Maturity of Negotiable Instruments

Sections 23 to 25 of the Act lays down the rules according to which the maturity of a negotiable instrument can be decided. According to section 22 the maturity of a promissory note or bill of exchange is the date at which it falls due.

But, three days of grace shall be allowed in the case of all instruments (note and bill) other than those that are expressed to be payable on demand. A cheque or a bill of exchange when payable on demand is not entitled to any days of grace.

In the case of a hundi, the days of grace will depend on the local custom. Days of grace are calculated by excluding the day on which the amount falls due and three days are calculated consecutively without any deduction for holidays between the first and the third day. In case an instrument is payable in instalments, every instalment is entitled to three days of grace. Ordinarily the instrument is presented before that date is considered invalid. The holder however becomes entitled to sue before maturity in the event of insolvency of drawer or drawee.

If a promissory note or a bill of exchange is made payable after a stated number of months after date or after sight or after a certain event, it becomes payable three days after the corresponding date of month after the stated number of months (section 23). If the month in which the period would terminate has no corresponding day, the period is held to terminate on the last day of such a month. For example, a bill dated 30 January 1989 is made payable one month after date. The date of maturity falls due on 3 March 1989. In the above case, the day on which the instrument is drawn or presented for acceptance or sight, or the day on which the event happens, is to be excluded (section 24). If a bill payable thirty days after sight is presented for sight on 1st March 1989, it will fall due on 3 April 1989. When the day on which a promissory note or bill of exchange matures is a public holiday, the instrument is deemed to be due on the next business day (section 25). Sundays and other days declared by the Central Government by notification in the Official Gazette are public holidays.

To sum up, days of grace are allowed on all instruments and (bills and notes) expressed to be payable on a specified day or at a certain period after date or after sight. No days of grace are allowed for a cheque or bill payable on demand or at sighs or presentment or to which no time for payment is specified.

Payment of Interest (Sections 79 and 80): The Act lays down that when the interest is specified in the promissory note or bill of exchange, the interest shall be calculated at the rate specified, on the amount of the principal money due thereon, from the date of the instrument until tender or realisation of such amount, or until such date after the institution of a suit to recover such amount as the court directs. When no interest rate is specified in the instrument, the rate of interest will be 18 per cent per annum. This will be notwithstanding any oral agreement between the parties. Finally, when the party charged is the endorser of an instrument dishonoured by non-payment, he is liable to pay interest only from the time that he receives notice of the dishonour.

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