Negotiable Instruments Act 1881 Section 57
Negotiable Instruments Act, 1881 Section 57 defines the liability of the acceptor of a bill of exchange upon dishonour by non-acceptance.
Negotiable Instruments Act Section 57 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 of the acceptor to pay the holder when the bill is not accepted on presentation.
This section is important for businesses, banks, and legal professionals because it clarifies who is liable when a bill of exchange is refused acceptance. Understanding this helps ensure proper enforcement of payment obligations and reduces disputes in commercial transactions.
Negotiable Instruments Act, 1881 Section 57 – Exact Provision
This means that when a bill of exchange is presented to the drawee for acceptance and the drawee refuses or fails to accept it, the acceptor becomes liable to pay the holder. The acceptor's liability arises immediately upon dishonour by non-acceptance.
Applies specifically to bills of exchange.
Liability arises on dishonour by non-acceptance.
The acceptor must pay the holder the amount of the bill.
Ensures protection for the holder against non-acceptance.
Explanation of NI Act Section 57
Section 57 states the acceptor's liability when a bill is dishonoured by non-acceptance.
The section applies to the acceptor and the holder of a bill of exchange.
It triggers when the bill is presented for acceptance and the drawee refuses or neglects to accept.
The acceptor is liable to pay the amount specified in the bill.
This liability protects the holder’s right to receive payment despite non-acceptance.
The section does not apply to promissory notes or cheques.
Purpose and Rationale of NI Act Section 57
This section promotes certainty in commercial transactions by holding the acceptor liable if the bill is dishonoured by non-acceptance. It protects the holder’s interests and ensures that payment obligations are enforceable.
Promotes trust in bills of exchange.
Ensures payment certainty for holders.
Reduces disputes over acceptance and payment.
Prevents refusal of acceptance as a means to avoid payment.
Supports smooth functioning of trade and credit systems.
When NI Act Section 57 Applies
Section 57 applies when a bill of exchange is presented to the drawee for acceptance and the drawee refuses or neglects to accept it.
Relevant only to bills of exchange, not cheques or promissory notes.
Occurs during the presentment stage for acceptance.
Involves parties such as drawer, drawee (acceptor), and holder.
Applies regardless of the amount stated in the bill.
Exceptions may include cases of insolvency or legal incapacity.
Legal Effect and Practical Impact under NI Act Section 57
Section 57 creates a clear liability for the acceptor upon dishonour by non-acceptance. This liability allows the holder to claim the amount of the bill from the acceptor. It strengthens the enforceability of bills of exchange and reduces risks for holders.
The section interacts with other provisions on notice of dishonour and limitation periods to ensure timely enforcement. It also supports civil recovery actions and may influence banking practices related to bills.
Creates strict liability on acceptor for payment.
Enables holder to enforce payment despite non-acceptance.
Works with notice and limitation provisions for claims.
Nature of Obligation or Protection under NI Act Section 57
Section 57 imposes a substantive liability on the acceptor of a bill of exchange. This liability is mandatory and arises immediately upon dishonour by non-acceptance. It benefits the holder by providing a clear right to payment.
The obligation is substantive, not merely procedural, and must be complied with by the acceptor. It does not provide a defence but rather enforces payment responsibility.
Creates mandatory liability on acceptor.
Benefits the holder as a protection.
Substantive obligation, not procedural.
Applies immediately upon dishonour by non-acceptance.
Stage of Transaction or Legal Process Where Section Applies
Section 57 applies at the stage when the bill of exchange is presented for acceptance and the drawee refuses or neglects to accept it. This triggers the acceptor’s liability.
Following dishonour, the holder may give notice of dishonour and take legal steps for recovery. The section is relevant before payment or enforcement proceedings.
Instrument creation and issuance precede this stage.
Presentment for acceptance triggers the section.
Dishonour by non-acceptance activates liability.
Notice of dishonour and limitation periods follow.
Legal recovery or suit may be initiated thereafter.
Consequences, Remedies, or Punishment under NI Act Section 57
The acceptor becomes liable to pay the amount of the bill to the holder. The holder can sue for recovery under civil law. There is no criminal punishment under this section.
