A cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the. A negotiable instrument means a promissory note, bill of exchange or cheque either to order or bearer. Negotiable instrument is a convenient and safe means of transferring money, and provides a permanent record and receipt for its transaction. Definition section of the negotiable instruments act defines a negotiable instrument to mean promissory note, bill of exchange or cheque, payable either to order or to bearer. In order words, the identity of the presenter of the cheque is not insisted by the banker. Negotiable instruments amendment bill, 2017 a aims to amend the negotiable instruments act, 1881, asking the drawer of a cheque that has been dishonoured to pay interim compensation to the complainant. Dec 04, 2017 as per negotiable instrument act 1881, a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Negotiable instruments by statue the act mentions only three types of negotiable instruments section. This act was framed in our country in the year 1881 when the british ruled our country. Section 6 in the negotiable instruments act, 1881 1 6 cheque. The negotiable instruments act, 1881 indian kanoon. Negotiable instrument act is a very interesting topic of economic, business and commercial laws which is explained below.
Negotiable instruments act, 1881 linkedin slideshare. Dishonour of cheques section 8 of negotiable instruments act. Mcqs on negotiable instruments act with answers speakhr. A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer. This act may be called the negotiable instruments act, 1881. Thus, a negotiable instrument means a written document whose ownership can be transferred by one person to another by delivery alone or by delivery and indorsement. It is used by individuals, businesses, corporate and others to transact for making and receiving payment. Sep 04, 2017 in daytoday banking, a negotiable instrument usually refers to checks, drafts, bills of exchange, and some types of promissory notes. The negotiable instruments act was enacted, in india, in 1881 and it came into force on 1st march 1881. Banks make payment of order cheque only on confirming the endorsements of payee and other endorsees on the reverse of the cheque. A cheque can be paid either to the bearer who presents the cheque to the bank or order whose name is specified on the cheque. Essentially the liability of the parties to a negotiable instrument has it statutory provisions under sections 30, 32 and 35 of the negotiable instruments act 1881. An act further to amend the negotiable instruments act, 1881. Be it enacted by parliament in the sixtyninth year of the republic of india as follows.
The biggest danger in accepting a cheque is that the person writing it may not have enough money in the bank to cover it. The first section in this aspect to be analyzed, would be s. Be it enacted by parliament in the fiftythird year of the republic of india as follows. Negotiable instruments amendment bill, 2017 first published. The negotiable instruments amendment and miscellaneous provisions bill, 2002 a bill further to amend the negotiable instruments act, 1881, the bankers books evidence act, 1891 and the information technology act, 2000. A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is.
What is the difference between order cheque and bearer. A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees section 2. Cheques and its types in negotiable instrument act, 1881. Is section8 of negotiable instrument act a misfit in modern. Negotiable instrument is an inclusive term and it includes a promissory note, bill of exchange or cheque payable moreover to order or to bearer. A negotiable instrument act can be a cheque, a bill of exchange or a promissory note that is payable to either a bearer or to order. Negotiable instruments amendment bill, 2017 gktoday. Sep 12, 2017 a negotiable instrument means a promissory note, bill of exchange or cheque either to order or bearer. A demand draft is always payable to a specified party. Prior to 1881 the transactions governing negotiable instruments were regulated under the cover of indian contract act 1872. Negotiable instrument act presumption in favour of holder. Nov, 2017 a negotiable instrument act can be a cheque, a bill of exchange or a promissory note that is payable to either a bearer or to order. Section 8 of the negotiable instruments act, 1881 the term negotiable means transfer by endorsement or delivery and the term instrument means any legal document in writing, which is created in favour of any person.
Cheque is a negotiable instrument used to make payment in day to day business transaction minimizing the risk and possibility of loss. Negotiable instruments act, 1881ni act, a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer. Government to amend negotiable instrument act to deal with. A citybased lawyer filed a case under negotiable instruments act against his former client after a cheque of rs 1. Local extent, saving of usages relating to hundis, etc. But in practice, many other documents which meet the basic requirements of a negotiable instruments.
