Negotiable Instrument is any document, necessarily in writing, through which rights, vested in one person, could be transferred in favour

of another person, in accordance with the provisions of N I Act. Any violation of Sections 31 and 32 of the RBI Act, is punishable under law with fine. Section 31 of the RBI Act stipulates that no person (other than RBI or Central Government), can draw, accept, make or issue any bill of exchange or a promissory note payable to bearer on demand.

Secti f t e RBI Act pr i t t, if per i es any bill f exchange or a promissory note, payable to bearer, on demand, shall be punishable with fine. ecause, in case banks promissory note, bank drafts, or bankers cheques (which are widely accepted without any fear of dishonour) is made payable to the bearer, the title of such negotiable instruments could be transferred to any other person, for any number of times, just by mere deli ery, without endorsements. This way, these instruments, would be changing hands as currency notes. negotiable instrument means a promissory note, bill of exchange or cheque, payable either to order or to bearer. (Secti ). ut other instruments, having characteristics of being negotiable, are also treated as Negotiable Instruments; e.g. bank notes, bank drafts, interest warrants, dividend warrants, bearer debentures, share certificates, and treasury bills. Later, under Secti 85A, bank drafts have also been included as a negotiable instrument.

Main features of Negotiable Instruments

(i) Freel transferable, without restrictions, by delivery (if a bearer instrument), and by endorsement and delivery (if an order instrument). Thus, actual delivery is of essence. (ii) Title of the holder must be free from defects. ut, hol er in due course [who gets title to the instrument, for consideration, and in good faith (i.e. without any notice of defect in the title of the previous endorser], acquires good title even in cases of some defect in the title of the last endorser. (iii)Holder in due course can sue in his own name. (iv) negotiable instrument can be transferred any number of times during its maturity, currency or validity.

Presumptions regarding all negotiable instruments, unless proved otherwise: [Sections 11 and 119]: (i) hat, all instruments have been drawn, made, accepted, endorsed, negotiated (or purchased), discounted, or transferred, for some consideration.

(ii) hat, every instrument must bear date of its execution or drawing or acceptance for payment. (iii) hat every time a bill of exchange was accepted, within a reasonable time, after the date appearing thereon, and before the date of its maturity. (iv) hat, every transfer of a time instrument was made before the date of its maturity.

(v) That, the sequencing of the endorsements was made in the same order, as appearing on the instrument or on the allonge. (vi) That, if the instrument gets lost or destroyed, it is presumed that it was duly stamped, and that such stamps were duly cancelled. (vii)That, the holder of the instrument is its holder in due course; unless proved to be only a holder. (viii)That, where a suit has been filed, involving the dishonour of an instrument, ourt will, on production of proof of its having been duly protested, presume that the bill of exchange was dishonoured.