This document discusses negotiable instruments under Indian law. It defines negotiable instruments as written documents that are freely transferable from one person to another, including promissory notes, bills of exchange, and cheques. It explains the key elements of each type of instrument, such as signatures, unconditional terms, certainty of sums and parties. Promissory notes are written promises to pay a debt, bills of exchange order payment from one party to another, and cheques are demand drafts on a specified bank. The document also covers negotiation, endorsements, and crossed versus bearer cheques.
2. The law relating to negotiable instrument is
contained in the Negotiable instrument Act, 1881
which applies and extent to the whole of India
except the state of Jammu and Kashmir.
The present Act is based on English Negotiable
Instrument Act with certain modification.
3. The word “negotiable” means transferable from one person
to another, and the term “instrument” means, any written
document by which a right is created in favor of some
person.
According to Section 13(1) of the negotiable
instrument Act “ a negotiable instrument means a
promissory note, bill of exchange or cheque payable either
on order or to bearer”.
4. Negotiation is a transfer of an instrument from
one person to another in such a manner as to
express title and to represent the transferee the
holder thereof.
Passing of possession
With intention to pass title
Must be transferred in such a manner that the
transferee becomes holder thereof.
5. Writing and Signature
Money
Freely transferable
Title
Notice
Presumptions
Special Procedure
Popularity
Evidence
6. The Negotiable Instrument Act mention only three
kinds of Negotiable Instruments ( Sec 13 ) These are:
1. Promissory Notes
2. Bills of Exchange
3. Cheques
7. A promissory note is a written instrument that
documents or records a transaction where money
is loaned or owed from one party to another. The
terms of the loan, the repayment schedule, the
interest rate (if any), where the payments are to be
made, etc., are included in the note. The note is
signed by the person borrowing the money. Then
note is kept by the person lending the money as
evidence of the loan and the repayment agreement
with a copy usually provided to the borrower.
8. The instrument must be in writing
The instrument must be signed by the maker of it
The instrument must contain a promise to pay
The promise to pay must be unconditional
Must contain promise to pay in terms of money only
There are 2 parties involved i.e. maker and the payee
A Promissory note must be stamped according to Indian
Stamp Act
The sum of money to be paid must be certain
9. The instrument must be signed
The payee must be certain
The sum payable must be certain
The promissory note may be payable on demand
or after a certain definite period of time
A currency note is not a promissory note
10. Maker
Maker is the person who promise to pay the amount
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
11.
12. According to sec, 5 of Negotiable instrument act,
“A bill of exchange is a document in writing containing
an unconditional order, signed by the maker, directing
a certain person to paying a certain sum of money only
to or to the order of a certain person, or to the bearer of
instrument”. It is also called Draft.
13. The instrument must be in writing
It must express order to pay
The order must be unconditional
There must be three parties i.e. Drawer, Drawee, Payee
Order to pay money only
Order to pay certain sum
It must be signed by the drawer
It must be stamped
14. Drawer
The maker of a bill is called drawer
Drawee
The party on whom such bill of exchange is drawn
and who is directed to pay is called the drawee
Payee
The person to whom the amount of the bill is
payable is called the payee
15.
16. According to section 6 “A cheque is a bill of exchange
drawn on a specified banker and not expressed to be
payable otherwise than on demand”.
It is signed by the person who has deposited money
with the banker
It is always drawn on a specified bank
It is payable on demand
17. In Writing
Requisites of bill of exchange
Unconditional
Signature of the Drawer
Certain Sum of Money
Payable On Demand
Only Money
No stamped
Drawn upon a specified Banker
Payable to bearer
18. There are two kinds of cheques:
Bearer Cheque
A cheque which is payable to any person who
presents it for payment at the bank counter is
called ‘Bearer cheque’.
Crossed Cheque
When a cheque is crossed, the holder
cannot encash it at the counter of the bank.
19. There are three types of crossing
1. General Crossing
2. Special Crossing
3. Restrictive Crossing