Negotiable Instruments Act, Section 132

Negotiable Instruments Act, Section 132: Set of Bills

Section 132 of the Negotiable Instruments Act, 1881 recognizes the commercial practice of drawing a bill of exchange in several numbered parts, each payable only so long as the other parts remain unpaid.

Although drawn in multiple parts, all parts together constitute a single bill and payment of one part generally discharges the entire set, except where different parts are accepted or indorsed in favour of different persons.

1. Meaning of Set of Bills

A set of bills consists of a bill of exchange drawn in several numbered parts, each stating that it is payable only if the other parts remain unpaid, and all such parts together constitute one complete bill of exchange.

2. Historical Purpose of Drawing Bills in Sets

The practice of drawing bills in sets developed mainly in international and long-distance trade, where communication and transportation were often uncertain.

To reduce the risk of loss, delay, or destruction during transit, merchants prepared multiple parts of the same bill and sent them through different routes so that at least one part would safely reach the payee.

3. Nature of Each Part of the Set

Each part of a set of bills represents the same transaction, refers to the other parts, and is intended to operate only if the other parts remain unpaid, so that all parts, though physically separate, together constitute one instrument.

4. Numbering of Parts

The section requires each part of the bill to be separately numbered so that the different parts belonging to the same set can be properly identified.

Such numbering helps prevent confusion and fraud, ensures proper tracking and payment, and may appear as First of Exchange, Second of Exchange, or Third of Exchange.

5. Condition Attached to Each Part

Each part of a set of bills remains payable only so long as the other parts remain unpaid, ensuring that payment is made only once and protecting the drawee from multiple liability.

6. Entire Set Constitutes One Bill

The section provides that all parts of a set together constitute only one bill of exchange, ensuring that duplicate or triplicate parts do not create multiple independent liabilities or claims.

7. Extinguishment of the Bill

The section provides that the entire set is extinguished when one part would, if treated as a separate bill, be extinguished.

Accordingly, payment, cancellation, or satisfaction of one valid part ordinarily discharges the entire set, and the drawee is not required to make payment more than once.

8. Protection Against Multiple Claims

The provision protects parties from multiple recoveries on the same bill by treating the entire set as a single instrument, thereby preventing separate claims and commercial confusion.

9. Effect of Accepting Different Parts

Where the acceptor accepts multiple parts of a bill in favour of different holders, each accepted part may operate as a separate bill.

In such cases, the acceptor becomes separately liable on each part, and the rule protects innocent holders while preventing misuse.

10. Effect of Indorsing Different Parts

Where an indorser indorses different parts of a bill in favour of different persons, the indorser and all subsequent indorsers become separately liable on each part.

Each part may be enforced independently, and the law imposes such liability because the same person has created multiple competing claims.