Section 26 of Negotiable Instruments Act 1881: Capacity to Make Notes, Bills and Cheques
Section 26 of the Negotiable Instruments Act, 1881 deals with legal capacity in relation to promissory notes, bills of exchange and cheques. It states who may bind themselves by making, drawing, accepting, indorsing, delivering or negotiating such instruments and contains specific rules concerning minors and corporations.
Section 26: Capacity to Make Promissory Notes, Bills and Cheques
Every person capable of contracting, according to the law to which that person is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.
Meaning of Capacity under Section 26
The section does not create a separate universal test of contractual capacity. Instead, it refers to the law to which the person is subject. A person who is capable of contracting under that applicable law may bind himself and be bound through the acts specifically listed in Section 26.
Acts Covered by Section 26
The provision expressly covers the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque. The legal effect of a person's act therefore depends both on the requirements of the Negotiable Instruments Act and on that person's capacity under the applicable law.
Minor under Section 26
A minor may draw, indorse, deliver and negotiate such instruments so as to bind all parties except himself.
This is an express statutory rule. A minor's drawing, indorsement, delivery or negotiation may operate so as to bind other parties, but Section 26 protects the minor from being personally bound by those acts.
Corporations and Negotiable Instruments
Nothing in Section 26 shall be deemed to empower a corporation to make, indorse or accept such instruments except in cases in which, under the law for the time being in force, it is so empowered.
Accordingly, Section 26 does not by itself confer power on every corporation to make, indorse or accept negotiable instruments. The corporation must have the necessary power under the law for the time being in force that governs it.
Meaning of Promissory Note, Bill of Exchange and Cheque
A promissory note is defined in Section 4, a bill of exchange in Section 5, and a cheque in Section 6. These definitions identify the principal instruments to which Section 26 applies.
Meaning of Negotiation and Indorsement
Sections 14 and 15 deal with negotiation and indorsement. Section 14 explains when a promissory note, bill of exchange or cheque is negotiated, while Section 15 deals with indorsement by the maker or holder for the purpose of negotiation.
Related Provisions on Parties to Notes, Bills and Cheques
Section 26 begins Chapter III of the Act, dealing with parties to notes, bills and cheques. Sections 27 and 28 address agency and the liability of an agent signing an instrument. Sections 29 onward deal with liabilities and relationships of other parties to negotiable instruments.
Official legal text: The current statutory text of the Negotiable Instruments Act, 1881 can be checked on India Code, the official Government of India legal database.