This is the presentation of Negotiable Instrument law.

1. ( The Negotiable Instruments Act,1881 )
Submitted To:
Prof. Vijay Vora
Submitted By:
Ravi Golwala
Jina Devi

2.  Reserve Bank Of India
 Negotiable Instruments
 Parties Of Negotiable Instruments
 Assignment
 Indorsement

4. It is the Central Bank of India Established
in1934 under the RESERVE BANK OF INDIA
ACT 1934. Its head quarters is in Mumbai
(Maharashtra). Its present governor is Dr.
Duvvuri Subbarao. It has 26 offices in which
four are regional offices located in
metropolitan cities.

5. It was set up on the recommendations of the
Hilton Young Commission. It was started as
share-holders bank with a paid up capital of INR
5 crores. Initially it was located in Kolkata. It
moved to Mumbai in 1937. Initially it was
privately owned. The govt. had a nominal value
of shares of INR 2,20,000. later on in 1949, the
bank was nationalised and is fully owned by the
Govt. of India.

6.  The Reserve Bank's affairs are governed by a
central board of directors and four local boards
of directors. The central board performs the
functions of general superintendence and
direction of the bank‟s affairs.
 Central board: Appointed/nominated by the GOI
for a time period of four years. It includes the
following;
 Official directors
 Non-official directors
 Committee of Central board
 Board for Financial Supervision(BFS)

7.  Board for Payment and Settlement system(BPSS)
 Sub - Committees of the Central Board
 Local board: There are four local boards, one
each for the four regions of the country situated
in Mumbai, New Delhi, Chennai and Kolkata. The
membership of each local board consists of five
members appointed by the central govt. for a
period of four years. The functions of the local
board include:
 to advise central board on local matters
 to perform such other functions as may be
delegated by the central board from time to time.

8. 

9.  Negotiable means “Transferable”.
 Instrument means a “Document”.
Definition:
Sec-13(1) of Negotiable Instrument Act,1881
A Negotiable instrument means “A promissory
note, bill of exchange or cheque payable
either to order or bearer”.

10. 1) Property.
2) Defects in Title.
3) Remedy.
4) Rights.
5) Payable to order.
6) Payable to bearer.
7) Payment.
8) Consideration.
9) Presumptions.

11.  It is a written document by which certain rights
are created and/or transferred to a certain
person.
 It must be signed by the maker or the drawer as
the case may be.
 There must exist the unconditional order or
promise to pay.
 There must be a time mentioned for such
payment.
 In particular cases, the drawee‟s name should be
specifically mentioned.
 It must be capable of being paid either by bearer
or by order.

12.  Freely transferable.
 Holder‟s title is free from defects.
 Can be transferred infinitum.

13.  As to consideration
 As regards time
 As regards acceptance
 As regards transfer
 As regards endorsements
 As regards dishonor of negotiable
instruments
 As regards capacity of the parties

14.  Can be dishonored in 2 ways –
1.By non-acceptance
2.By non-payment
 Notice of dishonor is mandatory.
 Noting of dishonor is also necessary.
 Protest is mandatory for foreign bills.

15.  Definition:
◦ A written, dated and signed two-party instrument
containing an unconditional promise by the maker
to pay a definite sum of money to a payee on
demand or at a specified future date.

16. 1. Writing:
2. Undertaking to pay:
3. Unconditional:
4. Signed:
5. Certain person:
6. Specific sum:
7. Promise to pay must be money only:
8. Stamping:

18.  It is an instrument in writing containing an
unconditional order by the maker, directing a
certain person to pay a certain sum of money to
the bearer of the instrument or to the order of a
certain person and it must be signed by the
maker.
 The same person can be the drawer and the
payee at the same time.
NEITHER THE PROMISSORY NOTE NOR THE BILL
OF EXCHANGE ARE REQUIRED TO BE ATTESTED
OR REGISTERED.

19. I. Writing:
II. Parties: 1) Drawer 2) Drawee 3) Payee
III. Order to Pay:
IV. Unconditional:
V. Signed:
VI. Person Directed:
VII. Money:
VIII. Payee must be certain:
IX. Certain Sum:
X. Stamping:

21.  Definition:
 A „Cheque‟ is a „bill of exchange‟ drawn
on a specified banker and not expressed
to be payable otherwise than on demand.
 A cheque is an order by the customer of
the bank directing his bank to pay on
demand the specified amount to a
certain person or to the order of a
certain person named therein.

