Section 117 of NIA : Section 117: Rules As To Compensation

Explanation using Example

Imagine John holds a cheque given by Alice which is due for payment. When John presents the cheque at the bank, it is dishonoured due to insufficient funds in Alice's account. Under Section 117 of The Negotiable Instruments Act, 1881, John is entitled to:

• The amount that was due on the cheque.
• Any expenses he incurred while presenting the cheque, such as bank charges for the dishonoured cheque.
• If Alice lived in a different city than where the cheque was supposed to be cashed, John could also claim the amount adjusted for the current rate of exchange between the two cities.

If John had endorsed the cheque to Emily before it was dishonoured, and Emily had to pay it off to avoid legal issues, Emily could claim:

• The amount she paid to settle the cheque.
• Interest at 18% per annum from the date of her payment until she is reimbursed.
• All expenses she incurred due to the dishonour and subsequent payment.
• If Emily and Alice reside in different cities, Emily can claim the amount adjusted for the current exchange rate between those cities.

Moreover, John or Emily could draw a new bill on Alice demanding the compensation amount, including all expenses. If Alice dishonours this new bill, she would be liable to compensate in the same manner as she would for the original dishonoured cheque.