January 2, 2018 this bill seeks to amend the negotiable instruments act, 1881 to primarily address the issues of dishonor of cheques and deal with unnecessary delay in disposal of such cases. Jun 15, 2017 negotiable instruments it is a document, used for making payment of specific amount of money on demand and at a specific time, with the payer name on the instrument. According to section 1 of the negotiable instruments act, 1881 ni act, a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer. Highlights of negotiable instruments amendment bill2017. A depositor cannot withdraw a smaller sum than one rupee except on the occasion of closure of the account. What is negotiable instruments act 1881 and important sections. In place of bundle of notes a piece of cheque is much easier to carry. The negotiable instrument act is applicable to all parts of india except jammu and kashmir. The negotiable instruments act mentions only three kinds of negotiable instruments section. Nonliability of banker receiving payment of cheque. Definition of negotiable instrument according to section of the negotiable instruments act, 1881, a negotiable instrument means promissory note, bill of exchange, or cheque, payable either to order or to bearer. Sections 31 and 32 of the rbi act, 1934 helps to guide this act. Negotiable instruments act ppt negotiable instrument.
As per the statement of objects and reasons of the bill of 2017, the negotiable instruments act of 1881 is proposed to be amended with a view to address the issue of undue delay in final. Cheques and its types in negotiable instrument act, 1881 jaiib caiib study material, mock tests by learning sessions. If such practices may be omitted by any words in the body of the tool, which designates and purpose that the legal relations of the parties thereto shall be governed by this act. So, a negotiable instrument is basically a written document which is created in favor of someone and can be easily transferrable. Dishonouring of a bank cheque punjab judicial academy. The case of the complainant is that the accused borrowed a loan of rs. According to section a of this act, negotiable instrument means, a promissory note, bill of exchange or cheque payable either to order or to bearer. Section 5 of the negotiable instruments act defines a bill of exchange as follows. In bangladesh, chapter xxvi of the 1881 act was substituted by chapter xvii in the year 1994. A bearer cheque is one which is payable to the presenter or bearer of the cheque. What is the meaning of material alteration in a cheque. Negotiable instruments can converted into liquid cash subject to certain condition. Every negotiable instrument shall be governed by the provisions of this act, and no usage or custom at variance with any such provision shall apply to any such instrument. The act went through a final amendment in the year 2000.
There are three parties in cheque transaction drawer, drawee and payee. In case of the bearer word in the cheque is cut then it becomes an order instrument. Mar 01, 20 cheque dishonour under section 8 of negotiable instruments act. These are fully transferable from one person to another. Types of negotiable instruments negotiable instruments recognized by statutes. But at the same time with the arrival of cheque system the problem of its dishonoring was also started. Cheque, section 8 of negotiable instrument act, 1881, banking system, dishonor i.
Oct 20, 2019 a negotiable instrument is a signed document that promises a sum of payment to a specified person or the assignee. Dishonour of a negotiable instrument legal steps to take. In case of a bearer cheque, no endorsement is required to encash it. The law and the framework, which governs the transaction of these instruments known as. Negotiable instruments act 1881 business and commercial laws. Here you can find the mcqs on negotiable instruments act with answers. The act was amended and amendment act inserts five new sections from 143 to 147 touching various limbs of the parent act and cheque truncation through digitally were also included and the amendment act has been recently brought into force on feb. Frequently asked questions on negotiable instruments act. According to section 1 of the negotiable instruments act, a negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to bearer.
There were total 142 sections in the negotiable instruments act 1881 when came into force. Jan 03, 2018 as per the statement of objects and reasons of the bill of 2017, the negotiable instruments act of 1881 is proposed to be amended with a view to address the issue of undue delay in final. When a company issued a cheque and it is dishonoured by the drawee bank it is said that offence under section 8 of the negotiable instrument act, is committed by the company. But company cannot be prosecuted for the offence because it is a legal entity and no physical punishment can be imposed upon a company. Difference between cheque and demand draft bankexamstoday. This multiple questions on negotiable instruments act 1881 can be considered for mcqs on business law or mcqs on legal aspect of business for mba, bba, b. Negotiable instruments act 1881 negotiable instruments act 1881. Source of income of complainant has to be proved in 8 ni. A cheque is defined in the negotiable instrument act, 1881. Definition includes only three documents in negotiable instruments. Drawer maker of cheque the person who issue the cheque or hold the account with bank. Study material for bank promotion negotiable instruments act. A negotiable instrument means a promissory note, bill of exchange or cheque payable either to the order or to the bearer. What is a cheque definition, types of cheques and features.