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Section 11 and Section 12 of Negotiable Instruments Act, 1881: Inland Instrument and Foreign Instrument

Sections 11 and 12 of the Negotiable Instruments Act, 1881 classify a promissory note, bill of exchange or cheque as an inland instrument or a foreign instrument. The classification depends principally on where the instrument is drawn or made, where it is payable, and, in the case of the alternative limb in Section 11, whether it is drawn upon a person resident in India.

Section 11 - Inland Instrument

Section 11 defines when a promissory note, bill of exchange or cheque is treated as an inland instrument for the purposes of the Act.

Statutory definition: A promissory note, bill of exchange or cheque drawn or made in India and made payable in, or drawn upon any person resident in, India is deemed to be an inland instrument.

Essential requirements of an inland instrument

The instrument must first be a promissory note, bill of exchange or cheque. It must be drawn or made in India. In addition, it must either be made payable in India or be drawn upon a person resident in India. These statutory conditions determine whether Section 11 applies.

For example, a cheque drawn in India on a person or bank resident in India falls within the statutory description of an inland instrument. Likewise, a qualifying note or bill made in India and payable in India is an inland instrument.

Section 12 - Foreign Instrument

Section 12 provides the complementary definition. An instrument of the kind referred to in Section 11 that does not satisfy the statutory conditions for an inland instrument is treated as a foreign instrument.

Statutory definition: Any such instrument not so drawn, made or made payable is deemed to be a foreign instrument.

Section 12 should therefore be read together with Section 11. The first question is whether the promissory note, bill of exchange or cheque satisfies Section 11. If it does not fall within that definition, Section 12 determines its status as a foreign instrument.

Inland Instrument and Foreign Instrument - Key Difference

Point	Inland Instrument - Section 11	Foreign Instrument - Section 12
Relevant instruments	Promissory note, bill of exchange or cheque	The same class of instruments considered by reference to Section 11
Place of drawing or making	Drawn or made in India	Does not satisfy the statutory conditions stated in Section 11
Additional Section 11 condition	Made payable in India, or drawn upon a person resident in India	An instrument outside the Section 11 definition is treated as foreign under Section 12
Statutory basis	Section 11, Negotiable Instruments Act, 1881	Section 12, Negotiable Instruments Act, 1881

Practical reading: Sections 11 and 12 form a connected classification rule. The precise facts concerning the place where the instrument was made or drawn, the place where it is payable, and the residence of the person upon whom it is drawn should be checked before classifying an instrument.

Related Definitions under the Negotiable Instruments Act

The classification under Sections 11 and 12 is easier to understand with the related statutory definitions of promissory note under Section 4, bill of exchange under Section 5, cheque under Section 6, payment in due course under Section 10 and negotiable instrument under Section 13.

Official legal text: For the authoritative and updated text of the Negotiable Instruments Act, 1881, refer to the Negotiable Instruments Act, 1881 on India Code.

This article explains Sections 11 and 12 for general legal information. The application of the provisions depends on the facts and the applicable law.