Sections 133 and 134 of the Negotiable Instruments Act, 1881
Section 133 deals with competing holders in due course of different parts of the same bill drawn in a set. Section 134, which appears in Chapter XVI on international law, identifies the law that ordinarily governs the liability of the maker or drawer, acceptor and indorser of a foreign negotiable instrument.
Section 133: where different holders in due course possess different parts of the same set, priority belongs to the person who first acquired title to his part.
Section 134: unless the parties contract otherwise, liability is connected to the law of the place where the relevant act concerning the foreign instrument occurred.
Section 133 - Holder of first acquired part entitled to all
As between holders in due course of different parts of the same set, he who first acquired title to his part is entitled to the other parts and the money represented by the bill.
Meaning and effect of Section 133
Section 133 forms part of Chapter XV, which deals with bills in sets. A bill of exchange may, in the circumstances contemplated by the Act, be drawn in several parts. Section 133 resolves a priority dispute where different parts of that same set reach different holders in due course.
A holder in due course is defined by Section 9 of the Negotiable Instruments Act, 1881. Broadly, it refers to a person who, for consideration, becomes the possessor of a promissory note, bill of exchange or cheque payable to bearer, or the payee or indorsee thereof if payable to order, before the amount becomes payable and without sufficient cause to believe that any defect existed in the title of the person from whom the holder derived title.
Section 134 - Law governing liability of maker, acceptor or indorser of foreign instrument
In the absence of a contract to the contrary, the liability of the maker or drawer of a foreign promissory note, bill of exchange or cheque is regulated in all essential matters by the law of the place where he made the instrument, and the respective liabilities of the acceptor and indorser by the law of the place where the instrument is made payable.
Meaning and effect of Section 134
Section 134 is a conflict-of-laws provision for foreign negotiable instruments. It applies subject to any contract to the contrary and separates the governing law according to the role of the party whose liability is in question.
For the maker or drawer, liability in essential matters is governed by the law of the place where that person made the instrument. For the acceptor or indorser, the relevant liability is governed by the law of the place where the instrument is made payable.
The expression foreign instrument should be read with Section 12 of the Act. Section 12 provides that any instrument which is not an inland instrument is a foreign instrument. Section 11 defines an inland instrument by reference to its drawing or making in India and its place of payment or the residence of the drawee.
Illustration under Section 134
The statutory illustration concerns a bill drawn by A in California, where the stated rate of interest is 25 per cent, and accepted by B, payable in Washington, where the stated rate is 6 per cent. The bill is indorsed in India and dishonoured. In an action in India against B as acceptor, B is liable at the Washington rate of 6 per cent; if A is charged as drawer, A is liable at the California rate of 25 per cent.
The illustration demonstrates the structure of Section 134: the drawer is connected with the law of the place where the instrument was drawn, while the acceptor's liability is connected with the law of the place where the instrument is payable.
Relationship with Sections 135 to 137
Section 134 begins Chapter XVI of the Act. The following provisions continue the international-law framework: Section 135 addresses the law of the place of payment in relation to dishonour, Section 136 deals with instruments made outside India in accordance with Indian law, and Section 137 provides a presumption regarding foreign law. These provisions should be read together where a negotiable instrument involves more than one jurisdiction.
Official text and reference
The current central text of the Negotiable Instruments Act, 1881 is available through India Code, the Government of India legislative database. Readers dealing with a transaction, dispute or proceeding should verify the current statutory text and any applicable amendments, notifications and judicial decisions.