Table of Contents
Definition
A “negotiable instrument” is one, which when transferred by delivery or indorsement, passes to the transferee a good title to payment according to its tenor and irrespective of the title of the transferor. provided he is a ‘bona fide‘ holder for value without notice of any defect obtaining in the instrument which is assignable by indorsement or delivery. According to section 13 of the Negotiable Instruments Act, 1881, a “negotiable instrument” means a written document that can be transferable for n number of times within maturity duration for trade i.e. for merchandise purposes.
History
The Act was first drafted in 1866 by the 3rd Indian Law Commission and introduced in December 1867 in the Council and it was referred to a Select Committee. Objections were raised by the mercantile community to the numerous changes from the English Law in which it contained. The Bill had to be redrafted in 1877. After the adequate time of criticism by the Local Governments, the High Courts, and the chambers of commerce, the Bill was revised by a Select Committee. In spite of this Bill could not reach the conclusive stage. In 1880 by the Order of the Secretary of State, the Bill had to be referred to a new Law Commission. On the approval of the new Law Commission, the Bill was re-drafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was enacted into law on 9th December 1881 being the Negotiable Instruments Act, 1881.
Note: This Act. came into force on 1st March 1882.
Things that are included in the Negotiable Instrument Act.
There are three things which include in Negotiable Instrument Act.:
Promissory Note:
Definition
A ‘Promissory Note‘ is a written document not being a banknote or a currency note 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 a bearer of the instrument.
Section 4 , Negotiable Instrument Act
Illustration
Mr. Z signs instrument in a following terms:
- “I promise to pay Mr. X or order Rs. 5,000”.
- “I acknowledge myself to be indebted to Mr. X in Rs 10,000 to be paid on demand of value received”.
These instruments are promissory note.
A promissory note is a written acknowledgment of debt with a promise to pay. The words ‘Baqi Dena’ tantamount to an express promise in pay and a note with these words is a promissory note. A promissory note payable to a particular person without express or implied prohibition of its transfer would be deemed to be payable to order and, therefore, a negotiable instrument.
Essentials of Promissory Note:
To constitute a promissory note only a fulfill of document is needed with the following requirements:
- There should be unconditional undertaking to pay;
- The sum should be a some of money and should be certain
- The payment should be to or to the order of a person who is certain or to the bearer of the instrument; and
- The maker should sign it.
The maturity date should be maintained there.
Kinds of Promissory Note:
there are three kinds of promissory note
- Promise to pay a certain sum of money to a certain person;
- Promise to pay a certain sum of money to the order of a certain person; and
- A promise to pay the bearer.
Bills of Exchange:
Definition:
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 the order of, a certain person or to the bearer of the instrument. The sum payable may be “certain”, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an installment, the balance unpaid shall become due.
The person to whom it is clear that the direction is given or that payment is to be made may be a “certain person”, although he is mísnamed or designated by description only. [Section 5, the Negotiable Instruments Act).
Essential elements
According to the definition of a “bill of exchange” as above, it must conform to the following requirements :
1. It must be an order for payment of money alone ;
2. The sum to be paid must be certain ;
3. The order must be absolute or unconditional;
4. The maker or drawer must be a certain person;
5. The payee and drawee must be a certain person.
Cheques:
Definition
A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. [Section 6 of Negotiable Instruments Act] A Cheque must be payable instantly on-demand.
A cheque is always drawn on a bank or a banker and is payable immediately on demand without any days of grace, [Ram Sarup v. Hardeo]
A cheque requires no acceptance, apart from prompt payment and a cheque is supposed to be drawn upon funds in the
Illustration
Can Curruncy notes include in Negotiable Instrument?
Trying to learn the art of advocacy.
Practicing at the Calcutta High Court and in its vicinity.
