Section 59 and Section 60 of Negotiable Instruments Act 1881: Dishonoured or Overdue Instrument
Sections 59 and 60 conclude Chapter IV of the Negotiable Instruments Act, 1881 on negotiation. Section 59 determines the rights of a holder who acquires an instrument after dishonour or after maturity, while Section 60 states how long a negotiable instrument remains capable of negotiation.
Section 59 - Instrument acquired after dishonour or when overdue
The holder of a negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment, without notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor:
Accommodation note or bill. Provided that any person who, in good faith and for consideration, becomes the holder, after maturity, of a promissory note or bill of exchange made, drawn or accepted without consideration, for the purpose of enabling some party thereto to raise money thereon, may recover the amount of the note or bill from any prior party.
Meaning and effect of Section 59
Section 59 addresses acquisition of a negotiable instrument after dishonour or after maturity. As against the other parties, the holder generally takes only the rights possessed by the transferor. The provision therefore limits the transferee to the transferor's rights in the circumstances specified by the section.
Dishonour may occur by non-acceptance or non-payment. These concepts are dealt with in Sections 91 and 92 of the Act. Maturity is governed principally by Sections 21 to 25, including the statutory rules for determining when a bill or note becomes due.
Accommodation note or bill - statutory exception
The proviso to Section 59 creates a specific exception for an accommodation promissory note or bill of exchange. A person who, in good faith and for consideration, becomes its holder after maturity may recover the amount from a prior party where the instrument was made, drawn or accepted without consideration for the purpose of enabling a party to raise money on it.
Illustration under Section 59
The acceptor of a bill of exchange, when he accepted it, deposited with the drawer certain goods as collateral security for payment of the bill, with power to the drawer to sell the goods and apply the proceeds in discharge of the bill if it were not paid at maturity. The bill was not paid at maturity. The drawer sold the goods and retained the proceeds, but indorsed the bill to A. A's title is subject to the same objection as the drawer's title.
Section 60 - Instrument negotiable till payment or satisfaction
A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof by the maker, drawee or acceptor at or after maturity, but not after such payment or satisfaction.
Meaning and effect of Section 60
Section 60 fixes the endpoint of negotiability. Subject to the statutory exception concerning the maker, drawee or acceptor after maturity, an instrument may continue to be negotiated until it is paid or otherwise satisfied by the maker, drawee or acceptor at or after maturity.
Once the instrument has been paid or satisfied in the manner contemplated by Section 60, it cannot thereafter be negotiated. The section should be read with the Act's provisions governing negotiation, maturity, payment and discharge from liability.
Sections 59 and 60 at a glance
| Provision | Subject | Main rule |
|---|---|---|
| Section 59 | Instrument acquired after dishonour or maturity | The holder generally has, against other parties, only the rights of the transferor, subject to the statutory accommodation note or bill proviso. |
| Section 60 | Duration of negotiability | An instrument may generally be negotiated until payment or satisfaction at or after maturity, but not after such payment or satisfaction. |
Related provisions
For a complete understanding of Sections 59 and 60, relevant connected provisions include Section 14 on negotiation, Sections 21 to 25 on maturity, Sections 46 to 58 on delivery and negotiation, Sections 78 to 82 on payment and discharge, and Sections 91 and 92 on dishonour by non-acceptance and non-payment.
This article explains the statutory provisions for general legal information. For authoritative wording, amendments and legislative status, refer to the official India Code source linked above.