Section 45A of the Negotiable Instruments Act,1881.
Where a bill of exchange has been lost before it is over-due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.
This section deals with the position caused by the loss of a bill of exchange before it is overdue. In the original Act there was no provision for the loss of such instruments although in the corresponding English Law, Sec 69 of the Bills of Exchange Act, there was provision for the same. The section was accordingly inserted by section 3 of the amending Act 11 of 1885. Although the section only relates to the bill of exchange its application has been extended to other negotiable instruments as well. Prior to the passing of this Act the principles enunciated in this section were applied in the case of the loss of a cheque.
Duplicate of a lost hundi is known as Peth.
Under the ordinary law the owner of a lost article can recover it from the finder thereof or from any transferee for value from the finder. A finder of goods is a bailee for the real owner. The rule embodied in this section is an exception to this rule of the Indian Contract Act. In the case of a bill of exchange and, for the matter of that, as stated before, in the cases of other negotiable instruments, the owner of the lost instrument can recover it from the finder until it passes to a holder in due course. As these instruments are negotiable a finder may transfer it and any person who becomes a holder in due course acquires a good title to it and can enforce it against all prior parties . The bill cannot, therefore, be recovered from such holder. On the other hand the latter can proceed against the former. The owner will, however, be able to recover it from a transferee for value from the finder if such transferee takes the instrument with notice of such loss. As in such cases the transferee is without bona fides and is not, therefore a holder in due course. When the instrument has passed from the finder to a bona fide transferee for value, that is to say, to a holder in due course before maturity the owner of the lost instrument can recover damages from the finder but not from such holder.
The essential condition under which a transferee for value before maturity from the finder of lost instrument can resist the claim of the true owner is that the transfer is a bona fide one. And there can be no bona fide transfer when a transferee takes the instrument, although for valuable consideration, with the knowledge that the instrument is a lost one. It is, therefore, necessary for the true owner, in order to safeguard his interest, to notify the loss of the instrument and that too before the instrument matures. Such notice should be given to all the parties liable on the instrument as well as to the public so that, on negotiation, none can become a holder in due course. The notice should reach the parties before maturity. The loss should be made well known to the parties.
When an ordinary article is lost it is, if untraceable, lost for good. But the owner of a lost negotiable instrument does not absolutely lose all his rights even if it is untraceable. He still continues to be the owner and on maturity is entitled to demand payment and in case of dishonour should give notice of dishonour to prior parties, otherwise he will lose his remedy against the drawer and the indorser. The owner has also a right to take from the drawer or maker, before it is overdue, a duplicate copy of the instrument on furnishing an indemnity bond against the possible claim of a holder in due course in future , for otherwise, if the instrument is subsequently found with a holder in due course, the drawer or the maker will be liable to such holder and thus may have to make double payment. To guard against such a contingency an indemnity from the owner is necessary. In such an event the owner will have to compensate the drawer or the maker. If the original has been duly paid, the duplicate need not be paid and a custom to the contrary cannot be given effect to. When the owner is willing to furnish the proper security an action will be against the drawer for his refusal to grant the owner a duplicate. It is only the holder of the bill, who, in his own name, is entitled to the possession of the instrument, that has a right to ask for a duplicate and none else.
The right conferred by this section upon an owner can be exercised only when the instrument is lost before maturity. If it is lost after it is over due, the owner has no right to ask for, nor is the drawer bound to give a duplicate under this section. The right to obtain a duplicate in case of loss is, however, a part of the mercantile laws of countries and duplicate may be demanded on equitable principles whether the bill is lost before or after maturity. Where no duplicate of a hundi is supplied no presentment as against the drawee is necessary under section 76(a).
In case of lost bills there is a chance of its recovery and, therefore, an indemnity clause has been provided for. In case of destroyed instruments no indemnity is necessary and the plaintiff can recover without indemnity.