Law Project - The Negotiable Instrument Act - RevisedV1

The Negotiable Instrument Act 1881 2010
1|Page
Business Law
The Negotiable Instrument Act 1881
Submitted to:
Dr. Devnani. G. N
2|Page
Submitted By:
Sr No Roll No Name Sign
1 MM-10-01 Mrs. Kajal P. Ajani
2 MM-10-03 Mr. Nilesh Chavan
3 MM-10-04 Mr. Sachin H. Dhabolkar
4 MM-10-05 Mr. Abhijit Dalvi
5 MM-10-06 Mr. Rajesh Dave
6 MM-10-07 Ms. Supriya Desai
7 MM-10-08 Mr. Amit J. Dhas
3|Page
Acknowledgement
We take this opportunity to express our sincere gratitude to each
and every person who has directly or indirect helped us through
this project. Our experience has been fulfilling and rewarding.
We also extend our sincere thanks to our
Director Prof. (Dr.) Dinesh D. Harsolekar, Librarian Mrs.
Madhura Deodhar, Course Coordinator Prof. Jagdale &
Coordinator Mrs. Vidya & most importantly our faculty Dr.
Devnani. G. N for giving us the opportunity to work on this
topic and carry out our project work. It is our pleasure to express
our sincere gratitude for his continuous support and guidance
which helped us in accomplishing this project successfully. We
thank him for providing his invaluable time, support, and
cooperation to complete the project work.
4|Page
“LAW OF NEGOTIABLE INSTRUMENTS”
(The Negotiable Instruments Act, 1881)
SR. PAGE NO.

NO. CONTENTS
1. Introduction.
2. Meaning of Negotiable Instruments
3. Negotiable Instrument.
4. Characteristics\Features of Negotiable Instrument.
5. PROMISSORY NOTES.
6. BILLS OF EXCHANGE
7. CHEQUE
8. “Criminal Action against Dishonour Cheque”
9. ENDORSEMENT 33
10 Conclusion
5|Page
“LAW OF NEGOTIABLE INSTRUMENTS”
(The Negotiable Instruments Act, 1881)
“Case Studies”
SR. PAGE
NO. CONTENTS NO.
1. S.Raju v C. Sathammai –
2. Goa Plast (P) Ltd. Vs. Chico Ursula D'souza
3. M/s. Rahul Builders v M/s. Arihant Fertilizers & Chemical and

another -
4. Jagdish Bagri v Rajendra Kumar Luhariwala and another- -
6|Page
INTRODUCTION
Exchange of goods and services is the basis of every business activity. Goods are
bought and sold for cash as well as on credit. All these transactions require flow of
cash either immediately or after a certain time. In modern business, large numbers of
transactions involving huge sums of money take place every day. It is quite
inconvenient as well as risky for either party to make and receive payments in cash.
Therefore, it is a common practice for businessmen to make use of certain documents
as means of making payment. Some of these documents are called negotiable
instruments. In this lesson let us learn about these documents.
The history of the present Act is a long one. The Act was originally drafted in 1866 by
the India 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 deviations from the English Law which it contained. The
Bill had to be redrafted in 1877. After the lapse of a sufficient period for 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 final stage. In
1880 by the Order of the Secretary of State, the Bill had to be referred to a new Law
Commission. On the recommendation 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 passed into law in 1881 being the
Negotiable Instruments Act, 1881 (26 of 1881)
7|Page
Meaning of Negotiable Instruments

To understand the meaning of negotiable instruments let us take a few examples of
day-to-day business transactions. Suppose Pitamber, a book publisher has sold books
to Prashant for Rs 10,000/- on three months credit. To be sure that Prashant will pay
the money after three months, Pitamber may write an order addressed to Prashant that
he is to pay after three months, for value of goods received by him, Rs.10,000/- to
Pitamber or anyone holding the order and presenting it before him (Prashant) for
payment. This written document has to be signed by Prashant to show his acceptance
of the order. Now, Pitamber can hold the document with him for three months and on
the due date can collect the money from Prashant. He can also use it for meeting
different business transactions. For instance, after a month, if required, he can borrow
money from Sunil for a period of two months and pass on this document to Sunil. He
has to write on the back of the document an instruction to Prashant to pay money to
Sunil, and sign it. Now Sunil becomes the owner of this document and he can claim
money from Prashant on the due date. Sunil, if required, can further pass on the
document to Amit after instructing and signing on the back of the document. This
passing on process may continue further till the final payment is made.
In the above example, Prashant who has bought books worth Rs. 10,000/- can also
give an undertaking stating that after three month he will pay the amount to Pitamber.
Now Pitamber can retain that document with himself till the end of three months or
pass it on to others for meeting certain business obligation (like with sunil, as
discussed above) before the expiry of that three months time period.
You must have heard about a cheque. What is it? It is a document issued to a bank
that entitles the person whose name it bears to claim the amount mentioned in the
cheque. If he wants, he can transfer it in favour of another person. For example, if
Akash issues a cheque worth Rs. 5,000/ - in favour of Bidhan, then Bidhan can claim
Rs. 5,000/- from the bank, or he can transfer it to Chander to meet any business
obligation, like paying back a loan that he might have taken from Chander. Once he
does it, Chander gets a right to Rs. 5,000/- and he can transfer it to Dayanand, if
required. Such transfers may continue till the payment is finally made to somebody.
8|Page
In the above examples, we find that there are certain documents used for payment in
business transactions and are transferred freely from one person to another. Such
documents are called Negotiable Instruments. Thus, we can say negotiable instrument
is a transferable document, where negotiable means transferable and instrument
means document. To elaborate it further, an instrument, as mentioned here, is a
document used as a means for making some payment and it is negotiable i.e., its
ownership can be easily transferred.
Thus, negotiable instruments are documents meant for making payments, the
ownership of which can be transferred from one person to another many times before
the final payment is made.
 Negotiable Instrument Act, 1881:
9|Page
 DEFINITION:
Section 13 of the Negotiable Instrument Act, 1881, defines a
negotiable instrument as: “A negotiable instrument means a promissory note,
bill of exchange or cheque payable either to order or to bearer.” [Sec. 13(1)].
Explanation: A promissory note, bill of exchange or cheque is payable to order,

which is expressed to be so payable, or which is expressed to be payable to a
particular person, and does not contain words prohibiting transfer or indicating an
intention that it shall not be transferable.
‘Negotiable’ literally means ‘transferable’. ‘Instrument’ means a
‘document.’ Therefore, negotiable instrument means an ‘a transferable document’.
However, it does not mean that an instrument in order to be valid must be
negotiable. Instruments may be marked ‘not negotiable’ yet they are valid
instruments and governed by the provisions of the Act.
The Act narrows down the meaning of instrument. It regulates only
three types of instruments, viz., Promissory Notes, Bills of Exchange and Cheques.
A negotiable instrument is one which entitles the holder to the receipt
of money. It gives him the right to transfer the same by mere delivery or
endorsement thereon. The negotiability of the instrument continues till its maturity.
10 | P a g e
 Characteristics\Features of Negotiable Instrument:

