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Negotiable Instruments Act

Negotiable Instruments Act

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Published by: Prabhdeep Singh Grewal on Mar 31, 2010
Copyright:Attribution Non-commercial


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AcknowledgementI take this opportunity to express our sincere gratitude to each andevery person who has directly or indirect helped me through thisproject. My experience has been fulfilling and rewarding. I alsoextend our sincere thanks to Dr.Dogra , Faculty, UniversityInstitute Of Law , Ludhiana for giving us the opportunity to work onthis topic and carry out our project work. It is our pleasure toexpress our sincere gratitude for his continuous support andguidance which helped us in accomplishing this projectsuccessfully. We thank him for providing his invaluable time,support, and co-operation to complete the project work.
Executive Summary“A ‘cheque’ is a bill of exchange drawn on a specified banker andnot expressed to be payable otherwise than on demand.” Acheque is a kind of bill of exchange. It is always drawn on a bankor a banker, and is payable immediately on demand. A chequerequires no acceptance apart from prompt payment. With thegrowth & development of commerce & trade the use of variousforms money i.e. cheque, demand draft, bankers cheque etc arebeing used widely. But cheque is that instrument which has beenin news for all the wrong reasons & which is the least safe amongall the instruments. Cases of cheque bounce are not uncommonthese days. In most of the transactions be it re-payment of loan or payment of fees for business purpose, payments are made bycheque. These cheques bearing large amounts sometimes remainunpaid and are returned by the bank on which they are drawn dueto insufficient balances or due to certain error on the part of bankemployees. The whole act of Liability towards dishonour of cheques is governed by Negotiable Instruments Act, 1881. Apartfrom that the resultant liability & legal recourse available to thedrawee, banker & drawer are explained henceforth.
NEGOTIABLE INSTRUMENTS ACT, 1881Object of the ActThe main object of the Negotiable Instruments Act is to legalise thesystem by which instruments contemplated by it could pass fromhand to hand by negotiation like any other goods. The purpose of the Act was to present an orderly and authoritative statement of leading rules of law relating to the negotiable instruments Toachieve the objective of the Act, the Legislature thought it proper tomake provision in the Act for conferring certain privileges to themercantile instruments contemplated under it and provide specialprocedure in case the obligation under the instrument was notdischarged.Section 4. “Promissory note” – A ‘Promissory Note’ is aninstrument in writing (not being a bank-note or a currency-note)containing an unconditional undertaking, signed by the maker, topay a certain sum of money only to, or to the order of, a certainperson, or to the bearer of the instrument.Essential featuresAn instrument is a promissory note if there are present thefollowing elements:-

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