Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Foreign Instruments and Rules under the Negotiable Instruments Act

Updated 11 October 2026 · Fact-checked

A foreign instrument is a promissory note, bill or cheque that is not an inland instrument (Sections 11 and 12). Its parties' liabilities follow the law of the place of making or payment (Section 134), dishonour follows the law of the place of payment (Section 135), and foreign law is presumed same as Indian law (Section 137).

Understand Foreign Instruments and International Law Rules

Every promissory note, bill of exchange or cheque is either inland or foreign. The test is in Section 11. An instrument is inland if it is drawn or made in India and is either payable in India or drawn upon a person resident in India. Section 12 says any instrument not so drawn, made or made payable is a foreign instrument.

So a cheque made in Mumbai and payable in Singapore, on a Singapore-resident drawee, is foreign. A note made in Dubai and payable in Delhi is also foreign, because it was not made in India. Do not decide by looking at one fact only. Check where it was made and where it is payable or whom it is drawn on.

Once an instrument is foreign, a question arises: whose law applies? The Act gives conflict-of-laws rules. Section 134 says that, unless there is a contract to the contrary, the maker or drawer is liable according to the law of the place where he made the instrument. The acceptor and the indorser are liable according to the law of the place where the instrument is made payable. Section 135 says that where an instrument is payable at a place different from where it was made or indorsed, the law of the place of payment decides what is dishonour and what notice of dishonour is enough.

Section 136 protects Indian acceptances and indorsements. If an instrument is made, drawn, accepted or indorsed outside India but in accordance with Indian law, the agreement may be invalid under the law of the country where it was entered into. That does not invalidate a later acceptance or indorsement made within India. Section 104 adds that foreign bills must be protested for dishonour when the law of the place where they are drawn requires it.

Section 137 helps in court. Foreign law on notes, bills and cheques is presumed to be the same as Indian law until the contrary is proved. Section 118 also gives presumptions that apply to negotiable instruments generally: consideration, date, time of acceptance, time of transfer, order of indorsements, stamp on a lost instrument, and that the holder is a holder in due course. All are rebuttable.

Key rules to remember

Inland instrument (Section 11): Drawn or made in India AND (payable in India OR drawn on a person resident in India); Both parts must be met. Failing either makes it foreign.
Foreign instrument (Section 12): Any instrument not an inland instrument; It is a residual definition.
Liability of maker or drawer (Section 134): Law of the place where he made the instrument; Applies in all essential matters, in the absence of a contract to the contrary.
Liability of acceptor and indorser (Section 134): Law of the place where the instrument is made payable; Same condition: absence of a contrary contract.
Dishonour and notice (Section 135): Law of the place of payment decides dishonour and sufficiency of notice; Applies where the place of payment differs from the place where it was made or indorsed.
Instrument made abroad under Indian law (Section 136): Invalidity under foreign law does not invalidate later acceptance or indorsement within India; Protects subsequent Indian parties.
Presumption as to foreign law (Section 137): Foreign law is presumed same as Indian law until the contrary is proved; The party who says it differs must prove it.
Protest of foreign bills (Section 104): Protest is required when the law of the place where the bill is drawn requires it; Applies to foreign bills of exchange.
Presumptions (Section 118): Consideration, date, time of acceptance, time of transfer, order of indorsements, stamp on lost instrument, holder in due course; All hold until the contrary is proved. For the holder in due course presumption, the proviso shifts the burden to the holder where the instrument was obtained by offence, fraud or unlawful consideration.

How to solve Foreign Instruments and International Law Rules questions

Use this method for any fact-based question on foreign instruments. Write the provision first, then the facts, then the conclusion.

1List the facts: where the instrument was made, where it is payable, who the drawee is and where he resides.
2Apply Sections 11 and 12 and classify the instrument as inland or foreign. State both limbs of Section 11.
3Identify the issue: liability of a party, dishonour and notice, protest, or proof of foreign law.
4For liability, apply Section 134: maker or drawer by the law of place of making; acceptor and indorser by the law of place of payment. Check for a contract to the contrary.
5For dishonour or notice, apply Section 135 if the place of payment differs from the place of making or indorsement. For protest of a foreign bill, apply Section 104.
6If foreign law is not proved, apply Section 137. If an Indian acceptance or indorsement is in issue, consider Section 136.
7Add any Section 118 presumption that helps, such as consideration or holder in due course, and remember it is rebuttable.
8Close with a clear one-line conclusion.

Quickest way: Two-question shortcut

When to use it: Use it when time is short and the question gives a simple set of facts about places.

