introduction

Definition

A negotiable instrument is a piece of paper which entitles a person to a certain sum of money and which is transferable from one to another person by a delivery or by endorsement and delivery.

Discharge of negotiable Instrument

An Instrument is said to be discharged when all rights of action under it are completely extinguished. The term discharge in negotiable instrument is used in two senses. Discharge of the instrument Discharge of one or more of the parties from liability

Discharge of instrument
By payment in due course

Payment of interest
By party primarily liable becoming holder By express waiver

By cancellation
By discharge as a simple contract

Discharge of a party or parties

By payment

By Cancellation
By release By allowing drawee more than forty-eight hours

By non-present of cheque
Cheque payable to order

Cont..
Draft drawn by one branch on another

Parties not consenting discharged by qualified

acceptance By operation of law By material alteration Discharge by payment of altered instrument

Material alteration An alteration is material which Alters the character or identity of the instrument Changes the rights and liabilities of the parties Alters the operation of the instrument

Dishonour of a negotiable instrument

A negotiable instrument may be Dishonoured Dishonour by Non acceptance Dishonour by Non payment
Notice of dishonour When a negotiable instrument is dishonoured the holder of the instrument must give a notice of dishonour to all endorsers

Negotiable instrument Act Recent Amendments

2002: Definition of cheque widened to include electronic

image of a truncated cheque

and cheque in electronic form.
2010 : RBIs circular stipulates the impacts of alteration

of cheques.
2012 : The validity of cheques reduced from 6 months to

3 months.