22.  It includes an electronic cheque and the
electronic image of a truncated cheque.
 The drawer of the cheque must date it before
it leaves his hands.
 A cheque may be ante-dated or post-dated.
 All cheques are bills of exchange but all bills
of exchange are not cheques.

23.  It is a direction given by the customer to the
banker that payment should not be made
across the counter.
 Crossing is effected by drawing two parallel
transverse lines with or without particular
abbreviations.
 A cheque that is not crossed is called an
open cheque.
 It serves as a measure of safety against
theft or loss of cheques in transit.

24. GENERAL: SPECIAL:
1. Addition of two 1. Drawing of two
parallel transverse parallel lines is not
lines. always necessary.
2. Between the lines, 2. Addition of the
the words “Not specific name of
negotiable”, “A/c banker on the face
Payee”, “& Co.”, of cheque.
“and Co.”, may or
may not be written.

25.  Both the drawer and the holder can cross a
cheque.
 General crossing can be converted into
special crossing but special crossing cannot
be converted into general crossing.
 A cheque crossed in favour of a particular
banker can again cross it in favour of a
another banker.

27. i. Accommodation Bill:
ii. Fictitious Bill:
iii. Escrow:
iv. Instrument payable on demand:
v. Bearer and Order instruments:
vi. Inchoate stamped instrument:
vii. Ambiguous instruments:
viii. Inland and foreign instruments:
ix. Forged instrument:

28.  Definition:
Any person:
◦ Who is entitled in his own name to the
possession of the negotiable instrument.
◦ Has right to receive or recover the amount
from the parties thereto.

29.  A principal whose name appears on an
instrument as the holder though it is
executed in the name of his agent for him.
 Where a negotiable instrument is a bearer
one, any person who is in the possession of
such instrument is the holder.
 The endorsee of a cheque is called a holder.
 If a holder of a negotiable instrument is
dead, the heirs of deceased holder become
the holder.

30.  A principal on whose behalf a pro-note is
endorsed in blank and is delivered to his
agent, he is a holder of the instrument
though his name does not appear on the
instrument.

31.  A thief or a finder of an instruments is not a
holder though he is in possession of an
instrument.
 The word “entitled” used in the definition of a
holder shows that the title of the person who
claims to be the holder must be acquired in a
lawful manner. A person obtaining the
instrument under forgery is not a holder.

32.  The definition of the holder in due course in
section 9 means that any person who for the
consideration paid becomes the possessor of
a negotiable instrument, before its maturity,
in good faith and without any sufficient
reason to believe that any defect existed in
the title of the person from whom he
obtained it.

33.  Liability of prior parties.
 Fictitious drawer or payee.
 No effect of conditional delivery.
 Instrument cured of all defects.

34.  Instrument obtained by unlawful means or
unlawful consideration.
 Estoppel against denying original validity of
instrument.
 Estoppel against denying capacity of the
payee to endorse.

35.  Estoppel against denying signature or
capacity of prior party.
 Inchoate stamped instruments.

36.  The maker of a bill of exchange or cheque is
called the „Drawer‟.
 The person is directed to pay is called the
„Drawee‟.
 When in the bill or in any indorsement
thereon the name of any person is given in
addition to the drawee to be resorted to in
case of need, such person is called a “a
drawee in case of need.”

37. Assignment takes place where the holder of
an instrument transfers it to another so as to
confer a right on the transferee to receive the
payment of the instruments. The main feature
of assignment is that the assignee obtains the
right of the assignor. Therefore, if the
assignor‟s title is defective, assignee‟s title
will also be defective.

38. Cont..
Bills, notes and cheques represent debts and
as such have been held to be assignable
without endorsement. Transfer by assignment
takes place when the holder of a negotiable
instrument sells his right to another person
without endorsing it. The assignee is entitled to
get possession and can recover the amount
due on the instrument from the parties thereto.
Of the two methods of transfer of negotiable
instruments discussed, transfer by negotiation
is recognized by the Negotiable Instrument Act.

