Section 117 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.
Section 117 sets out the rules by which the compensation payable on dishonour of a promissory note, bill of exchange or cheque is worked out, in clauses (a) to (e). As per the consolidated text consulted, it covers the holder's claim, rate of exchange, an indorser's claim with interest at eighteen per centum per annum, and the right to draw a bill to recover the amount.
Compensation on dishonour, payable by any party liable to the holder or an indorsee, follows five rules. The holder gets the amount due on the instrument plus expenses properly incurred in presenting, noting and protesting it (clause (a)). An indorser who has paid gets the amount paid with interest at eighteen per centum per annum from payment until tender or realisation, plus expenses (clause (c)). This is the civil measure under the Act; it is not the fine under Section 138.
What Section 117 covers
The section begins: "The compensation payable in case of dishonour of a promissory note, bill of exchange or cheque, by any party liable to the holder or any indorsee, shall be determined by the following rules". It is therefore a measuring section. It does not create liability (that comes from Sections 30 to 36 and the sections that follow), and it does not prescribe an offence or punishment.
Be careful not to mix it with the criminal provision for returned cheques. The offence, the notice, the fine and the complaint are in Section 138; see also our guide on the penalty for cheque bounce. Section 117 is about the money the holder or indorser can claim from a liable party through the ordinary civil route. If you are weighing a civil claim for a dishonoured instrument, our recovery suit service explains how such a claim is prepared. A note on spelling: the Act writes "indorser"; "endorse" is the common spelling.
The five rules
| Clause | Who | What they are entitled to |
|---|---|---|
| (a) | The holder | The amount due upon the instrument, together with the expenses properly incurred in presenting, noting and protesting it |
| (b) | The holder, where the person charged resides at a place different from where the instrument was payable | Such sum at the current rate of exchange between the two places |
| (c) | An indorser who, being liable, has paid the amount due | The amount so paid with interest at eighteen per centum per annum from the date of payment until tender or realisation, together with all expenses caused by the dishonour and payment |
| (d) | An indorser, where the person charged and the indorser reside at different places | Such sum at the current rate of exchange between the two places |
| (e) | The party entitled to compensation | May draw a bill upon the party liable, payable at sight or on demand, for the amount due plus expenses properly incurred |
Clause by clause
(a) The holder's claim. The holder is entitled to the amount due on the instrument and the expenses "properly incurred in presenting, noting and protesting it". The word "properly" limits expenses to those reasonably and rightly incurred. Noting and protest are explained in Sections 99 and 100. The text does not state any amount for these expenses.
(b) Place of residence differs. When the person charged lives at a place different from the one at which the instrument was payable, the holder may receive the sum "at the current rate of exchange between the two places". The text does not explain how the rate is found.
(c) Indorser who has paid. An indorser who "being liable, has paid the amount due on the same" is entitled to the amount he paid, interest "at eighteen per centum per annum" from the date of payment until tender or realisation, and all expenses caused by the dishonour and payment. The copy prints "ateighteen" with joined words, which is a printing slip; the figure is eighteen per centum per annum as printed. Note that this interest is for the indorser, starting from the date of payment. Clause (a) does not state any interest for the holder. For interest on instruments more generally, see Section 80.
(d) Indorser at a different place. The same exchange-rate idea applies between the person charged and the indorser when they reside at different places.
(e) Drawing a re-draft. The party entitled to compensation "may draw a bill upon the party liable to compensate him, payable at sight or on demand, for the amount due to him, together with all expenses properly incurred by him." The bill "must be accompanied by the instrument dishonoured and the protest thereof (if any)". If this bill is itself dishonoured, "the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill."
A worked example
Example. Naveen Distributors draws a bill on Oberoi Stores of Chennai, payable at a bank in Mumbai, to Prakash Wholesale, who indorses it to Qureshi Finance. At maturity the bill is dishonoured, and Qureshi Finance has it noted and protested, incurring notary expenses. Under clause (a), Qureshi Finance is entitled to the amount due plus the expenses properly incurred in presenting, noting and protesting it. Because Oberoi Stores lives at Chennai while the bill was payable at Mumbai, clause (b) lets Qureshi Finance receive the sum at the current rate of exchange between the two places. If instead Prakash Wholesale, being liable, pays Qureshi Finance, Prakash Wholesale is entitled under clause (c) to what it paid with interest at eighteen per centum per annum from the date of payment until tender or realisation, and expenses. Under clause (e), Prakash Wholesale may draw a sight or demand bill on the party liable for that amount and expenses, with the dishonoured instrument and the protest attached.
Points to watch
- Keep it separate from Section 138. Section 117 measures civil compensation. It does not provide for imprisonment or the fine in the criminal provision. The existing guides on Section 138 and on recovering money through a civil suit deal with those routes; check limitation before choosing one.
- Rate printed. The figure is eighteen per centum per annum for the indorser under clause (c). The text prints it as "ateighteen".
- Illustrative, not current figures. The text states no sum for expenses, so keep receipts for presenting, noting and protest costs.
- Who is "party liable". The liability itself arises under other sections of the Act. Section 117 only fixes the measure.
Need help recovering on a dishonoured instrument?
If you hold a dishonoured note, bill or cheque and want to claim the amount, expenses and any interest the Act allows, the claim is usually built from the instrument, the return papers and the proof of expenses. Our recovery suit team can review those papers with you and explain the route.
Key takeaways
- Section 117 fixes the measure of compensation on dishonour of a note, bill or cheque, in clauses (a) to (e).
- The holder gets the amount due and the expenses properly incurred in presenting, noting and protesting.
- An indorser who has paid gets interest at eighteen per centum per annum from payment until tender or realisation, with expenses.
- Exchange-rate rules apply where the parties reside at different places.
- A re-draft bill, payable at sight or on demand, may be drawn for the amount due, with the dishonoured instrument and protest.
- This is separate from the criminal provision in Section 138.
Read next
- Sections 113 to 116: payment for honour and drawee in case of need
- Sections 78 to 80: payment to holder and interest on negotiable instruments
- Section 138: cheque bounce (dishonour of cheque)
- Cheque bounce penalty guide
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.