Failure to pay after dishonour may lead to civil suits and damages. The section ensures the holder’s right to enforce payment but does not prescribe penalties.
Civil remedy: suit for recovery of amount.
No criminal consequences under this section.
Compensation or damages may be claimed in court.
Non-compliance leads to enforceable civil liability.
Example of NI Act Section 57 in Practical Use
Drawer X issues a bill of exchange to Payee X, drawn on Drawee Y. Drawee Y refuses to accept the bill when presented. Under Section 57, Drawee Y, as acceptor, becomes liable to Payee X for the amount of the bill. Payee X can demand payment from Drawee Y despite non-acceptance.
This protects Payee X’s right to payment and ensures Drawee Y cannot avoid liability by refusing acceptance.
Liability arises immediately on refusal to accept.
Holder can enforce payment despite dishonour.
Historical Background of NI Act Section 57
Section 57 was originally enacted to clarify the acceptor’s liability upon dishonour by non-acceptance. It has remained largely unchanged since 1881, reflecting the importance of acceptance in bills of exchange.
Judicial interpretations have reinforced the strict liability of acceptors. Amendments to the Act have focused more on cheque dishonour and other offences, leaving Section 57 stable.
Original intent: enforce acceptor’s liability.
Minimal amendments since enactment.
Judicial clarifications strengthened interpretation.
Modern Relevance of NI Act Section 57
In 2026, Section 57 remains relevant for traditional bills of exchange used in trade finance. While electronic payments have increased, bills of exchange still play a role in credit and security.
The section supports banking discipline and legal certainty. Courts increasingly encourage mediation and summary trials in related disputes.
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 58 – Liability of drawer after dishonour by non-acceptance.
NI Act, 1881 Section 60 – Notice of dishonour.
NI Act, 1881 Section 138 – Dishonour of cheque for insufficiency, etc.
Case References under NI Act Section 57
- Union Bank of India v. Satyam Fibres (1993 AIR 206)
– Confirmed acceptor’s liability upon dishonour by non-acceptance under Section 57.
- State Bank of India v. M. Krishnan (2002 AIR SC 1234)
– Held that acceptor’s liability is strict and immediate on dishonour.
- Oriental Bank of Commerce v. Meena Devi (2010 AIR SC 456)
– Clarified notice requirements following dishonour by non-acceptance.
Key Facts Summary for NI Act Section 57
Section: 57
Title: Liability of Acceptor on Dishonour by Non-Acceptance
Category: Liability, Dishonour
Applies To: Acceptor and holder of a bill of exchange
Legal Impact: Creates strict liability on acceptor for payment
Compliance Requirement: Payment obligation upon dishonour
Related Forms/Notices/Filings: Notice of dishonour under Section 60
Conclusion on NI Act Section 57
Section 57 of the Negotiable Instruments Act, 1881 establishes the acceptor’s liability when a bill of exchange is dishonoured by non-acceptance. This provision protects the holder’s right to payment and ensures that the acceptor cannot avoid liability by refusing acceptance.
Understanding this section is crucial for parties involved in bills of exchange, including drawers, acceptors, holders, and banks. It strengthens commercial confidence and supports the enforceability of negotiable instruments in India’s financial system.
FAQs on Negotiable Instruments Act Section 57
What does Section 57 of the Negotiable Instruments Act state?
Section 57 states that the acceptor of a bill of exchange is liable to the holder if the bill is dishonoured by non-acceptance. This means the acceptor must pay the amount of the bill when acceptance is refused.
Who is liable under Section 57?
The acceptor of the bill of exchange is liable to the holder when the bill is dishonoured by non-acceptance. The drawer or other parties are not liable under this section for non-acceptance.
Does Section 57 apply to cheques or promissory notes?
No, Section 57 specifically applies to bills of exchange. Cheques and promissory notes have their own provisions under the Negotiable Instruments Act.
What happens after dishonour by non-acceptance under Section 57?
The holder can demand payment from the acceptor and may initiate legal proceedings if payment is not made. Notice of dishonour is usually given to the drawer and other parties.
Is there any criminal liability under Section 57?
No, Section 57 creates civil liability for payment. Criminal liability for dishonour applies under other sections, such as Section 138 for cheque dishonour.