to date

(b) that every negotiable instrument bearing a date was made or drawn on such date;

as to time of acceptance

as to time of transfer

(d) that every transfer of a negotiable instrument was made before its maturity;

as to order of indorsements
(e) that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

as to stamp
(f) that a lost promissory note, bill of exchange or cheque was duly stamped;

that holder is a holder in due course
(g) that the holder of a negotiable instrument is a holder in due course : provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.