The Negotiable Instruments Act, 1981 is an Act of the Parliament of India that provides the legal framework for negotiable instruments such as cheques, bills of exchange, and promissory notes in India. It was enacted to consolidate and amend the law relating to negotiable instruments, and to provide for the punishment of certain offences relating to such instruments.
The Act defines a negotiable instrument as a written document that is signed by the maker or drawer, and which contains an unconditional promise or order to pay a certain sum of money to a certain person, or to the bearer of the document. The Act specifies the rights and duties of the various parties involved in a negotiable instrument transaction, including the maker, drawer, payee, endorser, and holder.
One of the key provisions of the Act is the concept of negotiability, which refers to the ability of a negotiable instrument to be transferred from one person to another by endorsement and delivery. This allows for the easy transfer of ownership of a negotiable instrument, which is a crucial aspect of the functioning of the financial system.
The Act also contains provisions on the limitations of liability of parties involved in a negotiable instrument transaction. For example, a drawee who pays a cheque that has been properly endorsed and presented to them cannot be held liable for any loss or damage suffered by the payee as a result of the cheque being dishonoured.
In addition, the Act contains provisions on the rights and duties of parties involved in a dishonoured cheque. If a cheque is dishonoured, the payee has the right to demand payment from the drawer, and if the drawer fails to make payment within 15 days, they may be punished with imprisonment and/or a fine.
Overall, the Negotiable Instruments Act, 1981 plays a crucial role in the functioning of the financial system in India, and serves as a valuable tool for the protection of the rights of parties involved in negotiable instrument transactions.
Basics of Negotiable Instruments Act, 1881
Thank you for your love and support. A holder is due course can recover the full amount on the instrument. Other signers may by agreement stand in immediate relation with a holder. A is not discharged, for he has not suffered actual damage through any delay in presenting the cheque. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.
Chahal Engineering and Construction Ltd. When party to whom notice given is dead. Presentment of promissory note for sight. A is not only reinstated in his former rights, but has the rights of an indorsee against B and C. Where an instrument may be construed either as a promissory note or bill of exchange, the holder may at his election treat it as either and the instrument shall be thence forward treated accordingly. Loss of goods in transit is borne by — a Consignee b Consignor c Both a and b proportionately d Insurance company 309.
Negotiable Instrument Act was enacted in a 1981 b 1881 c 1871 d 2001 297 Which
Sudhir of Simla consigned 100kg of vegetables to D of Delhi for ' 1500. Explanation iii Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option. Liability of drawee of cheque. The indorser of a negotiable instrument may, by express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen. Cheque A cheque is a bill of exchange on a selected banker and not expressed to be payable other than on-demand, and it contains a cheque in the electronic form or the electronic image of a cheque.
Negotiable Instruments Act, 1881. Updated Bare Act with PDF (2019)
The instrument is at maturity on the third day after the 28th February, 1878. Chapter X Of Reasonable Time 105. Where the acceptance does not express for whose honour it is made it shall be deemed to be made for the honour of the drawer. The bank fails before the cheque could be presented in ordinary course. Estoppel against denying original validity of instrument.
Where a cheque is uncrossed, the holder may cross it generally or specially. A promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in a certain event is not negotiable except in the hands of a holder for value without notice of the condition unless such event happens. When noting equivalent to protest. In the absence of these instruments, trade, and commerce activities were likely to be negatively affected. Conversion of indorsement in blank into indorsement in full. Presentment by or to agent, representative of deceased, or assignee of insolvent.
Negotiable instruments act 1881, Nature and Characteristics of Negotiable instruments
A consignor is entitled to —————— a Profit on consignment b Commission on Sales c Reimbursement of expenses d Interest on capital 310. Classification of Negotiable Instruments Broadly, Negotiable instruments are classified into 4 types. A is not only reinstated in his former rights, but has the rights of an indorsee against B and C. A cheque must, in order to charge any person except the drawer, be presented within a reasonable time after delivery thereof by such person. The drawer of a bill of exchange or cheque is bound in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given to, or received by, the drawer as hereinafter provided. Chahal Engineering and Construction Ltd.
Acceptance not specifying for whose honour it is made. When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day. The Act deals with only three types of negotiable instrument, i. Reasonable time for transmitting such notice. Payable to order: A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable to a particular person. No party to the instrument who has induced any other party to make, draw, accept, indorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover thereon an amount exceeding the value of the consideration if any which he has actually paid or performed.
The proposed amendments in the Act are aimed at early disposal of cases relating to dishonour of cheques, enhancing punishment for offenders, introducing electronic image of a truncated cheque and a cheque in the electronic form as well as exempting an official nominee director from prosecution under the Negotiable Instruments Act, 1881. Partial absence or failure of money consideration. Illustration A bill of exchange was drawn by A in California where the rate of interest is 25 per cent. The law concerning negotiable instruments is the law of the industrial world which was practised to facilitate the activities in trade and commerce, creating provision or giving holiness to the instruments of credit that can be deemed to be convertible into cash and easily transferable from one person to another. Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof.
Where a bill of exchange has been lost before it is over-due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. For the purposes of this Act, where a bill of note is required to be protested within a specified time or before some further proceeding is taken it is sufficient that the bill has been noted for protest before the expiration of the specified time or the taking of the proceeding; and the formal protest may be extended at any time thereafter as of the date of the noting. The recommendations of the Working Group alongwith other representations from various institutions and organisations were examined by the Government in consultation with the Reserve Bank of India and other legal experts, and a Bill, namely, the Negotiable Instruments Amendment Bill, 2001 was introduced in the Lok Sabha on 24th July, 2001. Mode in which notice may be given. A holder of a negotiable instrument who derives title from a holder in due course has the rights thereon of that holder in due course. No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance. A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof.
Subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to bearer is negotiable by delivery thereof. Instrument payable at specified place. Days of grace- Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable. Explanation- For the purpose of clause a where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case maybe, maintains the account. If such bill is dishonoured, the party dishonouring the same is liable to make compensation thereof in the same manner as in the case of the original bill. Parties not consenting discharged by qualified or limited acceptance.
