Sections 19 and 20 of Negotiable Instruments Act 1881: Instruments Payable on Demand and Inchoate Stamped Instruments
Sections 19 and 20 of the Negotiable Instruments Act, 1881 deal with two distinct subjects. Section 19 identifies promissory notes and bills of exchange that are payable on demand and confirms that a cheque is payable on demand. Section 20 deals with signed and delivered stamped paper that is wholly blank or contains an incomplete negotiable instrument.
Section 19: Instruments Payable on Demand
Section 19: A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand.
Section 19 therefore covers a promissory note or bill of exchange where the instrument does not specify a time for payment. It also expressly provides that a cheque is payable on demand.
Meaning of Payable on Demand
For Section 19, the absence of a specified time for payment makes a promissory note or bill of exchange payable on demand. Section 21 further provides that, in a promissory note or bill of exchange, the expressions "at sight" and "on presentment" mean on demand.
Section 20: Inchoate Stamped Instruments
Section 20: Where a person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and the paper is either wholly blank or contains an incomplete negotiable instrument, the signer gives prima facie authority to the holder to make or complete upon it a negotiable instrument for an amount specified therein not exceeding the amount covered by the stamp. The signer is liable in the capacity in which the instrument was signed to a holder in due course for such amount. A person other than a holder in due course cannot recover from the person delivering the instrument anything exceeding the amount intended by that person to be paid under it.
Essential Elements of Section 20
Section 20 operates where the paper is signed and delivered, is stamped in accordance with the applicable law relating to negotiable instruments, and is either wholly blank or already contains an incomplete negotiable instrument. The act of signing and delivery gives the holder prima facie authority to make or complete the instrument, subject to the amount specified and the amount covered by the stamp.
Prima Facie Authority
The authority created by Section 20 arises from signing and delivering the stamped blank or incomplete paper. The section permits the holder to make or complete a negotiable instrument on that paper within the statutory monetary limit.
Liability to a Holder in Due Course
The signer may be liable upon the completed instrument, in the capacity in which it was signed, to a holder in due course for the amount contemplated by Section 20. The section separately limits recovery by a person who is not a holder in due course to the amount intended by the person delivering the instrument to be paid under it.
Meaning of Holder and Holder in Due Course
Sections 8 and 9 define "holder" and "holder in due course". These definitions are particularly important to Section 20 because the provision distinguishes the authority given to the holder from the liability that can arise in favour of a holder in due course.
Related Provisions
Sections 19 and 20 should be read with the definitions of promissory note under Section 4, bill of exchange under Section 5, cheque under Section 6, holder and holder in due course under Sections 8 and 9, and negotiable instrument under Section 13.
Official legal text: The current text of the Negotiable Instruments Act, 1881 can be checked on the official India Code portal maintained by the Government of India.