39. Cont..
1.Writen document duly signed by the transferor is
mandatory for an assignment.
2.The consideration has to be proved in case of an
assignment.
3.Informing the creditor about the assignment is
mandatory.
4.The activities concerning an assignment are
regulated by the transfer of property act,1882.

40. Negotiation Assignment
1.Consideration is presumed until 1.Consideration must be proved.
country is proved.
2.Assignee‟s title is always subject
2.If transferee is a holder in due to defences and equities between
course,he takes the instrument the original debtor and assignor.
free from any defects.
3.Notice of assignment must be
3.Notice of transfer is not given.
necessary.
4.Assignee cannot do so.
4.Transferee can sue the third
party in his own name. 5.There are no such presumptions.
5.There are a number of
presumption in favour of holder in
due course.

41. The person who so signs the instrument is called
the „indorser‟. The person to whom the
instrument is indorsed is called the „indorsee‟.
Indorsement thus means, writing any thing on
the face or on the back of instrument, for the
purpose of negotiation. Such a writing must be
signed by the indorser. Simple signature without
any words will also constitute indorsement. Any
amount of indorsements may be made on the
instrument.

42.  The indorsement of a promissory note, bill of
exchange or cheque is completed by
delivery, actual or constructive. Indorsement
constitutes a contract between the indorser and
indorsee. Indorser can be liable to the indorsee if
indorsement is complete. Indorsement is
complete only when :
1. The holder writes or signs on the face or back
of the instrument or on a stamped paper;
 the instrument is delivered to the indorsee;
 the instrument is indorsed and delivered with
an intention to transfer the property in the
insturument.

43. The maker or holder of a negotiable
instrument may indorse, otherwise than as
such maker.
The maker or drawer shall indorse or
negotiate any instrument only when he is in
lawful possession or is holder thereof.
Similarly, a payee or indorsee shall indorse or
negotiate an instrument only when he is the
holder thereof. Therefore, a thief cannot
indorse the imstrument.

44.  The indorsement of a negotiable instrument
followed by delievery transfers to the
indorsdee, the property therin with the right
of further negotiation. The indoresement
may, by express words, restrict or exclude
such right, or may merely construct the
indorsee an agent to indorse the instrument,
or to receive its contents for the indorser or
for some other specified person.

45. There are seven kinds of indorsement.
 Indorsement in blank
 Indorsement in full
 Partial indorsement
 Conditional or Qualified indorsement
 Restrictive indorsement
 Facultative indorsement
 Forged indoesement.

46. 1) Indorsement in blank:
If the indorser signs his name only, the indorsement
is said to be „in blank‟. A blank indorsement is also
called „general indorsement‟. The name of indorsee is
left blank. The indorser singns the instrument.
2) Indorsement in full:
If the indorser singns his name and adds a
direction to pay amount mentioned in the instrument
to the order of a specified person, the indorsement is
said to be „in full‟. Where one person specifies the
name of other person to whome money is to be paid
and sings the instrument, it is a case of „indorsement
in full‟. Indorsement in full is also known as „special
indorsement‟.

47. 3) Partial indorsement:
No writing on a negotiable instrument is valid for
the purpose of negotiation if such writing purports to
transfer only a part of the amout appearing to be due
on the instrument. But,where such amount has been
party paid, a note to that effect may be indorsed on
the instrument, which may then be negotiated for the
balance.
4) Conditional or Qualified indorsement :
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 to receive the amount due
thereon dependant upon the happening of a specified
event, although such event may never happen. Where
an indorser so excludes his liability and afterwards
becomes the holder of the instrument, all the
intermediate indorsers are liable to him.

48. 5) Restrictive indorsement :
The indorsement may, by express words, restrict or
exclude the right of further negotiation, i.e., it puts
an end to negotiability. The last indorsee can sue
upon the instrument. An indorsement may not
restrict further transfer of an instrument though it
may prohibit further negotiation.
6) Facultative indorsement :
When the indorser abandons some right or increases
his liability under an instrument, the indorsement is
called “Facultative”.
7) Forged indorsement :
Forgery is nullity. Where an instrument is negotiated
by a forged indorsement, no person can acquired the
rights of a holder in due course, even if he has
obtained the instrument for value and in good faith.