NEGOTIABLE INSTRUMENTS

PRESENTED BY:
KETHAN RAJPUROHIT
D THARUN REDDY
T ABHIROOP
RAYAPANENI MOHITH SAI
SHIVRAM NAIDU M
 INTRODUCTION

MEANING:
Negotiable instrument is a written document by which a right is created in
favor of some person. It means a promissory note, bill of exchange, or
cheque payable either to order or to bearer.

CHARACTERESTICS:
 Easily Transferable
 Title free from Defects
 Right to Sue NEGOTIABLE INSTRUMENTS
 No notice to transfer
 Presumptions
 Credit of the Party
 KINDS OF NEGOTIABLE INSTRUMENTS

PROMISSARY NOTE:
A promissory note is an instrument in writing containing an
unconditional undertaking, signed by the maker, to pay a certain sum
of money only to or to the order of a certain person or to the bearer of
the instrument.

BILL OF EXCHANGE:
A bill of exchange is an instrument in writing containing an
unconditional order, signed by the maker, directing a certain person
to pay a certain sum of money only to or to order of, a certain
person of to the bearer of the instrument.
 FEATURES OF BILL OF DIFFERENCE BETWEEN
EXCHANGE AND BILLS OF EXCHANGE AND
PROMISSARY NOTE PROMISSARY NOTE
 Instrument in Writing
 Unconditional order/ promise
 Drawn on a certain person
 A certain sum of money
 Payee to be certain
 Payable on Demand or After a Certain Date
 Signed by the Drawer/ Maker
 Delivery Essential
 CHEQUE:

MEANING:
A cheque is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise
than on demand. All cheques are bills of exchanges
but bills are not cheques.

FEATURES OF CHEQUE:
 Instrument in writing  Date of the cheque
 An unconditional order  Amount
 On a specified banker  No acceptance
 Payee must be certain required
 A certain sum of money
 Payment on demand
 Signed by the drawer
PARTIES TO CHEQUE
 Drawer: The person who draws a cheque
is called the drawer. The drawer is always
the customer of that bank which has
issued the cheque book to him.
 Drawee: The drawee is the person on
whom a cheque is drawn. It is none other
than the ‘paying banker’ with whom the
customer has an account.
 Payee: The payee is the person to whom
the amount of the cheque is payable. In
the case of a cheque drawn in favor of
‘self’, i.e. the customer himself, the drawer
and the payee are one and the same. In
case, the payee is not mentioned, it is
payable to the bearer in case the cheque
is a bearer cheque.
TYPES OF CHEQUE
 Open cheque: An open cheque is one which is
payable across the counter of the bank. It needs
not be paid through a bank. It can be cashed at the
counter of the bank. An open cheque is of two
types,
 Bearer cheque: A bearer cheque is that cheque in
which amount is payable to a person named in the
cheque or to the bearer there of who present to
the bank.
 Order cheque: The bank is obliged to make sure
that only the right claimant in whose name the
cheque is issued gets the payment.
 Crossed cheque: A crossed cheque is not
payable across the counter of the bank. It must be
collected through a bank. It is paid into the bank
account of a person and cannot be cashed at the
counter of the bank.
 CROSSING OF CHEQUES

MEANING:
The drawing of two transverse parallel lines with or without any words across the face of the cheque is known
as Crossing of Cheques.

TYPES OF CROSSING:
 General Crossing: When a cheque bears two transverse parallel lines at
the left hand of its top corner. Words such as 'and company' or any other
abbreviation (such as & co.) may be written between these two parallel
lines, either with or without words 'not negotiable', is called General
Crossing. 

 Special crossing: When a cheque bears the name of the bank in between
the two parallel lines, with or without the words 'not negotiable' is called
Special Crossing.
Not-negotiable crossing: Not Negotiable Crossing is that it makes
the cheque non- transferable. Not Negotiable Crossing does not affect
either the paying banker or the collecting banker. The primary objective
of ‘Not Negotiable Crossing’ is to safeguard the interest of the true
owner of the cheque.

Account Payee Crossing: A/c payee crossing is an instruction to the

collecting banker to collect the amount of the cheque for the benefit of
the payee’s account only and give credit of the amount to the account
of the payee only and nobody else.

A/c payee Crossing: A/c payee crossing is an instruction to the

collecting banker to collect the amount of the cheque for the benefit of
the payee’s account only and give credit of the amount to the account
of the payee only and nobody else.
 ENDORSMENT

MEANING:
It means writing of a person’s name on the back of
the instrument or on any paper attached to it for the
purpose of negotiation.

ESSENTIALS OF VALID
ENDORSMENT:
 On the backside of Instrument
 Written in Ink
 Endorsement of entire instrument
 Two or more Payees
 No use of Honorable Words ENDORSMENT OF A CHEQUE
 Endorsement by Illiterate Person
 Delivery of Instrument
TYPES OF ENDORSMENT:
 Blank Endorsement or General Endorsement: The endorser simply puts his signature on the back of
instrument. He does not mention the name of anyone else as the endorsee. The idea here is to convert
it into a bearer instrument.
 Full endorsement or Special endorsement: In this case, the endorser writes the name of a specific
person to whom the title is being transferred.
 Restrictive Endorsement: A restrictive endorsement is an endorsement in which the endorser restricts
the endorsee from further negotiation of the instrument.
 Sans Recourse Endorsement: In the case of a sans recourse endorsement, the endorser frees himself
from such a liability by writing the words “Sans Recourse” or “without recourse to me” after writing the
name of the endorsee.