These are the following characteristics of a negotiable instrument:
Property:
The possessor of the instrument is the holder and owner thereof. A
negotiable instrument does not exactly give possession of the instrument, but right
to property. Whosoever gets possession of the instrument becomes its owner and is
entitled to the sum mentioned therein as the holder. The complete right of
ownership in a negotiable instrument passes by mere delivery where instrument is
payable to bearer. Where instrument is payable to order, right of ownership passes
by endorsement and delivery.
Good Title to the Instrument:

The holder is good faith and for value called the ‘holder in due
course’ gets the instrument free from all defects of any previous holder.
Rights of Holder in Due Course:

The holder in due course is not affected by certain defences
which might be available against previous holder, for example, fraud, criminal,
smugglers, to which he is not a party.
Writing & Signature:

According to the Rules of Negotiable Instrument, it must be
written and signed by all the parties according to the rules relating to the promissory
notes, bills of exchange, and cheques.
11 | P a g e
Payment:
A negotiable instrument may be made payable to two or more payees
jointly, or it may be made payable in the alternatives to one or two, or some of
several payees [Sec. 13(2)].
Payable by legal Tender Money of India:

Negotiable Instruments are payable to legal tender
money of India. The liabilities of the parties of negotiable instruments are fixed in
terms of legal tender money only.
No Need of giving Notice:

It is not necessary to give notice of transfer of a
negotiable instrument in his own name for the recovery of the amount mentioned
therein. Consideration in the case of a negotiable instrument is presumed.
 PROMISSORY NOTES;
Suppose you take a loan of Rupeess Five Thousand from your friend Ramesh.
You can make a document stating that you will pay the money to Ramesh or the
12 | P a g e
bearer on demand. Or you can mention in the document that you would like to pay
the amount after three months. This document, once signed by you, duly stamped
and handed over to Ramesh, becomes a negotiable instrument.
Now Ramesh can personally present it before you for payment or give this
document to some other person to collect money on his behalf. He can endorse it
in somebody else’s name who in turn can endorse it further till the final payment
is made by you to whosoever presents it before you. This type of a document is
called a Promissory Note.
 DEFINITION:
Section 4 defines a promissory notes as under: “A ‘promissory
note’ is an instrument in writing (not being a bank-note 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 the bearer of
the instrument.”
 Essentials Characteristics of a Promissory Note:

1. All kinds of negotiable instruments, including a
promissory note, must be in writing:
The promissory note must be in writing. In a oral form or promise is
made, they all are excluded from this. Whatever the words may be used, it is not
compulsory writing by using pen or pencil or ink pen or even may be printed or
cyclostyled. But the important thing is that the words should be visible. Intention of
writing, it should be clear.
The instrument must contain an express or unconditional promise to pay:

It is not necessary to use the word “promise” but the intention must
clearly show an ‘unconditional undertaking’ to pay the amount. It was held that
13 | P a g e
absence of the word promise does not mean that a document is not a promissory
note, provided it should fulfills the requirements of this section and there is clear
intention on the part of the parties to treat the document as a promissory note.
• ILLUSTRATIONS:
• This are the promissory notes:
 “I acknowledge receipt of Rs. 1,000 for value received.”
 “I promise to pay B Rs. 1,000 on demand.”
 “I promise to pay B or order Rs. 1,000 on demand.”
 “I acknowledge myself to be indebted to B in Rs. 1,000 to paid on
demand, for value received.”
 “Received from X Rs. 1,000, which I promise to pay on demand with
interest”.
This are not the promissory notes:

“I acknowledge receipt of Rs. 1,000.”
“I owe you Rs. 1,000.”
“Mr. Prakash Rs. 1,000.”
A document which is a receipt for money paid by cheque and which
incidentally contains a promise to repay the amount is not a promissory note, as
there is no intention of creating a negotiable instrument at all.
Unconditional:
The undertaking to pay must be definite and unconditional. If the
promise is uncertain or conditional, the negotiable instrument is not valid. Hence,
promissory notes, payable on the death of a person or persons, or at a particular
place, or after a specified time, are valid notes, under Section 5 (2). At a particular
place or at a specified time. A promise given for an executed consideration. Any
promise to pay an instrument on lapse of certain period, after a specified event
which is certain to happen.
14 | P a g e
• Valid Conditional Promissory Notes:

 “I promise to pay B Rs. 1000, three days after the death of X.
 “I promise to pay B Rs. 1000 at Mumbai.”
 “I promise to pay B Rs. 1000 on 31st December 1977.”
4. The promissory note must be signed by the maker,

otherwise, it is incomplete and of no effect with free consent:
Person must sign the instrument with the physically and
mentally act with an intention to sign without the signature the instrument is not
valid person must sign with a free consent.
5. Both the drawer and the payee must be indicated or

designated with certainty on the face of the promissory note:
Where two or more persons sign the promissory note, their
liabilities will be joint and several.
Two distinct persons should fill in the role of a maker and
payee. A note cannot be made payable to the maker himself. However, if the maker
endorses the note, it is then valid. A note may be made payable to two or more
persons jointly. Payee must be a certain person. If he is capable of being ascertained
where he is misnamed or wrongly described, he will be a certain person.
For example:
A promissory note payable to “my only niece living in England” is a
valid promissory note.
Specific Sum:
The sum payable must be certain and must not be capable of
contingent subtractions or additions.
Illustrations:
I promise to pay A Rs. 1000 and all other sums due to him.
I promise to pay A Rs. 2000 together with the fine according to the rule.
15 | P a g e
The sum payable under a promissory note is certain in the following cases:
 When it is payable with interest. However, if the rate of interest is not mentioned in
the instrument, it is not a promissory note.
 When it is payable by installments, with a provision that on default of payment of an
installment, the balance unpaid shall become due (Sec. 5).
 Thus, the act does require that the amount should be stated in both words
and figures form.
7. Promise to pay must be money only:

A promissory note should contains only payment of
money rather than anything else or other than the money.
Illustrations:
“I promise to pay B Rs. 100 in cash and Rs. 199 worth of cosmetics.”
“I promise to pay B Rs. 299 and to deliver him my black horse.”
“I promise to pay B Rs. 999 in Government Bonds.”
“These above are all invalid promissory notes.”
8. Stamping:
As in every instrument which is legal, there are certain formalities
which are compulsory should be included and such formalities are date, place,
consideration, etc should be mentioned in the instrument. Without all this
formalities, the instrument is said to be invalid.
 Types of Promissory Notes:

