Skip to content

CS Professional · Banking and Insurance - Laws and Practice · Payment and Collection of Cheques and Other Negotiable Instruments

A bill of exchange payable to order was accepted by Deshmukh Pharma. On the due date, Deshmukh Pharma paid the full amount to the holder, Eshan Chemicals, and the bill was handed back. Eshan Chemicals then indorsed the same bill to Farhan for value. What is the legal position under Section 60?

Farhan cannot acquire rights on the bill. Section 60 permits negotiation only until payment or satisfaction by the maker, drawee or acceptor at or after maturity, and not afterwards. The acceptor had already paid, so the later indorsement could not negotiate the bill.

  1. AFarhan can enforce the bill, because it was negotiated before cancellation
  2. BFarhan cannot acquire rights, because a bill cannot be negotiated after payment or satisfactionCorrect
  3. CFarhan can enforce it only against Eshan Chemicals
  4. DFarhan can enforce it if he had no notice of the payment

Explanation

Section 60 allows negotiation until payment or satisfaction by the maker, drawee or acceptor at or after maturity, but not after such payment or satisfaction. Deshmukh Pharma, the acceptor, had already paid, so the bill could no longer be negotiated. Lack of notice is not a condition recognised in Section 60.

Did you get it right without looking?

One question tells you little. A timed set on Payment and Collection of Cheques and Other Negotiable Instruments shows your real accuracy, how long you take and where you lose marks.

Practise Payment and Collection of Cheques and Other Negotiable InstrumentsFree diagnostic mock

More Payment and Collection of Cheques and Other Negotiable Instruments questions