NEGOTIABLE

INSTRUMENTS ACT
1881
Ranika chaudhary
INTRODUCTION
 Human society was always aware about the
concept of exchange. To facilitate trade
precious metals like gold ,silver copper were
medium of exchange .
 To facilitate this exchange much better a
different arrangement was worked out,
which is promissory note under negotiable
instrument.
So a negotiable instrument means a promissory
note, bill of exchange or a cheque payable
either to the order or the bearer
ESSENTIAL CHARACTERISTICS
 Written document
 Can sue
 Certain
 Unconditional
 Unambiguous
 It works in the same manner like money
CLASSIFY?
 I owe to B Rs 5000
 I am liable to pay 10000
 I have borrowed 10000 from Ram
 I promise to pay B after I receive money from
x
 I promise to pay B 5000 and other charges
 I promise to pay B 5000 but after deducting
money owed by him
CATEGORIESATION OF
NEGOTIABLE INSTRUMENTS
Semi Not
Negot negotiab negotiab
iable le le
●
Promissory ●
Bill of lading ●
Money order
note ●
Dock warrant
B/E
●
Postal order
L/C
●
●
●
Cheque ●
Deposit
Share warrant
●
Railway
●
receipt
Dividend receipt
Share
●
●
warrant
●
Wharf infer
●
Bank draft certificate certificate
PARTIES TO A NEGOTIABLE
INSTRUMENT
 Drawer or maker
 Drawee (in cheque it is always a bank)
 Payee
 Holder
 Endorser
 Endorsee
CHEQUE
 A cheque is an unconditional order in writing
drawn by a customer on his bank to pay on
demand a certain sum of money to a person
named in the cheque or to the bearer of
cheque .
 Essentials of cheque

-specified banker
-payable on demand
-signed by drawer
-unconditional order
-Dated (post- dated)
PROBLEMS WITH CHEQUE
 The bank may not pay a person even if he is
holding a valid cheque
 What if the bank makes payment to forged
cheque?
 What if cheque is lost and the finder collects
the money?
 What if the holder does not have sufficient
money?
 What if subsequent parties alter the cheque?
CROSSING OF CHEQUE

 Crossing means when two lines are drawn on

the face of cheque ,the cheque is said to be
crossed.
 Types of crossing
 General crossing
 -special crossing
WHEN THE BANK MUST REFUSE
PAYMENT
 Countermand of payment
 Clear instruction by court
 Defective title of the person
 Customer has informed about the loss of
cheque
 Material alteration in the cheque
 Customer has issued notice to close his bank
account
DISCHARGE,DISHONOUR,BOUNCI
NG OF CHEQUE
 Discharge means ,when the bank makes
payment to the holder, the purpose of
instrument is over and the negotiable
instrument is said to be discharged
 A cheque is dishonored when the holder is
refused payment, bank gives noting on it,
specifying the reason thereto
BOUNCING OF CHEQUE
 A cheque is said to be bounced when ,when the
banker defaults in its payment even if he is
required to pay.
 If a person issues a cheque to settle down his
liabilities without having sufficient funds in it ,he
has committed a fraud
 If he does not receive payment he must make a
demand within 30 days of dishonor.
 He can be imprisoned for 2 years