There are four kinds of promissory notes, and they are
1. Promissory notes payable on demand;
2. Promissory notes payable after date;
3. Joint promissory notes; and
4. Joint and several promissory notes.
1. Promissory notes payable on demand:
16 | P a g e
When the drawer or you can say the maker gives an

unconditional undertaking, under his signature, to pay on demand certain sum of
money to the payee, it is called a promissory note payable on demand. In such a
note, no time is fixed for payment.
Specimen of a Promissory Note Payable on Demand
Mumbai,
Rs. 5,000/- 1st June, 1999
On Demand, I promise to pay Prakash or order the sum of rupees five

thousand with interest at 18 per cent per annum, for value received.
Stamp
Sd/- XYZ
To
Prakash,
Empty Stomach,
Mumbai 400 052.
2. A Promissory Note Payable after Date:

When the maker or drawer promises, under his
signature to pay certain sum of money to the payee, at a future date, say for
example, three months after date, it is called a promissory note, payable after date,
or at a future date.
Specimen of a Promissory Note Payable after Date
Mumbai,
Rs. 5,000/- 1st June, 1999
Three months after date, I promise to pay Srichand Rohra or Bearer/Order

the sum of rupees five thousand, for value received.
Sd/-
To
Srichand Rohra,
Jai Palace,
Mumbai 400 052.
Sta
17 | P a g e
XY
3. Joint Promissory Notes:

When a promissory note is made by two or more
persons jointly, it is known as a joint promissory note. In such a case, the liability of
the makers (Promisers) is joint and collective towards the payee, i.e., in case of a
default, the payee can take legal action one or all of them. If he elects to take action
against one of the promisers, it is deemed to be action against all of them. He
cannot, in that case, take action against the remaining promisers. The payee has only
one right of action.
Joint promissory notes may be payable on demand or
after date. Following is a specimen of a joint promissory note:
Specimen of a Joint Promissory Note
Mumbai,
Rs. 5,000/- 1st June, 1999
We jointly promise to pay on demand to the Bank of India, or order, the

sum of Rs. 5,000/- (Rupees five thousand) only for value received with interest at
10 per cent per annum.
Stamp
Sd/-
1. Signature:
Address:
Signature:
Stamp
Address:
4. Joint and Several Promissory Notes:

When a promissory note is made by two or more
persons jointly and severally, it is called a joint and several promissory notes. The
promisers of such a promissory note are not only collectively liable to the payee but
they are also separately and individually liable to him. In other words, the payee has
more than one right of action against the promisers. He can take action-
a. Against all the promisers simultaneously, or
b. Against any one of them, or
c. Against one promiser after another till the full amount of the note is recovered.
18 | P a g e
A joint and several promissory note may be payable on

demand or after date. In India, there is no difference in practice between a joint
promissory note and joint and several promissory notes. A holder of a joint promissory
note may, therefore, treat it as a joint and several promissory note and accordingly
proceed as (1) against any one of the promisers, or (2) against all of them
simultaneously, or (3) against one promiser after another till the full amount of the note
is recovered.
Specimen of a Joint and Several Promissory Notes
Mumbai,
Rs. 5,000/- 1st June, 1999
We jointly and severally, promise to pay on demand to the Bank of India,

or order, the sum of Rs. 5,000/- (Rupees five thousand) only for value received
with interest at 10 per cent per annum.
1. Signature…………
Address…………..
Mumbai,
Rs. 5,000/- 1st June, 1999
We jointly promise to pay on demand to the Bank of India, or order, the

sum of Rs. 5,000/- (Rupees five thousand) only for value received with interest at
10 per cent per annum.
Sd/-
1. Signature:
Address:
Signature:
Stamp
Address:
Promissory Note Fabricated Case Study: S.Raju v C. Sathammai –
19 | P a g e
The respondent-defendant instituted the suit on the basis of a promissory note, dated
November 11, 2004, for Rs.1,50,000/- along with interest at the rate of 25% per
annum allegedly signed by the appellant in the presence of two witnesses.
On behalf of the appellant, it was stated that the promissory note, forming the basis of
the defendant s claim was completely sham and fabricated. It was further stated that
he was an uneducated and illiterate person, engaged in the work of civil construction,
as a contractor. He lived in the same locality and had agreed to build the house of the
appellant s son. He completed the construction of the house at a relatively much
cheaper rate of Rs.430/- per square ft. The defendant-respondent/her son used to take
his signatures on blank stamp papers telling him that those were for receipts of the
payments made to him and were required for income tax purposes. Being a simple,
uneducated person he put his signatures on blank papers without any question and in
good faith. It was alleged that one of the signatures made by him was later used to
forge the promissory note for filing the suit. It was also stated on his behalf that the
alleged signatures on the promissory note were not his signatures as would be
apparent from the fact that there were two signatures on the promissory note, one in
English and the other in Telugu.
The trial court noted that the contentions raised by the appellant for defending the suit
were quite inconsistent. On the one hand, he denied the signatures on the promissory
note as his signatures and, on the other hand, it was stated that his signatures were
obtained on blank stamp papers on the pretext that those were to be made into receipts
for payments made to him and one of those signatures was used for creating the
promissory note.
Verdict: The trial court accordingly rejected the petition filed by the appellant under
Order 37, Rule 3, CPC. Against the order passed by the trial court, the appellant
moved the High Court in revision but the High Court dismissed the revision and
affirmed the order passed by the trial court primarily on the ground that there was an
inherent inconsistency in the case of the appellant.
 BILLS OF EXCHANGE:
20 | P a g e
Suppose Rajiv has given a loan of Rupees Ten Thousand to Sameer, which Sameer
has to return. Now, Rajiv also has to give some money to Tarun. In this case, Rajiv
can make a document directing Sameer to make payment up to Rupees Ten Thousand
to Tarun on demand or after expiry of a specified period. This document is called a
Bill of Exchange, which can be transferred to some other person’s name by Tarun.
 DEFINITION:
“Section 5 defines a bill of exchange as 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.”
 Essentials\Characteristics of Bill of Exchange:

The following are the essentials of a bill of exchange:
Writing:
A bill of exchange, is like a promissory note, must be in writing. It
may be written in any language and in any form. It should be with the requirements
of Section 5. The provisions of promissory notes relating to writing, as discussed
above, are also applicable to bills of exchange.
Parties:
There are generally three parties to a bill of exchange, known as:
Drawer,
Drawee and
Payee.
Drawer:
The drawer is a person, who makes the bill of exchange, or who gives
the order to the drawee to pay a certain sum of money to the payee.
Drawee:
21 | P a g e
The drawee is a person, who is directed by the drawer to pay the

money to the payee.
Payee:
According to the section 7 of the Act defines ‘Payees’ as the person
named in the instrument, to whom or to whose order the money is, by the
instrument directed to be paid.
All these parties must be named or otherwise indicated with
reasonable certainty. Sometimes the drawer and the payee are the same persons, as
for example, where a bill is drawn “pay to me or my order.” But the drawer and the
drawee cannot be the same, because there cannot be an order to oneself.
Drawee and Acceptor:

