This presentation is on Negotiable instrument and it covers following points :- Introduction Negotiable instrument Characteristics of negotiable instrument Presumption as to negotiable instrument Types of negotiable instruments Maturity or days of grace Negotiation & Assignment Endorsement Holder in due course Dishonor of negotiable instrument Discharge of negotiable instrument

3. Acknowledgement:I would like to express my special thanks of
gratitude to my teacher (Pragya Bhargav
Ma’am) who gave me the golden opportunity
to do this wonderful project on the topic
(Companies Act,2013),which also helped me in
doing a lot of Research and I came to know
about so many new things I am really thankful
to them.
Secondly I would also like to thank my parents
who helped me a lot in finalizing this project
within the limited time frame.

4. Content:
 Introduction
 Negotiable instrument
 Characteristics of negotiable instrument
 Presumption as to negotiable instrument
 Types of negotiable instruments
 Maturity or days of grace
 Negotiation & Assignment
 Endorsement
 Holder in due course
 Dishonor of negotiable instrument
 Discharge of negotiable instrument

5. Introduction:-
 In the modern period, business transaction do not take place
only through cash but also with the use of negotiable
instrument.
 So the act was passed for negotiable instrument.
 The act is “THE NEGOTIABLE INSTRUMENT ACT,1881”.
 This act come into force on 1st march, 1882.
 The act extends to whole of INDIA except J&K.
 This act equally applies to all person in INDIA including the
Non-Indian.

6. Negotiable instrument:-
 The term “negotiable instrument” consists of
two words ‘negotiable’ & ‘instrument’.
 Negotiable means capable of being transferred
or passed or negotiate to another.
 Here, Instrument means a written paper or
document with signed creating a right of
person to claim certain sum of money.
 so concluded that, negotiable instrument is a
written document with signed entitle a person
to claim certain sum of money and which is
transferrable to another person.

7. Characteristics of negotiable instrument:
 Freely transferrable
 Written document
 Signature of party
 Money
 Absolute and good title
 Presumption
 Right to claim
 Unconditional

8. Presumptions as to negotiable instrument:
 As to consideration (every negotiable instrument was made
drawn, accepted or endorsed for consideration)
 As to date (date shall be the making or drawing date of
instrument)
 As to time of acceptance
 As to time of transfer
 As to stamp
 As to holder

9. Types of negotiable instrument
By
statute
By custom
or usage
Promissory
note
Bill of exchange
Cheque
Hundies
Treasury bill
Share warrants
Dividend warrants
Banker’s draft etc

10. Promissory note
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.”
Note: No any other person except RBI or central
government can make a promissory note payable to
the bearer.

11. Essentials of promissory note
 Written
 Signature
 Unconditional
 No prescribed proforma
 Certain sum of money
 Promises to pay money only
 Maker must be certain person
 Certain payee
 Stamped
 Amount must be certain

12. Parties to a promissory note
 Maker: the maker is the person who
promises to pay the amount stated in the
note
 Payee: the payee is the person to whom the
amount of the note is payable.
 Holder: he/she is either the payee or the
person to whom the note may have been
endorsed.

14. Bill of exchange
Section 5 of the Act defines, “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”.

15. Essentials of bill of exchange
 Written
 Signature
 No prescribed proforma
 Must contain an order to pay
 Unconditional
 Pay only money
 Three parties
 Drawee must be certain person
 Payee must be certain person
 Stamped
 Must be delivered

16. Parties to a bill of exchange
 Drawer: the maker of the bill of exchange
 Drawee: the person directed to pay the
money to drawer.
 Payee: the person named in instrument to
whom the amount of the bill is to be paid.

18. Difference b/w promissory note & bill of exchange
S.
no.
Basis Promissory note Bill of exchange
1 Number of
parties
Two parties-
maker(debtor) &
payee (creditor)
Three parties- drawer,
drawee & payee
2 Maker Maker is in the
position of debtor
Maker is in the position
of creditor
3 Promise or order Unconditional promise Unconditional order
4 Acceptance
required
Not required Required
5 Nature of liability Liability of maker is
primary or absolute
Liability of maker is
secondary and
conditional

19. Cheque
Section 6 of the Act defines “A cheque is a bill of
exchange drawn on a specified banker, and not
expressed to be payable otherwise than on demand”.

