Negotiable law 1881

1. WELCOME TO OUR
PRESENTATION

3. Introduction
The Negotiable Instruments Act was enacted, in
India, in 1881. Prior to its enactment, the provision of
the English Negotiable Instrument Act were
applicable in India, and the present Act is also based
on the English Act with certain modifications. It
extends to the whole of India except the State of
Jammu and Kashmir.

4. MEANING OF NEGOTIABLE
INSTRUMENT
 The word negotiable means ‘transferable by delivery’,
and word instrument means ‘a written document by
which a right is created in favor of some person.
 Passing of possession
 With intention to pass title
 Must be transferred in such a manner that the transferee
becomes holder thereof.

5. Definition
 According to section 13 (1) of the Negotiable
Instrument Act.” a negotiable instrument means
promissory note, bill of exchange or cheque payable
either to order or to bearer.

6. FEATURES OF NEGOTIABLE
INSTRUMENTS
 Writing and Signature
 Money
 Freely Transferable
 Title of Holder Free from all Defects
 Notice
 Presumption
 Special Procedure
 Popularity
 Evidence

7. TYPES OF NEGOTIABLE
INSTRUMENTS
1. Instruments Negotiable by Statute:
The Negotiable Instruments Act mentions only
three kinds of negotiable instruments (Section 13).
These are:
 Promissory Notes
 Bills of Exchange and
 Checks

8. TYPES OF NEGOTIABLE
INSTRUMENTS
2. Instruments Negotiable by Custom or
Usage:
There are certain other instruments which have
acquired the character of negotiability by the usage or
custom of trade. For example: Exchequer bills, Bank
notes, Share warrants, Circular notes, Bearer
debentures, Dividend warrants, Share certificates with
blank transfer deeds, etc.

9. PROMISSORY NOTES
Section 4 of the Act defines, “A promissory note is an
instrument in writing (note being a bank-note or a
currency note) containing an unconditional
undertaking, signed by the maker, to pay a certain
sum of money to or to the order of a certain person,
or to the bearer of the instruments.”
The person who makes the promissory note and
promises to pay is called the maker. The person to
whom the payment is to be made is called the payee.

10. Essentials of Promissory Note
 It must be in writing
 It must contain express promise to pay : ‘I am liable
to pay’
 The promise to pay must be unconditional
 It must be signed by maker
 The maker must be certain- It must describe the name
& designation of the maker, sum of money
 There are 2 parties involved i.e. maker and the payee

11. Essentials of Promissory Note
 The payee must be certain- It is essential that it must
contain a promise to pay some person ascertained by
name or designation.
 The sum payable must be certain
 The payment must be in legal money
 A currency note is not a promissory note

12. PARTIES TO A PROMISSORY
NOTE
 Maker:
Maker is the person who promises to pay the
amount stated in the note.
 Payee:
Payee is the person to whom the amount of the
note is payable.
 Holder:
He is either the payee or the person to whom the
note may have been endorsed.

13. SPECIMEN OF PROMISSORY NOTE

14. BILL OF EXCHANGE
According to Section 5 of the act, A bill of exchange is “an
instrument in writing containing an unconditional order signed by
the maker, directing a certain person to pay a certain sum of
money only to, or to the order of, a certain person or to the
bearer of the instrument”. It is also called a Draft.
Special Benefits of Bill of Exchange:
 A bill of exchange is a double secured instrument.
 In case of immediate requirement, a Bill may be discounted
with a bank.

15. ESSENTIAL ELEMENTS OF
BILL OF EXCHANGE
 It must be in writing
 It must contain an order to pay and a promise or
request
 The order must be unconditional
 There must be 3 parties i.e. : drawer, drawee , and
payee
 The parties must be certain
 It must be signed by the drawer
 Number, date and place are not essential

16. PARTIES TO A BILL OF
EXCHANGE
 Drawer:
The maker of a bill of exchange is called the drawer.
 Drawee:
The person directed to pay the money by the drawer is
called the drawee.
 Payee:
The person named in the instrument, to whom or to
whose order the money are directed to be paid by the
instruments are called the payee.

17. SPECIMEN OF BILL OF
EXCHANGE

18. CLASSIFICATION OF BILL OF
EXCHANGE
 Inland and Foreign Bills [Section 11 and 12]
Inland Bill:
 It is drawn in India on a person residing in India
whether payable in or outside India; or
 It is drawn in India on a person residing outside India
but payable in India.`
Foreign Bill:
 A bill drawn in India on a person residing outside
India and made payable outside India.
 Drawn upon a person who is the resident of a foreign
country.

19. CLASSIFICATION OF BILL
OF EXCHANGE
 Time and Demand Bills:
 Time Bill: A bill payable after a fixed time is termed as a time
bill. A bill payable “after date” is a time bill.
 Demand Bill: A bill payable at sight or on demand is termed
as a demand bill.
 Trade and Accommodation Bills:
 Trade Bill: A bill drawn and accepted for a genuine trade
transaction is termed as “trade bill”.
 Accommodation Bill: A bill drawn and accepted not for a
genuine trade transaction but only to provide financial help to
some party is termed as an “accommodation bill”.

20. CHEQUE
According to Section 6 of the act,
A cheque is “a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than
on demand”. A cheque is also, therefore, a bill of
exchange with two additional qualification:
 It is always drawn on a specified banker.
 It is always payable on demand.

21. ESSENTIAL ELEMENTS OF A
CHEQUE
 In writing
 Express Order to Pay
 Definite and Unconditional Order
 Signed by the Drawer
 Order to Pay Certain Sum
 Order to Pay Money Only
 Certain Three Parties
 Drawn upon a Specified Banker
 Payable on Demand

22. PARTIES TO A CHEQUE
 Drawer:
Drawer is the person who draws the cheque.
 Drawee:
Drawee is the drawer’s banker on whom the cheque has been
drawn.
 Payee:
Payee is the person who is entitled to receive the payment of a
cheque.

23. TYPES OF A CHEQUE
 Bearer Cheque

24. TYPES OF A CHEQUE
 Cross Cheque

25. TYPES OF A CHEQUE
Cheque Crossed Specially

26. TYPES OF A CHEQUE
 Restrictive Crossing (A/c Payee Only)

28. THANKS TO ALL