The drawer or the payee, who is in possession of the bill, is
called the holder. The holder must be present the bill to the drawee for his
acceptance. When the drawee accepts the bill, he becomes the acceptor. Which
means one person can plays the two roles at a time of drawee and acceptor.
Order to Pay:
The bill of exchange must contain an order by the drawer to
drawee to pay certain sum of money under any circumstances. The order must be
imperative; it should not be in a request form.
An Unconditional Order to Pay:

The bill of exchange must contain an order for promise to pay
certain amount it should be unconditional. If there is conditional order which is
invalid means their should not be like that if this event is happen then only I will
pay to you, it is invalid. Conditional bill should not be their because it is invalid.
6. Signed by Drawer:
The bill of exchange must be signed by the drawer.
Payee must be certain:
22 | P a g e
It must be payable to a definite person or his order. The payee

must be certain. Bill may be made payable to two or more payees jointly or in the
alternative.
Stamping:
Bill of exchange is chargeable with stamp duty.
 Types of Bills of Exchange:

There are five types of bills of exchange namely, (1) bill
of exchange payable on demand. (2) bill of exchange payable after date, (3) inland
bill of exchange, (4) foreign bill of exchange, and (5) accommodation bill of
exchange.
1. A Bill of Exchange Payable on Demand:
When a bill is made payable on demand, or at sight, or
on presentment, it is known as a bill of exchange payable on demand.
Following is a specimen of a bill of exchange payable on demand:
Mumbai,
Rs. 20,000/- 20th August, 1999
On demand, pay to Prof. P.P. Prakash, or order, a sum of rupees twenty
Stamp
thousand only for value received.
For Airedale & Company,

Sd/-
Partner
420, P.P. Road, Mumbai 400 004.
To
Prof. P.P. Prakash,
25, Raja Mahan, Accepted
Mumbai 400 001. Sd/-
R S T 21-8-1999
23 | P a g e
A bill of exchange payable to bearer on demand is

illegal under Section 25 of the Indian Paper Currency Act and also under Section
31(2) of the Reserve Bank of India Act, 1934. Hence, such a bill cannot be drawn
by a firm or an individual.
2. A Bill of Exchange Payable After Date:

When a bill is made payable after the expiry of a stipulated
period, or payable so many days after sight, it is known as a bill of exchange
payable after date, or a time bill.
Following are a couple of specimens of bills of exchange
payable after date and after sight:
Mumbai,
Rs. 20,000/- 20th August, 1999
Three months after pay M.N. Patel, 12 V.P. Road, Surat, or order, the sum
Stamp
of rupees ten thousand only for value received.
Sd/-
A.G. Joshi,
245, Mahatma Gandhi Road,
Mumbai 400 001.
To
M.N.Patel
15, Netaji Subhash Lane, Accepted
Surat. Sd/-
B.K. Shah 10-6-1999
In the above bill, A.G. Joshi is the drawer; B.K. Shah is the
drawee who has accepted the bill; therefore acceptor; and M.N. Patel is the payee.
The bill is made payable after date.
24 | P a g e
3. An Inland Bill of Exchange:

An Inland Bill of Exchange is one, which is—
a. Drawn and made payable in India, or
b. Drawn in India on a resident of India though the place of payment may
be outside India.
For example, a bill of exchange, drawn by a merchant in Mumbai upon
another merchant in Calcutta, made payable in India, is inland bill. Similarly, a bill
of exchange, drawn by a merchant in Chennai upon another merchant in Delhi and
payable in Washington, is an inland bill.
4. A Foreign Bill of Exchange:

A foreign bill of exchange is one, which is –
a. Drawn in India and made payable in some other country other than India.
b. Drawn upon a person who is a resident of a foreign country.
25 | P a g e
 CHEQUE:
Cheque is a very common form of negotiable instrument. If you have a
savings bank account or current account in a bank, you can issue a cheque in
your own name or in favour of others, thereby directing the bank to pay the
specified amount to the person named in the cheque. Therefore, a cheque may
be regarded as a bill of exchange; the only difference is that the bank is always
the drawee in case of a cheque.
 Definition:
Section 6 defines a cheque as under: “A cheque is a bill of
exchange, drawn on a specified banker and not expressed to be payable
otherwise than on demand.”
 Definition:
“Cheque is an instrument in writing containing an unconditional order,
addressed to a banker, sign by the person who has deposited money with the banker,
requiring him to pay on demand a certain sum of money only to or to the order of
certain person or to the bearer of the instrument.
 Essentials\Characteristics of a Cheque:
Instrument in Writing:
A cheque must be writing. It can be written in ink, ball
point pen, typed or even printed. The ink used for writing the cheque should not be
easily erasable. Any overwriting or alteration will make the cheque dishonor. Oral
orders are not considered as cheques.
Unconditional Order:
In cheque there must be an order by a depositor
(drawer) on its bank (drawee) for paying money to the holder (payees) and order
should be unconditional. A cheque containing conditional order is dishonoured by
the bank.
26 | P a g e
Payable on Demand:
A cheque when presented for payment must be paid on
demand. If cheque is made payable after the expiry of certain period of time then it
will not be require.
Certain Sum of Money:

Cheque must be for money only and it must be written
in words and figures. If the amount in words and figured will differ from each other
or if there will be insufficient balance in the account then the cheque will be
dishonoured.
Payee must be Certain:

The payee of the cheque should be certain person i.e.
either real person or artificial person e.g. Joint Stock Company. The name of payee
must be written on the cheque or it can be made payable to bearer.
Types of Cheques:
There are two types of cheques:
1) Those which are uncrossed are

popularly known as “bearer” or open cheques; and
2) Crossed Cheques.
1) Bearer Cheques or Open Cheques:

Bearer or open cheques are payable at the
counter of drawee banker on presentment. As the bearer cheques carry risk of being
lost or stolen and the finder may be able to get it encashed, crossing of cheques
avoids such a contingency and secures payment.
27 | P a g e
2) Crossed Cheques:
Crossing of cheques is of different types:
I. Cheques crossed generally (Sec. 123 &126).

