Home  /  Negotiable Instruments Act  /  Section 136

Section 136: Instrument made, etc. out of India, but in accordance with the law of India

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1881
Section 135 All 148 Sections of Negotiable Instruments Act Section 137

Legal Commentary & Landmark Judgments: Section 136

Section 136 validates foreign instruments made according to Indian law, enacting that if an instrument is made, drawn, accepted, or indorsed out of India, but in accordance with the law of India, the circumstance that any agreement thereon is invalid according to the law of the country where it was made does not invalidate subsequent acceptances or indorsements made in India.

  • Validation of Indian Contracts: An indorsement or acceptance executed in India on a foreign bill remains valid under Indian law even if prior contracts on the bill were irregular abroad.
  • Protection for Indian Commerce: Prevents foreign stamp laws or technical procedural defects from infecting commercial paper circulating within India.
  • Severability of Contracts: Each contract on a negotiable instrument (drawing, accepting, indorsing) is treated as an independent legal obligation.
Key Landmark Precedents:
  • Lebel v. Tucker (1867) LR 3 QB 77: Held that a bill drawn and payable in England is governed by English law, and an indorsement executed in conformity with English law is valid despite foreign defects.
  • British India Steam Navigation Co. v. Shanmughavilas Cashew Industries (1990) 3 SCC 481: Discussed the statutory severance of foreign and domestic commercial contracts under Section 136.
Courtroom Practice & Strategic Litigation Guidance:

In cross-border trade, foreign borrowers frequently argue that a promissory note or bill violated foreign local stamp regulations or foreign currency rules. Under Section 136, if the contract was made in accordance with Indian legal requirements, Indian courts will enforce it without regard to foreign regulatory infirmities.

Section 135 All 148 Sections of Negotiable Instruments Act Section 137