Negotiable Instruments Act, Section 72

Negotiable Instruments Act, Section 72: Presentment of Cheque to Charge Drawer

Section 72 of the Negotiable Instruments Act, 1881 lays down the requirement for timely presentment of a cheque in order to hold the drawer liable. 

The provision emphasizes that a cheque must be presented to the bank on which it is drawn before any change occurs in the relationship between the drawer and the banker that may prejudice the drawer.

1. Applicability of the Provision

This section specifically applies to cheques, which are bills of exchange drawn on a specified banker and payable on demand.

Since payment depends upon the availability of funds and the continuing relationship between the drawer and the bank, prompt presentment becomes essential.

2. Requirement of Presentment to the Drawee Bank

Section 72 provides that, in order to charge the drawer, the cheque must be presented at the bank upon which it is drawn.

This means that the holder must present the cheque to the drawee bank the bank named in the cheque for payment.

Presentment at the correct bank is therefore a necessary condition for enforcing the drawer’s liability.

3. Importance of Timely Presentment

The section emphasizes that presentment must occur before the relationship between the drawer and the banker has been altered to the prejudice of the drawer.

This means that the cheque should be presented while the drawer’s account remains active and sufficient funds are available.

The cheque must also be presented while the bank’s authority to honor it continues, because delay may adversely prejudice the drawer.

4. Meaning of “Altered to the Prejudice of the Drawer”

The relationship between the drawer and the bank may change due to closure of the drawer’s account, insolvency or winding up of the bank, or the death of the drawer revoking the bank’s authority.

It may also change because of attachment or freezing of the account, or withdrawal and depletion of funds affecting payment capacity.

If the holder delays presentment and such events occur, the drawer may lose the opportunity to have the cheque paid despite sufficient funds, and may therefore be discharged from liability to the extent of the resulting prejudice.

5. Protection of the Drawer

The purpose of this section is to protect the drawer against loss caused by the holder’s negligence or delay in presenting the cheque.

A drawer who has issued a cheque with adequate arrangements for payment should not suffer unfairly because of delayed presentment, and therefore the law requires the holder to act with reasonable diligence.

6. Subject to Section 84

Section 72 operates subject to the provisions of Section 84, which deals with the effect of delayed presentment.

This means that the consequences of delay and the extent to which the drawer may be discharged are governed by the principles contained in Section 84.

7. Commercial Significance

This provision is important for maintaining efficiency and certainty in banking transactions by ensuring that cheques are presented promptly for payment and that holders exercise proper diligence in handling negotiable instruments.

It also protects drawers from unnecessary prejudice and ensures that banking relationships are not unfairly disturbed because of delayed presentment.