A cheque is crossed generally when;
It has two parallel lines marked across its face; or
It bears an abbreviation “& Co.” between the parallel line; or
It bears the words “not negotiable” between the two parallel lines (Sec. 123).
A cheque crossed generally will be paid to the banker through

which it is presented. It is a direction to the drawee banker to pay the sum only
through a banker. Where a cheque is crossed generally, the banker on whom it is
drawn shall not pay it otherwise than to a banker (Sec. 126).
Specimens of General Crossing
II. Cheques crossed specially (Secs. 124 & 126):

When a cheque is crossed by two parallel
transverse lines and also the name of the banker is written between the two parallel
lines, with or without the words, ‘not negotiable’ it is called “special crossing” (Sec.
124). It is to be payable to that person only on which the bill is drawn which means
it is not a risky document as Bearer Cheque is. The banker on whom it is drawn
shall not pay it otherwise than to the banker to whom it is crossed or his agent for
collection (Sec. 126). It will paid only when presented by the banker.
28 | P a g e
Specimens of Special Crossing
Payment of cheque crossed especially more than once (Sec. 127):

A cheque cannot be crossed more than once
specially, except the banker on whom it is crossed specially can cross it again to his
agent for purpose of collection only. If the cheque is crossed especially more than
once, the banker has a right to refuse payment thereof.
III. Cheques crossed ‘A/c. Payee’:

Often cheques are crossed with two parallel
transverse lines and in between the two parallel lines the words “a/c payee” or “a/c
payee only” are written. This means that the proceeds of the cheque are to be
credited to the account of the payee only. This type of crossing is also called
“Restrictive crossing”. Insertion of words “A/c. Payee” does not restrict its
negotiability. It serves a good protection to drawer from loss or theft.
Specimens of Cheques Crossed A/c Payee

Or Restrictive Crossing
29 | P a g e
IV. Cheque bearing ‘Not Negotiable’ (Sec. 130):

A cheque crossed generally or specially may bear
additional words ‘not negotiable’. A person taking a cheque crossed generally or
specially bearing in either case the words ‘not negotiable’ shall not have and shall
not be capable of giving a better title to the transferee than that which the person
from whom he took it had.
It will be observed that writing the words ‘not
negotiable’ is a type of special crossing or general crossing. Cheques crossed
generally or specially, can be added with the words “not negotiable”. The words
“not negotiable” are not the same thing as special crossing, because in a special
crossing, the banker on whom it is drawn shall not pay it otherwise than to the
banker on whom it is crossed or his agent for collection. When the cheque is marked
with the words “not negotiable” in addition to the special crossing, it deprives the
cheque of its main feature of negotiability.
V. Crossing after issue (Sec. 125):
Crossing of cheque other than that authorized by the act
is unlawful. The following crossings are permissible:
Where a cheque is uncrossed, the holder may cross it generally or specially.
Where a cheque is crossed generally, the holder may cross it specially.
c. Where a cheque is crossed generally or specially,
the holder may add the words “not negotiable.”
d. Where a cheque is crossed specially, the banker to
whom it is crossed may again cross it specially to another banker or his agent, for
collection.
“Criminal Action against Dishonour Cheque”
30 | P a g e
1. Imprisonment, or Fine, or Both, for dishonour of Certain Cheques

for Insufficient Funds (Sec. 138):
Sec. 138 lays down that where any cheque, drawn by a
person, on an account, maintained by him with a banker, for payment of any amount
of money to another person, from and out of that account, for the discharge, in
whole or in part, of any debt or other liability, is returned by the Bank unpaid
because –
I. The amount of money, standing to the credit of that account, is
insufficient to honour the cheque or,
II. It exceeds the amount, arranged to be paid from that account by an
agreement made with that Bank, or,
III. Instructions were issued to the bank for stop payment, such person shall
be deemed to have committed an offence and shall, without prejudice to any other
provision of this Act, be punished –
With imprisonment for a term extending to one year, or,
With fine, which may extend to twice the amount of the cheque, or.
With both.
The following three conditions, however, are required to be fulfilled to
constitute the said offence under Sec. 138.
I. The cheque must have been presented to the bank within a period of six months
from the date, on which, it was drawn, or, within the period of its validity,
whichever is earlier
II. The payee, or the holder in due course of the cheque, as
the case may be must have made a demand for the payment of the said amount of
money, by giving a notice, in writing, to the drawer of the cheque, within fifteen
days of the receipt of information by him from the bank, regarding the return of the
cheque as unpaid; and
III. The drawer of such cheque must have failed to make the
payment of the said amount of money to the person within fifteen days of the receipt
of the said notice.
2. Presumption in Favour of Holder (Sec. 139):
31 | P a g e
It shall be presumed, unless the contrary is proved, that the

holder of a cheque received the cheque of the nature, referred to in section 138, for
the discharge, in whole or in part, of any debt, or their liability.
3. Defence, which may not be allowed in Any Prosecution, Under Section 138:
Sec. 140 lays, down that it shall not be a defence in a
prosecution for an offence under section 138 that the drawer had no reason to
believe, when he issued the cheque, that the cheque may be dishonoured on
presentment for the reasons, stated in section 138.
4. Such Offences by Companies:

If the person, committing an offence under section 138, is a
company, every person, who at the time of commission of the said offence, was in
charge of and was responsible to the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished accordingly [Sec. 141(1)].
5. Liability of Director, Manager, Secretary, or other Officer of the

Company [Sec. 141(2)]:
Notwithstanding anything contained in sub-section (1), where
any offence, under this Act, has been committed by company and it is proved that
the offence has been committed, with the consent or connivance of, or is attributable
to any neglect on the part of any director, manager, secretary, or other officer of the
company, such director, manager, secretary, or other officer, shall also be deemed to
be guilty of that offence and shall be liable to be proceeded against and punished
accordingly.
6. Cognizance of Offences:
32 | P a g e
Sec. 142 says that notwithstanding anything contained in the

