Special Rules of Evidence under Negotiable Instrument Act

(a) Presumption as to negotiable instrument (Section 118):
For deciding cases in respect of rights of parties on the basis of a bill of exchange, the Court is entitled to make certain presumptions. These are briefly stated as follow:

(a) That the negotiable instrument was made or drawn for consideration and every party who made itself bound in respect thereof did so for consideration;

(b) That the negotiable instrument was drawn on the date shown on the face of it;

(c) That the bill of exchange was accepted before its maturity, i.e., before it became overdue;

(d) That the negotiable instrument was transferred before its maturity;

(e) That the endorsements appearing upon a negotiable instrument were made in the order in which they appear.

(f) That an instrument which has been lost was properly stamped;

(g) That the holder of a negotiable instrument is the holder in due course, except when the instrument has been obtained from its lawful owner or its lawful custodian. Likewise, if it has been obtained from a maker or and acceptor by means of an offence or fraud, it is for the holder to prove that he is the holder in due course.

(b) Certain rules of estoppel applicable to instruments: When one person causes another person to believe a thing to be true and to act upon such belief he is not allowed in a suit between him and such person, to deny the truth of that thing. That is, he is not allowed to give evidence in support of his denial. This rule is called the rule of estoppel, by which evidence is excluded. There are certain rules of estoppel applicable to negotiable instruments. These are contained in Section 120 of the Act.



The objective of these provisions are: (i) that the original parties to the instrument may not deny the validity of the instrument; (ii) that the maker of a promissory note or an acceptor of a bill may not deny the right of the payee to receive the payment therefore; and (iii) that an endorser of a negotiable instrument may not disown the signature or capacity to contract of any prior party to the instrument.

Hundis : Bills of exchange drawn up in the vernacular are generally known as Hundis. The negotiable instruments Act ordinarily is not applicable to Hundis but, the parties to the Hundis may agree to be the Negotiable instrument Act.