Ask: made in India and payable in or drawn on a resident of India? If yes to both, inland. Otherwise foreign.
Ask: whose liability? Maker or drawer means place of making. Acceptor or indorser means place of payment.
Ask: dishonour or notice? Place of payment, if different from place of making or indorsement.
If nothing is proved about foreign law, assume it equals Indian law (Section 137).
Write the section numbers beside each point.

Common mistakes in Foreign Instruments and International Law Rules

Calling an instrument inland because it was made in India.
Students remember only one limb of Section 11.
Fix: Check both limbs: made in India and payable in, or drawn on a resident of, India.
Applying the law of the place of making to an acceptor or indorser.
Students merge the drawer rule and the acceptor rule.
Fix: Remember: maker or drawer is governed by the law of the place of making; acceptor and indorser by the law of the place of payment.
Ignoring the words 'in the absence of a contract to the contrary' in Section 134.
Students learn the rule as absolute.
Fix: State the condition. A contrary contract can displace the default rule.
Reading Section 136 as saying the instrument is valid under all laws.
The wording about invalidity is confusing.
Fix: Say that foreign invalidity of the original agreement does not invalidate a later acceptance or indorsement made within India.
Treating Section 118 presumptions as conclusive.
Students forget the opening words.
Fix: Write 'until the contrary is proved'. The opposing party can rebut.
Using Indian rules of notice for a bill payable abroad.
Students assume Indian law applies since the case is heard in India.
Fix: Section 135 applies the law of the place of payment to dishonour and notice.

Worked examples

Example 1

Ravi makes a promissory note at Mumbai in favour of Sunil. It is payable at Colombo. Is it an inland or a foreign instrument? Give reasons.

Show the solution

Section 11: an instrument is inland if it is drawn or made in India and is payable in, or drawn upon a person resident in, India.
The note was made in India, so the first limb is met.
A promissory note has no drawee. It is payable at Colombo, which is outside India, so the second limb fails.
Section 12: any instrument not so drawn, made or made payable is a foreign instrument.

Answer: The note is a foreign instrument under Section 12, because it is not payable in India.

Example 2

A bill is drawn by Anil in Dubai and accepted by Bina, payable in Chennai. Bina indorses it in Chennai to Chetan. It is dishonoured. Which law decides Anil's liability, Bina's liability, and what constitutes dishonour? Assume there is no contract to the contrary.

Show the solution

The bill was drawn in Dubai, so it is not drawn in India. It is a foreign instrument under Sections 11 and 12.
Section 134: the drawer's liability is governed by the law of the place where he made the instrument, which is Dubai. Anil's liability follows Dubai law.
Section 134: the acceptor's and indorser's liabilities follow the law of the place where the instrument is made payable, which is Chennai. Bina's liability follows Indian law.
Section 135: the place of payment (Chennai) differs from the place where it was made (Dubai). Indian law therefore decides what is dishonour and what notice is sufficient.
Section 137: if Dubai law is not proved, it is presumed to be the same as Indian law.

Answer: Anil's liability is governed by Dubai law; Bina's liability and the rules on dishonour and notice are governed by Indian law. If Dubai law is not proved, it is presumed the same as Indian law.

Exam tips

Start every answer by classifying the instrument under Sections 11 and 12. Marks are often given for this step.
Learn the drawer versus acceptor and indorser split in Section 134 as a one-line pair.
Quote the condition 'in the absence of a contract to the contrary' when using Section 134.
For presumption questions, list the Section 118 presumptions and add that all are rebuttable.
Use short headings in your answer: provision, application, conclusion.

Practice questions from Law relating to Negotiable Instruments

Foreign Instruments and International Law Rules in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Foreign Instruments and International Law Rules: frequently asked questions

What is the difference between an inland and a foreign instrument?

An inland instrument is made or drawn in India and is payable in India or drawn on a person resident in India (Section 11). Any other instrument is foreign (Section 12). Both limbs of Section 11 must be met for an instrument to be inland.

What does Section 136 of the Negotiable Instruments Act say?

It deals with an instrument made, drawn, accepted or indorsed outside India but in accordance with Indian law. If the agreement is invalid under the law of the foreign country where it was made, that does not invalidate a later acceptance or indorsement made within India.

Which law applies to dishonour of a foreign instrument?

Under Section 135, where the instrument is payable at a place different from where it was made or indorsed, the law of the place of payment decides what is dishonour and what notice of dishonour is sufficient.

What are the presumptions under Section 118?

Until the contrary is proved, it is presumed that the instrument was made for consideration, bears the true date, was accepted within a reasonable time, was transferred before maturity, has indorsements in order, that a lost instrument was duly stamped, and that the holder is a holder in due course.