Code of Criminal Procedure, 1973 (2 of 1974), --
I. No court shall take cognizance of any offence punishable under Section 138
except upon a complaint, in writing, made by the payee, or as the case may be, the
holder in due course of the cheque.
II. Such complaint is made within a period of one month of the date, on which,
the cause of action arises, under clause (c) of the provision to section 138.
33 | P a g e
Case Study On Cheque Fraud: Canara Bank vs. Canara Sales Corporation and
Others
The company has a current account with the bank which was operated by the
Company’s Managing Director. The Company’s account in whose custody the cheque
book was, forged the signature of the Managing Director in 42 Cheques totaling
Rs.326047.92 over a period of time. This was detected by another accountant. The
company immediately on detected of the fraud demanded the amount from the bank.
The bank refused payment and therefore the company files a suit against the bank.
The bank lost the suit and took the matter up to the Supreme Court.
Judgment:
The Supreme Court dismissed the appeal of the bank and held that:
Since the relationship between the customer and the bank is that of a creditor and
debtor, the bank had no authority to make payment of a cheque containing a forged
signature. The bank would be acted against the law in debiting the customer with the
amount of the forged cheque as there would be no mandate on the bank to pay. The
Supreme Court pointed out that the document in the cheque form on which the
customer’s name as drawer was forged was a mere nullity. The bank would succeed
only when it would establish adoption or estoppel.
34 | P a g e
Case Study On Cheque Stop Payment: Goa Plast (P) Ltd. Vs. Chico Ursula
D'souza
An appeal was filed before the Hon’ble Supreme Court seeking whether Section 138
of the Negotiable Instruments Act is applicable when cheque is dishonored by the
bank due to stop payment instructions issued by the payer.
The apex court underlined that the relationship between the drawer and the drawee is
not material when the liability is admitted and it is not necessary that there should be a
mercantile or commercial relationship between the drawer and the drawee. Hence
stopping the payment of a post-dated cheque, issued to discharge debt or liability, is a
criminal offence under the Negotiable Instruments Act.
Judgment:
Hon’ble Supreme Court held that a person who issues a cheque could not stop
payment by the bank on the ground that the payment was not due and the amounts
were disputed. He would be covered by Section 138 of the Negotiable Instruments
Act and would be liable to imprisonment and fine. The Apex Court was of the view
that when a cheque is issued it is a sufficient evidence to prove that there was liability
and according to the presumption under Section 139, this is admission of liability.
35 | P a g e
Case Study On Cheque Dishonor: M/s. Rahul Builders v M/s. Arihant Fertilizers
& Chemical and another -
Appellant is a partnership firm. Respondent No. 1 entered into a contract with it for
construction of a building and factory premises. Appellant executed the said contract.
It submitted bills for execution of contractual work for a sum of Rs. 26,46,647/-.
Respondent No. 1 had made payments of Rs. 17,74,238/- and a balance of Rs.
8,72,409/- was said to be outstanding. A cheque for a sum of Rs. 1,00,000/- drawn on
Federal Bank Limited, Indore was issued by Respondent No. 1 in favour of the
appellant. Upon presentation of the said cheque, it was not honoured on the ground
that Respondent No. 1 had closed its account with the bank. A notice dated
31.10.2000 was sent by it to Respondent No. 1 stating:
"Your cheque No. 693336 dated 30/4/2000 for Rs. 1,00,000/- has also been returned
unpassed by the bank authorities with the plea that A/C No. 1461 has already been
closed. Hence the undersigned is now free to take up any legal step against you to get
the amount of my pending bills.
In view of the above, you are requested to remit the payment of my pending bills
within 10 days from the date of receipt of this letter otherwise suitable action as
deemed fit will be taken against you."
As despite receipt of the said notice, Respondent No. 1 did not make any payment, a
complaint petition was filed on 11.12.2000. An application was filed by Respondent
No. 1 for rejection of the said complaint inter alia on the ground that the notice issued
by the appellant was not a valid one. The said application was rejected. A revision
application filed there against before the District and Sessions Judge, Neemuch was
also dismissed.
36 | P a g e
Judgment:
The High Court, however, by reason of its impugned order, in exercise of its
jurisdiction under Section 482 of the Code of Criminal Procedure (Code), has quashed
the criminal proceedings pending against it holding:
(i) 15 days' notice having not been served upon Respondent No. 1, the same was not
valid in law.
(ii) The complainant by reason of the said notice having demanded a sum of Rs.
8,72,409/- as against the cheque which was for a sum of Rs. 1,00,000/- only, the
notice was vague and did not serve the statutory requirements of Provisos (b) and (c)
of Section 138 of the Act.
37 | P a g e
Jagdish Bagri v Rajendra Kumar Luhariwala and another- -
A sum of Rs.2,30,000/- was payable to the complainant-respondent No.1 herein by

the present appellant -accused and since the payment was not made there was an
agreement between the parties to stipulate the mode of payment. A sum of
Rs.2,30,000/- was to be paid in 8 installments and the first instalment was of a sum of
Rs.50,000/- payable by 22.6.2002 and the 8th instalment of Rs.10,000/- was payable
by 28.2.2003. As a security for the payment, the appellant issued three cheques. One
of the cheques was of Rs.1 lakh and that is the subject matter of present controversy.
Stand was taken that since the cheque was issued as a security; the provisions of
Section 138 of the Negotiable Instruments Act, 1881 (in short the `Act') had no
application.
Judgment:
The High Court noticed that the appellant failed to pay Rs.2, 30,000/- in 2 instalments
as agreed to and therefore because of default of payment cheque of Rupees one lakh
was presented. In that sense there is no question of any security.
38 | P a g e
 Endorsement - (Section 15)

The N.L act of 1881 defines endorsement as "when the maker or the
holder of the N.I. signs the same otherwise that as maker for the purpose of
negotiation on the back or on the face thereof or on a slip of paper annexed there to or
so sign for the same purpose a stamp paper intended to be completed as an negotiable
instrument, he is said to have endorsed the same & he is called a endorser
A-person who endorses a negotiable instrument is endorser. A person
in whose favour endorsement is made is called endorsee. & the act of signing a
negotiable instrument for the purpose of negotiation is called endorsement.
:
Following are condition for valid endorsement:-
1) A endorsement can only made by maker or holder of a negotiable instrument. They
include following parties to the instrument. Drawer of BOE , payee or endorsee of
N.I., holder in due course.
When the there are more than one drawer or holder who are not partner, all of them
are required to sign the document jointly .However, when a partnership firm is the
holder of a negotiable instrument any partner who-is duly authorized can endorsed a
negotiable instrument.
2) It must be
signed by the maker, as holder otherwise than as maker i.e. otherwise
then in the capacity of a maker.
3) An endorsement should be
made on the back or on the face of instrument or on a
slip of paper annexed there to which is called allonge or on a stamp paper which is
intended to be completed as a negotiable instrument.
4) It should be made with an intention to transfer not only the document in
favour of
endorsee but also to transfer all rights to the document in favour of endorsee
including the rights to recover the amt. mention in the document
5) Endorsement is complete only on delivery of instrument to endorsee.
39 | P a g e
6)
The N.L act has not prescribed any particular form of writing for an endorsement The
only requirement in that the words used for it must clearly indicate intentions of
endorser to transfer the instrument in favour of endorsee together with all rights of
instrument.
'
On the endorsement, being duly completed by delivery of instrument it not only
transfers instrument in favor of transferee but also confesses upon transferee all rights
of instrument and also the right to further transfer the instrument
However, the endorser may by specific words restricts or exclude some of the rights of
endorsee.
KINDS OF EDORSEMENT:-
1) GENERAL OR BLANK ENDQRSEMENT

