Effect of “Not Negotiable” on a cheque.

The Common Law describes that; no one can give an ownership to any thing where he / she don’t have
an ownership.

Ownership in Banking terms refer as “Title” Accordingly, no one can give a title to any thing where he /
she doesn’t have a title to.

 As we know, the title of a cheque can be transferred freely, (characteristics of a BOE) and the
transferor (who receives a cheque) l always get a better title than that of a transferee, (who
gives the cheque) Therefore, a cheque doesn’t govern under Common Law.

 Although the fact is that, the moment the words “NOT NEGOTIABLE” appears on the face of a
cheque, from that time the subject cheque will fall under the specifications explained under
common law.

 Under the said circumstances, although a cheque which carries words “Not Negotiable” remains
transferable, if there is a defective title to it, then the transfer take place subject to the said
defect.

 As explained clearly in the Section 81 of the BEO, the transferor will not be able or shall not be
capable of giving a better title to it. The person, who obtains such a cheque, will receive it
subject to any defect in the title.

 So that there can’t be a “HOLDER IN DUE COURSE” in a cheque that carries “Not Negotiable”