The Negotiable Instruments Act, 1882

1. THE
NEGOTIABLE
INSTRUMENTS
ACT, 1882

2.  Enacted on 9th December 1881
 Came into force on 1st March 1882
 To define and amend the law relating to PM, BOE and cheque.
 Applies to whole of India
 Based on English Common Law
 Codification of English Law
 ‘HUNDI’
 Negotiable instrument is a piece of paper
 Exception to General Principle of Transfer of Property Act:
“Nemo dat quod non habet” : No one can become the owner of the property
unless he has purchased it from the true owner of such property.
Case law: Raephal vs. Bank of England

3.  Promissory Note
 Bills of Exchange
 Cheque

4.  Same as Promissory note, Bills of exchange and Cheques, the term ‘Hundi’ was
used.
 It’s a native bills of exchange.
 It’s a written document in a vernacular language between persons governed by
local customs and usages of a particular locality or a particular trade which is
recognised by the act.
 Therefore, it is provided that if such customs are inconsistent with the provisions
of the Act than what would prevail is not the provisions of the act bu the customs
and usages.

5.  It entitles a person to a sum of money
 Which entitles a person to a sum of money
 Is transferable by mere delivery or endorsement and delivery
 From person to person
 The person to whom this instrument is transferred is entitled to the money and
also has a right to transfer in future.

6.  “NEMO DAT QUOD NON HABET”
 No one can transfer a better title than he himself has
 No one can become the owner of the property unless he has purchased it from the true
owner of such property.
Not applicable to Negotiable Instruments Act, 1882. Its an exception.
Case:
Rapheal vs. Bank of England

7.  Freely Transferable
 Defect free title to the transferee
 Recovering
 Ceiling on transfers
 Payable to order
 Payable to bearer
 Payment
 Presumptions

8. Promissory Notes
Bills of Exchange
Cheque

9.  It’s an instrument in writing containing an unconditional undertaking, signed by the
maker to pay a sum of money only to , or the order of a certain person, or only to the
bearer of the instrument
 Parties :
 Maker
 Payee
 Essentials:
 Must be in writing
 Must contain an express undertaking to pay
 Must be unconditional
 Signed by the maker
 Maker and payee must be a certain persons
 Must be properly stamped
 Must contain number, place and date of signature

10.  Its an instrument in writing, containing an unconditional order , signed by the maker ,
directing a certain person to pay a sum of money only to, or to the order of, a certain
person, or to the bearer of the instrument.
 Parties:
 Drawer
 Drawee
 Payee
 Essentials:
 Must be in writing
 Express order directing to pay
 Unconditional
 3 parties and all must be certain
 Order to pay money only
 Sum must be certain
 Must be duly stamped
 Must contain date, place and signature

11.  It’s a bill of exchange drawn on a specified banker, and not expressed to be payable
otherwise than on demand, and it includes the electronic image of a truncated cheque
and a cheque in the electronic form.
 Parties:
 Drawer
 Drawee (Bank)
 Payee
 Essentials:
 Must be in writing
 Should be drawn on a banker
 Unconditional order to pay
 Must have an order to pay a certain sum
 Must be signed by the drawer and must be dated
 Payable on demand
 Validity
 It doesnot require acceptance and stamp

12.  Parties
 Primary and Secondary liability
 Order, Promise
 Presentment of payment and notice to dishonour
 Conditional
 Immediate relation
 Protest for dishonour

13.  Who can be the drawee?
 Grace Period
 Acceptance
 Discharged from responsibility
 Crossing

14.  It’s a rule of law used by courts or jurists
 From where they obtain a particular inference from a particular fact or evidence.
 3 classes :
 Presumptions of law
 Presumptions of fact
 Presumptions of fact & law
 2 types:
 Rebuttable
 Irrebuttable

15. HOLDER AND HOLDER IN
DUE COURSE
 Holder: (Sec: 8)
Any person
Entitled in his own name to the possession thereof and,
To receive or recover the amount due thereon from the parties thereto.
Case Laws:
Sarjoo Prasad vs. Rampyari Debi (AIR 1950 Pat 493)
Suraj Bali vs. Ram Chandra

16.  Holder in due course: ( Sec:9)
 Any person
 Who for consideration
 Became the possessor of a P.M, BOE or cheque or the payee or endorsee thereof,
 Before the amount mentioned in it became payable &
 Without having sufficient cause to believe that any defect existed in the title of the
person from whom he derived his title.

17.  1. Entitlement
 2. Consideration
 3. Maturity
 4. Title
 5. Right to recover amount
 6. Notice of defect in the title
 7. Privileges

18. PAYMENT IN DUE COURSE
(SECTION: 10)
 Any person legally responsible to make payment under negotiable instrument must
make a payment due under in due course with the purpose of obtaining a valid
discharge against the holder

19. NEGOTIABLE
INSTRUMENTS: SPECIAL
RULES OF EVIDENCE
 Presumptions: (Sec:118 & 119)
 Estoppel:
 Estoppel against denying the original validity of the instrument
 Estoppel against denying the capacity of the payee to endorse the instrument
 Estoppel against denying the signature or capacity of prior parties