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Instrument negotiable till payment or satisfaction

Section 60 of the Negotiable Instruments Act,1881.

A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof by the maker, drawee or acceptor at or after maturity, but not after such payment or satisfaction.

When Negotiable

An instrument is negotiable so long it has a subsisting liability. No liability can subsist when the instrument has been discharged. A payment or satisfaction of the instrument by the maker, drawee or acceptor at or after maturity discharges the instrument and does away with its negotiability. But where the maker of a pronote payable on demand has paid the amount to the payee before there being made any demand and has not asked for the return of the pronote and the note is endorsed by the payee to a third person without the knowledge of the fact of payment the endorsee is entitled as a holder in due course to sue the maker on the note as wherever one of the two innocent persons must suffer by the action of a third person he who enabled the third person to occasion the loss must sustain it. The maker of the notes ought to have asked for the return of the note under section 81.

To affect negotiation the payment or satisfaction should be at or after maturity and not before. A payment or satisfaction of an instrument before maturity is not a payment in due course and, therefore, cannot affect the negotiation of the instrument. And if the holder after receiving such payment endorses it for value to a bona fide transferee, the latter can recover from the maker but the maker can claim a refund from the original payee. Where an endorsee of a note payable on demand is not at the time of endorsement aware that the note has been discharged or that any demand was made, he must be deemed to be a holder in due course even if as a matter of fact the endorsement was made in his favour after the discharge.

If after payment before maturity the drawee or acceptor gets possession of the bill, the bill is said to be retired and can be recovered before and not after maturity. But if the maker pays the instrument before maturity and without reissuing it before maturity, retains it till it matures, it is discharged and cannot afterwards be negotiated. Though negotiation is prohibited after payment, endorsement of some payments on the back of the note is no evidence of satisfaction or discharge and payment by the maker of the note, after such endorsed payments, to the payee, when the note is in possession of the latter, is no defence against the holder in due course.