Sections 11-12 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 11 and 12 sort every promissory note, bill of exchange and cheque into one of two classes. An instrument drawn or made in India and payable in India, or drawn on a person resident in India, is "inland". Any other instrument is "foreign". This article reads both sections as per the consolidated text consulted and shows how to apply the test to ordinary trade papers. If you are not sure how a particular instrument is classified, a legal consultation before relying on it is sensible.
An instrument is inland if it is drawn or made in India and is made payable in, or drawn upon any person resident in, India. Section 12 says any such instrument not so drawn, made or made payable is foreign. The test turns on place of drawing or making, place of payment and residence of the drawee. Later provisions on protest and on applicable law treat the two classes differently.
The text of the two sections
Section 11, headed "Inland instrument", says that a promissory note, bill of exchange or cheque drawn or made in India and made payable in, or drawn upon any person resident in, India shall be deemed to be an inland instrument.
Section 12, headed "Foreign instrument", says that any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.
The two sections are short, but the words "deemed" and "not so" do the work. Section 12 has no separate test. It simply takes everything that fails section 11.
Breaking down section 11
Section 11 has a first condition and an alternative second condition.
| Part | Requirement |
|---|---|
| First condition | The instrument is drawn or made in India |
| Second condition, limb one | It is made payable in India |
| Second condition, limb two | Or it is drawn upon a person resident in India |
The first condition is always needed. The second is satisfied by either limb: payable in India, or drawn on a person resident in India. The text uses the word "or" between "made payable in" and "drawn upon any person resident in", so one is enough.
"Drawn or made in India"
A bill of exchange or cheque is "drawn"; a promissory note is "made". The text uses both words so the same test applies to all three instruments. The place where the instrument is drawn or made is the first thing to ask.
"Made payable in, or drawn upon any person resident in, India"
The second question is about payment and the drawee. An instrument made in India but payable abroad and drawn on a person resident abroad would not satisfy either limb. An instrument made in India, payable abroad, but drawn on a person resident in India would satisfy the second limb.
Breaking down section 12
Section 12 says "any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument". The words "any such instrument" mean a promissory note, bill of exchange or cheque. "Not so drawn, made or made payable" means an instrument that does not meet the section 11 test.
A point of reading: section 12 speaks of "drawn, made or made payable" and does not repeat "drawn upon a person resident in". The simplest reading, which this article adopts, is that an instrument that does not satisfy section 11 as a whole is foreign. The copy consulted does not add any further explanation, and where the position is not clear on a particular instrument, the reader should check the official text and take advice.
Worked examples
The following examples use invented names and apply only the words of the two sections.
| Case | Drawn or made | Payable / drawee | Class on the text |
|---|---|---|---|
| A cheque drawn by a Delhi firm on a bank in Mumbai | In India | Drawn on a banker in India | Inland |
| A promissory note made in Pune, payable in Chennai | In India | Payable in India | Inland |
| A bill drawn in India on a buyer resident abroad, payable abroad | In India | Payable abroad, drawee resident abroad | Foreign |
| A bill drawn abroad on a buyer resident in India, payable in India | Abroad | Payable in India | Foreign, because the first condition (drawn in India) is not met |
| A bill drawn in India on a buyer resident in India but made payable abroad | In India | Drawee resident in India | Inland, because limb two is met |
The fourth row shows that the first condition cannot be skipped. The fifth row shows that the second condition can be met through the drawee's residence even where the place of payment is abroad.
The last row is an application of the words of section 11; the section does not itself give any such example, and nothing in the text consulted qualifies it.
Why the distinction matters
The text of sections 11 and 12 does not state any consequence of an instrument being inland or foreign. The consequences are elsewhere in the Act. Two areas are worth knowing about now.
- Protest. Later provisions on noting and protest treat foreign bills differently. See our article on sections 103 to 104A.
- Which law applies. A group of later sections deals with foreign instruments and the law that governs them. See our article on sections 134 to 137.
Traders who use bills in cross-border sales should classify each bill against sections 11 and 12 first, and then read those later provisions. Our guide to the bill of exchange in export trade shows how bills are used in that setting.
Common questions people ask about the classes
Does a cheque on an Indian bank always count as inland?
A cheque is drawn on a specified banker. If it is drawn in India and the banker is in India (the drawee is a person resident in India), it meets section 11. A cheque drawn outside India on an Indian bank does not meet the first condition, so section 12 would call it foreign.
Does the currency matter?
The text of sections 11 and 12 does not mention currency. A reader should not assume that currency decides the class; the text looks at where the instrument is drawn or made, where it is payable and where the drawee resides.
Can an instrument change class?
The text does not say so. The test is stated in terms of how the instrument is "drawn, made or made payable".
Need help with a cross-border instrument?
If you hold a bill or cheque with a foreign element and need to know which provisions apply, we can review it with you. Book a legal consultation and bring the original instrument.
Key takeaways
- An instrument is inland if drawn or made in India and either made payable in India or drawn upon a person resident in India.
- Section 12 deems any such instrument not so drawn, made or made payable to be foreign.
- The place of drawing or making is always needed; the place of payment or the drawee's residence satisfies the second condition.
- The sections do not state the consequences of the class; later provisions on protest and on applicable law do.
- The text mentions no currency test.
Read next
- Section 13: negotiable instrument payable to order or bearer
- Sections 103-104A: protest for non-payment and foreign bills
- Sections 134-137: foreign instruments and which law applies
- Bill of exchange in export trade
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.