An endorsement is said to be blank or general when the endorser signs the document
for the purpose of negotiation without writing the name of endorsee (transferee).
A N.I. endorsed in blank is like a bearer instrument & any person who is in possession
of such an instrument is entitled to receive the amount mentioned in the document.
In other words a N.I. endorsed in blank, is payable to the bearer of the instrument
even if it was originally an order instrument
FOR E.G.:- A B.O.E. which is payable to ' B’ can be endorsed by 'B', by making a
blank endorsement as under i.e. without writing the name of the transferee which will
have the effect of converting an order doc. in to a bearer doc.
TRANSFER TO Mr.__________
SD/- (B)
A N.I. which is endorsed in blank can be converted into full or special endorsement
by the endorsee without making any fresh endorsement & without signing the
instrument just by adding the name j of the transferee in the blank space above the
signature of the endorser who has made blank endorsement.
Thus, in the above e.g. if Mr. C is in the possession of the BOE with the blank
endorsement made by Mr. B , he can transfer the same to Mr. D without making a
fresh endorsement just by adding the name of Mr. D above die signature of Mr. B.
40 | P a g e
TRANSFER TO Mr.____________
SD/- (B)
2) FULL OR SPECIAL ENDORSEMENT

When a maker or a holder of a N.I . signs the N.I. for the purpose of negotiation &
also gives a specific direction to pay the amt. mentioned in the instrument to a
specified person or his order, it is called
full or special endorsement.
In other words, full or special endorsement is one in which the maker or the holder in
addition to his signature & the writings also specifies the name of the person in whose
favor the instrument is endorsed i.e. the name of the endorsee for e.g. a BOE which is
payable to Mr. B can be endorsed by Mr. B by making frill endorsement i.e. by
writing the name of the transferee.
For e.g. Mr. C
Transfer to Mr. C
SD / - ( B )
When a negotiable instrument is endorsed in full, the amt of the instrument cannot be
claimed by any person except by the person in whose favor it is validly transfer by the
endorsee.
Thus, a N.L which is a bearer instrument can be converted into an order instrument by
making full or special endorsement
A N.I. which is endorsed in blank can be converted in full or special endorsement by
the endorsee without making any fresh endorsement and without signing the same
just by adding the name of the transferee in die blank space above the signature of
the endorser who has made the blank endorsement
3) PARTIAL ENDORSEMENT
No form of writing in the nature of endorsement is valid if it only transfer a right to
receive part of the amt mentioned in the instrument. However, the instrument is partly
41 | P a g e
paid and the fact of such payment is recorded on the instrument it can be endorsed for
the balance amt of the instrument which remain^ unpaid.
4 ) RESTRICTIVE ENDORSEMENT - ( R . & )

R.E. is one which prohibits further negotiation of the instrument Thus, an
endorsement is R.E. when it by expressed words restricts the negotiability of the
instrument. The effect of R.E. is that it puts an end to the negotiability of the
instrument and the person in whose favour it is endorsed can only recover the amt of
the instrument
For e.g.: Transfer to Mr. A only.
5) CONDITIONAL OR QUALIFIED ENDORSEMENT

An endorsement is said to be conditional or qualified when it is subject to certain
conditions.
The most common type of conditional or qualified endorsement is called " SAN
RECOURSE ENDORSEMENT
San recourse means without recourse. By writing such words the endorser makes it
very clear to the endorsee that he will be not be held liable in the event the instrument
is dishonoured.
Thus, when the instrument is endorsed with San recourse endorsement, & it is
dishonour the holder of such instrument cannot make the endorser who had made San
recourse endorsement liable on the instrument. Thus by making a San recourse
endorsement the endorser excludes his liability on the instrument
6 ) FACULTATIVE ENDORSEMENT:- (F.E.)

When an endorser expressly gives up some of its rights on the negotiable instrument,
by making endorsement, the endorsement is called facultative endorsement.
For e.g.:- When an endorser by an endorsement gives up his right to receive
the notice of dishonour it called as F.E. Because under N.1 act he has right to receive
the notice of dishonour when the instrument is dishonour* But by making such an
endorsement, the endorser gives up some of his rights to receive the notice of
dishonour a thereby relieves, the endorsee from his duty to give notice of dishonour,
42 | P a g e
to other words, endorser increases his liable on the; endorsement. Therefore it is

called F.E.
 Conclusion:
What is a negotiable instrument? Negotiable means transferable. Instrument means
a document. Negotiable instrument, therefore means a transferable document.
Negotiable instrument entitles holder to the receipt of money therein. It also gives
him the right to transfer the same by delivery or by endorsement thereof. The Act
deals with only three types of negotiable instruments, i.e., promissory notes, bills of
exchange and cheques.
Characteristics of a negotiable instrument:
(1) The possessor is the holder and owner thereof.
(2) The holder in good faith and for value called the holder in due course receives the
instrument free from all defects.
(3) The holder can sue upon the instrument in his own name.
(4) The instrument may be payable either to the order or to the bearer.
(5) It may be made payable to either or more payees jointly.
(6) Consideration is presumed.
Types of Negotiable instrument:
(1) Promissory notes
(2) Bills of exchange
(3) Cheques
 Promissory note:
Essentials:
(1) It must be in writing;
(2) it must contain an undertaking to pay;
(3) such undertaking must be unconditional;
(4) the maker and payee must be certain and definite persons;
(5) the sum promised to pay must be certain and specific sum;
43 | P a g e
(6) it must be a promise to pay money only;

