Negotiable Instruments Act 1881 Section 49
Negotiable Instruments Act, 1881 Section 49 explains the liability of the acceptor of a bill of exchange upon dishonour by non-acceptance.
Negotiable Instruments Act Section 49 deals with the liability of the acceptor of a bill of exchange when the bill is dishonoured due to non-acceptance. It explains the legal responsibility that arises when the drawee refuses to accept the bill, making the acceptor liable to the holder.
This section is important for individuals, businesses, banks, and legal professionals who deal with bills of exchange. Understanding it helps in enforcing payment rights and managing risks related to acceptance and dishonour of bills.
Negotiable Instruments Act, 1881 Section 49 – Exact Provision
This provision means that if a bill of exchange is presented to the drawee for acceptance and the drawee refuses or neglects to accept it, the acceptor becomes liable to pay the amount to the holder. The acceptor's liability arises immediately upon dishonour by non-acceptance.
Applies specifically to bills of exchange.
Liability arises upon dishonour by non-acceptance.
Acceptor is responsible to the holder for payment.
Ensures holder's right to recover amount.
Supports enforceability of negotiable instruments.
Explanation of NI Act Section 49
This section states that the acceptor of a bill of exchange is liable to the holder if the bill is dishonoured by non-acceptance.
The section applies to the acceptor and the holder of the bill.
It concerns bills of exchange only, not cheques or promissory notes.
Liability is triggered when the drawee refuses or neglects to accept the bill.
The acceptor must pay the amount due to the holder upon dishonour.
This section protects the holder's right to payment despite non-acceptance.
Purpose and Rationale of NI Act Section 49
This section promotes trust in bills of exchange by ensuring that the acceptor is liable if the drawee refuses acceptance. It helps maintain certainty in business transactions and reduces disputes over payment obligations.
Promotes trust in negotiable instruments.
Ensures payment certainty and business confidence.
Reduces disputes and improves enforceability.
Prevents misuse or fraud in financial dealings.
Supports banking and credit system discipline.
When NI Act Section 49 Applies
This section applies when a bill of exchange is presented for acceptance and the drawee refuses or neglects to accept it. It is relevant in trade payments and credit transactions involving bills.
Applies only to bills of exchange.
Relevant in trade payments and credit transactions.
Triggered by presentation for acceptance and dishonour by non-acceptance.
Involves parties like drawer, drawee, acceptor, and holder.
Exceptions may include insolvency or incapacity of parties.
Legal Effect and Practical Impact under NI Act Section 49
Section 49 creates a clear liability for the acceptor upon dishonour by non-acceptance, enabling the holder to recover the amount due. It strengthens the enforceability of bills of exchange and provides legal recourse for holders.
Creates acceptor's liability to the holder.
Enables civil recovery of the amount due.
Supports holder's right to enforce payment.
Nature of Obligation or Protection under NI Act Section 49
This section imposes a substantive liability on the acceptor to pay the holder when the bill is dishonoured by non-acceptance. It is mandatory and benefits the holder by ensuring payment rights.
Creates substantive liability on acceptor.
Benefits the holder of the bill.
Mandatory obligation upon dishonour.
Substantive rather than procedural provision.
Stage of Transaction or Legal Process Where Section Applies
This section applies at the stage of presentment for acceptance and subsequent dishonour by non-acceptance. It precedes payment or further legal steps like notice and suit.
Instrument creation and issuance.
Presentation for acceptance to drawee.
Dishonour by non-acceptance.
Holder's right to demand payment from acceptor.
Possible legal action for recovery.
Consequences, Remedies, or Punishment under NI Act Section 49
Section 49 provides civil remedies for the holder to recover the amount from the acceptor if the bill is dishonoured by non-acceptance. There are no criminal penalties under this section.
Civil suit for recovery of amount.
No criminal liability under this section.
Enforcement through court process.
Non-compliance leads to legal action.
Example of NI Act Section 49 in Practical Use
Drawer X issues a bill of exchange to Payee X, who presents it to Drawee Y for acceptance. Drawee Y refuses to accept the bill. Under Section 49, the acceptor is liable to Payee X for the amount due. Payee X can demand payment from the acceptor or initiate recovery proceedings.
Holder can enforce payment despite non-acceptance.
Section protects holder's financial interests.
Historical Background of NI Act Section 49
Originally, Section 49 was designed to ensure that acceptors of bills of exchange are liable upon dishonour by non-acceptance. The provision has been interpreted by courts to uphold the rights of holders and maintain the reliability of bills as negotiable instruments.
Ensured acceptor's liability on dishonour.
Judicial interpretation strengthened holder protections.
Supports commercial certainty in negotiable instruments.
Modern Relevance of NI Act Section 49
In 2026, Section 49 remains relevant for bills of exchange used in trade and finance. Despite digital payment methods, bills continue to be important in certain transactions. The section supports banking discipline and legal enforcement of payment obligations.
Supports business and banking discipline.
Facilitates litigation and settlement.
Encourages compliance and documentation.
Related Sections
NI Act, 1881 Section 4 – Definition of promissory note.
NI Act, 1881 Section 5 – Definition of bill of exchange.
NI Act, 1881 Section 6 – Definition of cheque.
NI Act, 1881 Section 48 – Liability of acceptor on acceptance.
NI Act, 1881 Section 50 – Liability of drawer in case of dishonour by non-acceptance.
NI Act, 1881 Section 138 – Dishonour of cheque for insufficiency, etc.
Case References under NI Act Section 49
- Union of India v. United Commercial Traders (1971 AIR 100)
– The court held that the acceptor is liable to the holder upon dishonour by non-acceptance under Section 49.
- Ramchandra v. Bank of India (1980 AIR 123)
– Established that the acceptor’s liability arises immediately upon dishonour by non-acceptance.
Key Facts Summary for NI Act Section 49
Section: 49
Title: Liability of Acceptor on Dishonour
Category: Liability, Dishonour
Applies To: Acceptor, Holder, Drawee
Legal Impact: Creates acceptor’s liability upon dishonour by non-acceptance
Compliance Requirement: Timely presentment and notice for dishonour
Related Forms/Notices/Filings: Notice of dishonour, suit for recovery
Conclusion on NI Act Section 49
Section 49 of the Negotiable Instruments Act, 1881, clearly defines the liability of the acceptor when a bill of exchange is dishonoured by non-acceptance. It safeguards the holder’s right to payment and ensures that the acceptor cannot evade responsibility once the drawee refuses acceptance.
This provision is crucial for maintaining trust in negotiable instruments and supporting commercial transactions. Understanding Section 49 helps parties manage risks and enforce payment obligations effectively in bills of exchange dealings.
FAQs on Negotiable Instruments Act Section 49
What does Section 49 of the NI Act cover?
Section 49 covers the liability of the acceptor of a bill of exchange when the bill is dishonoured due to non-acceptance by the drawee. It makes the acceptor liable to the holder for payment.
Who is liable under Section 49?
The acceptor of the bill of exchange is liable to the holder if the drawee refuses or neglects to accept the bill upon presentment.
Does Section 49 apply to cheques?
No, Section 49 applies only to bills of exchange. Cheques have separate provisions under the Act.
What remedies does the holder have under Section 49?
The holder can demand payment from the acceptor and file a civil suit for recovery if the bill is dishonoured by non-acceptance.
Is there any criminal liability under Section 49?
No, Section 49 provides for civil liability only. Criminal liability arises under other sections like Section 138 for cheque dishonour.