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SUBMITTED TO

Mrs.BABITHA ELSA OOMMEN

LECTURER

DEPT. OF MBA

MOUNT ZION COLLEGE OF ENGG.

KADAMMANNITTA

SUBMITTED BY

ANCYMOL C BABU2nd SEM MBA

MOUNT ZION COLLEGE OF ENGG

KADAMMANNITTA

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CONTENTSCONTENTS

INTRODUCTION

CHARACTERISTICS

CLASSIFICATION

KINDS OF INSTRUMENTS

BIBILIOGRAPHY

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INTRODUCTIONINTRODUCTION

The law relating to negotiable instruments

is contained in the negotiable instrument

act 1881.

It is an act to define and amend the lawrelating to promissory notes, bills of

exchange, and cheques.

The act does not affect the custom or

local usage relating to an instrument inoriental language i.e., hundi

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NEGOTIABLE INSTRUMENTNEGOTIABLE INSTRUMENT

A

CT , 1881A

CT , 1881MeaningNegotiable instrument means

that a document transferable from

one person to another

Examples of negotiable instrument arepromissory note ,bill of exchagne,cheque..

Section 13(1)

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DEFINITION

According to Section 13 of

Negotiable Instrument Act a negotiableinstrument means apromissory note,

bills of exchange, or cheque payable

either to order or to bearer.

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Definition

an instrument ,the

property in which is acquired by any onewho take it bonafide,and for value ,notwithstanding any defect of title in the

person from whom he took it, from which itfollows that an instrument cannot be

negotible unless it is such and in such a statethat the true owner could transfer the

contract or engagement contained thereinby simple delivery of instrument [Willis-The law of Negotiable Securities, page 6]

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CHARACTERISTICSCHARACTERISTICS

1) The holder of the instrument ispersumed to be the owner of the

property contained in it.2) They are freely transferable.

3) A holder in due course gets the

instrument free from all defects of tittleof any previous holder.

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4) The holder in due course is entittled to sue

on the instrument in his own name.

5)The instrument is transferable till maturityand in the case of cheques till it becomes

stale {on the expiry of 6 months from thedate of issue}.

6)Certain equal presumptions are applicableto all negotiable instruments unless thecontray is proved.

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CLASSIFICATIONCLASSIFICATION

1) BEARER INSTRUMENTS.

2) ORDER INSTRUMENTS.

3) INLAND INSTRUMENTS. (SECTION 11)4) FOREIGN INSTRUMENTS.

5) DEMAND INSTRUMENTS. (SECTION 19)

6) TIME INSTRUMENTS.

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BEARER INSTRUMENTSBEARER INSTRUMENTS

A promissory note, bills of exchange or

cheque is payable to bearer when

1. It is expressed to be so payable.

2. The only or last endorsement on theinstrument is an endorsement in blank.

A person who is a holder of a bearer

instrument can obtain the payment of theinstrument.

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ORDER INSTRUMENTSORDER INSTRUMENTS

A promissory note, bills of exchange or

cheque is payable to order

1. Which is expressed to be so payable.

2. Which is expressed to be payable to a

particular person, and does not contain anywords prohibiting transfer or indicating an

intension that it shall not be transfeable

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INLAND INSTRUMENTS (SECTIONINLAND INSTRUMENTS (SECTION

11)11)

A promissory note, bills of exchange orcheque drawn or made in india, and madepayable, or drawn up on any person, resident

in india shall be deemed to be an inlandinstrument.

An inland instrument is one which is either:

1. Drawn and payable in india,

2. Drawn in India upon some presons residenttherein, even though it is made payable in aforeign country.

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FOREIGN INSTRUMENTSFOREIGN INSTRUMENTS

An instrument which is not an inlandinstrument, is deemed to be a foreign

instrument. The essentials of a foregian

instrument include that:1. It must be drawn outside India and made

payable outside or inside India.

2. It must be drawn in India and made payableoutside India and drawn on a personresident outside India.

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DEMAND INSTRUMENTS (SECTIONDEMAND INSTRUMENTS (SECTION

19)19)

A promissory note or a bills of exchange in

which no time for payment is specified is aninstrument payable on demand.

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TIME INSTRUMENTSTIME INSTRUMENTS

Time instruments are those which arepayable at sometime in the future.

Therefore, a promissorynote or bill of exchange payable after a fixedperiod, or after sight , or on a specified day,

or on the happening of an event which iscertain to happen is known as a timeinstrument.

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KINDS OF INSTRUMENTSKINDS OF INSTRUMENTS

1. PROMISSORY NOTES.

2. BILLS OF EXCHANGE.

3. CHEQUE.

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PROMISSORY NOTESPROMISSORY NOTES

DEFINITION

According to Section 4 apromissory note is an instrument in

writting (not being a bank note orcurrency note) containing anunconditional undertaking signed bythe maker, to pay acertain sum of

money only to or to the order of , acertain person, or to the bearer of theinsrtument.

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PARTIES TOAPROMISSORYPARTIES TOAPROMISSORY

NOTENOTE

The maker

The payee

The holderThe endorser

The endorsee

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ESSENTIALSESSENTIALS

It must be in writing.

It must contain a promise or undertaking.

The promise to pay must be unconditional.

It must be signed by the maker.

The maker must be a certain person.

The payee must be certain.

The sum payable must be certain.The amount payable must be in leagal tender

money of I ndia.

Other formalities.

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BILLS OF EXCHANGEBILLS OF EXCHANGE

DEFINITION

Section 5 of thenegotiable Instruments Act defines a bill of

exchange as A bill of exchange is aninstrument in writting containing an

unconditional order, signed by the

maker, directing a certain person topay a certain sum of money only to,

or to the order of, a certain person or

to the bearer of instrument.

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PARTIES TO BILLS OF EXCHANGEPARTIES TO BILLS OF EXCHANGE

The drawer

The drawee

The acceptor

The payee

The holder

The endorser

The endorsee

Drawee in the case of need

Acceptor of honour

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CHEQUESCHEQUES

DEFINITION

Section 6 as substitued bynegotiable insrtuments( Amendent and

Miscellaneous Provisions) Act 2002 definescheque as A cheque is a bill ofexchange drawn on a specifiedbanker and not expressed to be

payable otherwise than on demandand it includes the electrinic imageof a truncated cheque and a chequein the electronic form.

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PARTIES TOA CHEQUEPARTIES TOA CHEQUE

The drawerThe drawee

The acceptor

The payeeThe holder

The endorser

The endorsee

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ESSENTIALSESSENTIALS

It is always drawn on a holder.

It is always payable on demand.

It does not require acceptance.

A cheque can be drawn on bank where the drawerhas an account.

Cheques may be payable to the drawer himself.

The banker is liable only to the drawer.A cheque is usually valid for fix months.

No stamp is required to be affixed on cheques.

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BIBILIOGRAPHYBIBILIOGRAPHY

M C Kuchhal; Business Law; Vikas Publishing

House Pvt Ltd; Delhi; 2005.

I C S I; Elements of Business Laws andManagement. ( Foundation programe )

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