20. Essentials of cheque
 Written
 Signature by the drawer
 Unconditional order
 Drawn on a bank
 Payable only in money
 Payable on demand
 May be electronic form
 Three parties

21. Parties to cheque
Drawer: the person who draws the
cheque
Drawee: the drawee is the drawer’s
banker on whom the cheque has been
drawn.
Payee: the person who is entitle to
receive payment of a cheque

23. Difference b/w bill of exchange & cheque
s.no. Basis Bill of exchange Cheque
1 Drawee Drawn on any person or
firm including bank
May be drawn only on
a specified bank
2 Payable on
demand
May be payable on
demand
Always payable on
demand
3 Acceptance
required
Required Not required
4 Liability of
drawer
Secondary or conditional Primary or absolute
5 Stamp Must be stamped as per
provision of Indian stamp
act
Not required to be
stamped
6 Form No prescribed form Always prescribed
form

24. Types of negotiable instrument by custom or usage
 Hundies: the word hundi is derived from Sanskrit word ‘hund’
means “to collect”. Thus, hundi is negotiable instrument
written in oriental language used to collect money stated in it.
This is sometime looks like a bill of exchange or promissory
note.
 Treasury bill: a short term debt which is mature in less than
one year and pay no interest.
 Share warrant: A share warrant is a bearer document of title
to shares and can be issued only by public ltd companies and
that to against fully paid up shares only.
 Dividend warrant: a document showed that shareholders is
entitled to a dividend.
 Etc….

25. Maturity and days of grace
 An instrument is said to be at maturity when its
payment becomes due.
 The maturity of negotiable instrument under two
heads:
a. Payable on demand
b. Payable other than on demand
 Days of grace: in case of bill or notes payable other
than on demand , the date of maturity has to be
calculated. Such instruments are at maturity on the
third day after the day on which it is expressed to be
payable.

26. negotiation
 It means transfer of negotiable instrument by one
to another.
 For e.g.:- A delivers a bearer cheque to B, his
accountant against payment of salary.so there is
negotiation of cheque of B.
 There are two parties-
a. Endorser
b. Endorsee

27. Methods/modes of negotiation
 Negotiation by delivery: (Sec. 47): Where a promissory note
or a bill of exchange or a cheque is payable to a bearer, it may
be negotiated by delivery thereof.
For e.g.:-A, the holder of a negotiable instrument payable to
bearer, delivers it to B’s agent to keep it for B. The instrument
has been negotiated.
 Negotiation by endorsement and delivery (Sec. 48): A
promissory note, a cheque or a bill of exchange payable to
order can be negotiated only be endorsement and delivery.
Unless the holder signs his endorsement on the instrument
and delivers it, the transferee does not become a holder. If
there are more payees than one, all must endorse it.

28. assignment
 Assignment of negotiable instrument means transfer of
ownership of negotiable instrument from one person to
another.
 There are two parties-
1. Assignor
2. Assignee

29. Endorsement
 When the maker or holder of a negotiable instrument signs
the instrument for the purpose of negotiation, it is said to be
endorsement of the instrument.
 The person who effects an endorsement is called an
‘endorser’, and the person to whom negotiable instrument is
transferred by endorsement is called the ‘endorsee’.
 Essentials for valid endorsement- endorser must be holder,
signature, delivery, intention etc….

30. Classes of endorsement
 An endorsement may be:
(1) Blank or general
(2) Special or full
(3) Partial
(4) Restrictive
(5) Conditional

31. Holder in due course
 A holder in due course is a special kind of holder who satisfies
certain conditions laid down by law.
 Such conditions are:-
1. He must be holder of negotiable instrument
2. He must have become holder of the instrument for
consideration
3. He must have become holder before maturity of the
instrument
4. He must obtained instrument in good faith
5. He must have received the instrument complete and regular
(properly dated or stamped)

32. Dishonor of negotiable instrument
 Generally, an instrument is said to be dishonored when the
acceptance/payment is refused on a duly presented
instrument.
 There are two ways of dishonored of instrument:-
i. By non-acceptance
ii. By non-payment

33. Dishonor by non-acceptance
Only a bill dishonor in such cases
 Drawee refuses to accept the bill (Sec. 91)
 Not signed by all the drawees (Sec.34)
 Not accepted by any partners (Sec.34)
 Bill not accepted within 48 hours (Sec.63 & 91)
 Drawee is incompetent (Sec.91)
 Drawee could not be found (Sec.61)
 Refusal by drawee in case of need (Sec.115)

34. Dishonor by non-payment
 Default in payment (Sec.92)
 When excused from presentment (Sec.76)

35. Discharge of negotiable instruments
 It means the discharge of the rights and obligations of
all the parties to the instrument.
 Methods of discharge of instrument:-
a. By payment in due course.
b. By cancellation
c. By release or wavier
d. By operation of law
e. By alteration
f. By party becomes holder

36. Thanks for reading
this presentation

37. Made by :
Yamini Kahaliya
BBA (honors’)