Negotiable instruments Act 1881

- Section 138 to section 142

- Chapter 17 comprising sections 138 to 142 of the NI act was introduced by way of
banking, public financial institutions, and negotiable instruments laws (public
amendments act)
- The object underlined the provision contained in the said chapter was aimed at
inculcating faith in the efficacy of banking operations and giving creditability to
Negotiable instruments in business and day-to-day transactions by making dishonour
of such instruments and effects.
- The object of the enactment of section 138(most imp)- is to punish unscrupulous
persons who purported to discharge the liability by issuing cheques without really
intending to do so, as demonstrated by the state of their accounts.
- Section 13a- defining what a negotiable instrument is- a promissory note, bill of
exchange, and cheque talks about a written doc which creates rights for a given
person
- Characteristics of NI
1. Property- a negotiable instrument does not merely give possession of the
instrument but the right of ownership also. The property in a NI can be
transferred without any formality in the case of a bearer instrument the property
passes by mere delivery to the transferee.
2. Title- the transferee of the NI is known as a “holder in due course”.
3. Rights- the transferee of the NI can sue in his own name in case of dishonor. A NI
can be transferred any number of times before it has matured. The holder of the
instrument need not give notice of transfer to the party liable on the instrument
to pay
Cheques= bills of exchange
All cheques are bills of exchange, but all bills of exchange are not cheques.
Drawer- making the bill of exchange ( who signs on the cheque)
Drawee- who extracts the money fron the bill of exchange
Holder in due course- any person who holds on to the cheque or bill of exchange
till the money is withdrawn.