(7) it must bear the proper stamp.
 Bill of exchange:
Essentials:
(1) It must be in writing;
(2) it must have three parties, the drawer, the drawee and the payee;
(3) it must contain an order by the drawer to the drawee to pay;
(4) it must be unconditional;
(5) it must be signed by the drawer;
(6) the drawee must be certain;
(7) the order must be to pay money only;
(8) payee must be certain ;
(9) the sum payable must be certain;
(10) it must bear proper stamp duty.
 Cheque:
Types of cheques: Cheques are of two types
(1) bearer or open cheques;
(2) crossed cheques. Crossing of cheques may be of following types:
(a) Cheques crossed generally;
(b) Cheques crossed specially.
A cheque may be crossed specially more than once. Cheques may be crossed account
Payee. Cheques may bear the words “not negotiable” Such a cheque shall not be
capable of giving a better title to the transferee that which the person from the tool it
had. Cheques crossed with the words “not negotiable” is a type or general crossing. In
a special crossing the banker on whom it is drawn shall not pay it otherwise than to
the banker on whom it is crossed. Cheque marked with the words “not negotiable” is
deprived of the main feature of negotiability.
44 | P a g e
Cheques may be crossed after the issue under certain circumstances only. The
crossing of cheques other than those that are authorised by the Act is unlawful.
Banker and customers: The Act gives protection to the banker while receiving and
making payments. When the banker receives the payment on behalf of the customer
and the customer’s title is defective, the banker will not be liable to the true owner. It
shall be the duty of the banker who receives payment based on electronic image of
truncated cheque to verify the genuiness of the cheque. The relation between the
banker and the customer arises out of a contract. It is that of creditor and a debtor. The
banker has to take special care while making the payment from the customer’s funds.
Banker will be protected when the payment of the cheque is made in due course. In
case where the banker makes the payment otherwise than in due course, the banker
shall be liable to the true owner for any loss he may sustain. If the banker dishonours
the cheque wrongfully, he is bound to compensate the drawer for loss or damages
suffered by the drawer. It shall be the duty of the bank to ensure the exactness of the
apparent tenor of electronic image of the truncated cheque while truncating and
transmitting the image. The banker is liable only to the drawer and not to the holder of
the cheque. The holder has a remedy against the drawer of the cheque only. However,
the holder may proceed against the bank when the drawer is discharged because the
holder does not present it for payment within reasonable time and drawer suffers
actual damages through delay or when the banker makes the payment of the crossed
cheque out of the due course. The banker, under circumstances, is justified in
dishonouring the cheque, for example, if the funds of the drawer are insufficient or the
cheque is not properly presented.
Maturity of an instrument: The maturity of a promissory note or a bill of exchange
is the date on which it falls due. Every promissory note and bill of exchange payable
at sight and on presentation means payable on demand. Instrument which is not
expressed to be payable on demand, matures on the third day, that is, it is entitiled to
three days of grace. Bills and notes payable on a specified date or a t certain period
after the date or after sight, enjoy three days grace.
45 | P a g e
 Endorsement:
When the maker or holder signs the instrument on the back or the face of it or on slip
of paper called “allonage” or signs stamp paper for that purpose, he is said to have
made a valid endorsement. Every sole maker, drawer payee or endorser may endorse
and negotiate the instrument. Only a person who is a holder of the instrument can be
endorse and negotiate the instrument.
Effects of Endorsement: it transfers to the endorsee the property therein with the
right of further negotiation.
Kinds of endorsement: There are six kinds:
(i) General or Blank Endorsement; If the endorsee signs his name only, the
endorsement sis said to be blank or general endorsement
(ii) Full or Special Endorsement; Endorsee signs his name and adds direction to pay
the amount mentioned in the instrument. The endorsement s then said to be if full.
The holder of an instrument may convert the endorsement in blank to endorsement in
full
(iii) Partial Endorsement; where a part amount is paid and the note to that effect has
been endorsed on the instrument, the instrument may be negotiated for the balance
amount.
(iv) Restrictive Endorsement; It restricts or prohibits further negotiation of the
instrument. It puts an end to the negotiability.
(v) Conditional or Qualified Endorsement; the endorser may express words in
endorsement, excludes his own liability thereon an make such liability or right of
endorsee to receive the amount therein depending upon the happening of the specified
even although such event may never happen. When the endorser excludes his liability
and subsequently the instrument comes back in his hands, all the intermediate party to
whom he was previously liable. Only where prior endorsement was made without
recourse, the holder can enforce payment against intermediate parties. This is called
46 | P a g e
negotiation back. The party who gets back the instrument may further negotiate the
bill. This is called taking up of the bill.
(vi) Facultative Endorsement; by this, the endorser abandons some right or increases
his liability under an instrument.
Bibliography:
Business Law For Management- Bhulchandani
www.google.com
www.vakilno1.com
www.indianlawcds.com
www.icmrindia.org
http://chddistrictcourts.gov.in
www.dateyvs.com
www.indianlawcds.com
www.wikipedia.org
www.legalserviceindia.com
www.manupatra.com
47 | P a g e
48 | P a g e

Law Project - The Negotiable Instrument Act - RevisedV1

Transféré par

Informations du document

Description originale:

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Law Project - The Negotiable Instrument Act - RevisedV1

Transféré par

Droits d'auteur :

Formats disponibles

The Negotiable Instrument Act 1881 2010

Sr No Roll No Name Sign

1 MM-10-01 Mrs. Kajal P. Ajani

2 MM-10-03 Mr. Nilesh Chavan

3 MM-10-04 Mr. Sachin H. Dhabolkar

4 MM-10-05 Mr. Abhijit Dalvi

5 MM-10-06 Mr. Rajesh Dave

6 MM-10-07 Ms. Supriya Desai

7 MM-10-08 Mr. Amit J. Dhas

“LAW OF NEGOTIABLE INSTRUMENTS”

(The Negotiable Instruments Act, 1881)

SR. PAGE NO.

2. Meaning of Negotiable Instruments

4. Characteristics\Features of Negotiable Instrument.

8. “Criminal Action against Dishonour Cheque”

“LAW OF NEGOTIABLE INSTRUMENTS”

(The Negotiable Instruments Act, 1881)

2. Goa Plast (P) Ltd. Vs. Chico Ursula D'souza

3. M/s. Rahul Builders v M/s. Arihant Fertilizers & Chemical and

4. Jagdish Bagri v Rajendra Kumar Luhariwala and another- -

Meaning of Negotiable Instruments

 Negotiable Instrument Act, 1881:

Explanation: A promissory note, bill of exchange or cheque is payable to order,

 Characteristics\Features of Negotiable Instrument:

Good Title to the Instrument:

Rights of Holder in Due Course:

Writing & Signature:

Payable by legal Tender Money of India:

No Need of giving Notice:

 Essentials Characteristics of a Promissory Note:

The instrument must contain an express or unconditional promise to pay:

This are not the promissory notes:

• Valid Conditional Promissory Notes:

4. The promissory note must be signed by the maker,

5. Both the drawer and the payee must be indicated or

7. Promise to pay must be money only:

 Types of Promissory Notes:

1. Promissory notes payable on demand:

When the drawer or you can say the maker gives an

On Demand, I promise to pay Prakash or order the sum of rupees five

2. A Promissory Note Payable after Date:

Three months after date, I promise to pay Srichand Rohra or Bearer/Order

3. Joint Promissory Notes:

We jointly promise to pay on demand to the Bank of India, or order, the

4. Joint and Several Promissory Notes:

A joint and several promissory note may be payable on

We jointly and severally, promise to pay on demand to the Bank of India,

We jointly promise to pay on demand to the Bank of India, or order, the

 Essentials\Characteristics of Bill of Exchange:

The drawee is a person, who is directed by the drawer to pay the

Drawee and Acceptor:

An Unconditional Order to Pay:

Payee must be certain:

It must be payable to a definite person or his order. The payee

 Types of Bills of Exchange:

On demand, pay to Prof. P.P. Prakash, or order, a sum of rupees twenty

For Airedale & Company,

A bill of exchange payable to bearer on demand is

2. A Bill of Exchange Payable After Date:

3. An Inland Bill of Exchange:

4. A Foreign Bill of Exchange:

Certain Sum of Money: