This document discusses negotiable instruments under Indian law. It defines negotiable instruments as written documents that are freely transferable from one person to another, including promissory notes, bills of exchange, and cheques. It explains the key elements of each type of instrument, such as signatures, unconditional terms, certainty of sums and parties. Promissory notes are written promises to pay a debt, bills of exchange order payment from one party to another, and cheques are demand drafts on a specified bank. The document also covers negotiation, endorsements, and crossed versus bearer cheques.

1. Rukhsar Shaikh

2. The law relating to negotiable instrument is
contained in the Negotiable instrument Act, 1881
which applies and extent to the whole of India
except the state of Jammu and Kashmir.
The present Act is based on English Negotiable
Instrument Act with certain modification.

3. The word “negotiable” means transferable from one person
to another, and the term “instrument” means, any written
document by which a right is created in favor of some
person.
According to Section 13(1) of the negotiable
instrument Act “ a negotiable instrument means a
promissory note, bill of exchange or cheque payable either
on order or to bearer”.

4.  Negotiation is a transfer of an instrument from
one person to another in such a manner as to
express title and to represent the transferee the
holder thereof.
 Passing of possession
 With intention to pass title
 Must be transferred in such a manner that the
transferee becomes holder thereof.

5.  Writing and Signature
 Money
 Freely transferable
 Title
 Notice
 Presumptions
 Special Procedure
 Popularity
 Evidence

6. The Negotiable Instrument Act mention only three
kinds of Negotiable Instruments ( Sec 13 ) These are:
1. Promissory Notes
2. Bills of Exchange
3. Cheques

7. A promissory note is a written instrument that
documents or records a transaction where money
is loaned or owed from one party to another. The
terms of the loan, the repayment schedule, the
interest rate (if any), where the payments are to be
made, etc., are included in the note. The note is
signed by the person borrowing the money. Then
note is kept by the person lending the money as
evidence of the loan and the repayment agreement
with a copy usually provided to the borrower.

8.  The instrument must be in writing
 The instrument must be signed by the maker of it
 The instrument must contain a promise to pay
 The promise to pay must be unconditional
 Must contain promise to pay in terms of money only
 There are 2 parties involved i.e. maker and the payee
 A Promissory note must be stamped according to Indian
Stamp Act
 The sum of money to be paid must be certain

9.  The instrument must be signed
The payee must be certain
 The sum payable must be certain
 The promissory note may be payable on demand
or after a certain definite period of time
 A currency note is not a promissory note

10.  Maker
Maker is the person who promise to pay the amount
 Payee
Payee is the person to whom the amount of the note
is payable
 Holder
He is either the payee or the person to whom the
note may have been endorsed

12. According to sec, 5 of Negotiable instrument act,
“A bill of exchange is a document in writing containing
an unconditional order, signed by the maker, directing
a certain person to paying a certain sum of money only
to or to the order of a certain person, or to the bearer of
instrument”. It is also called Draft.

13.  The instrument must be in writing
 It must express order to pay
 The order must be unconditional
 There must be three parties i.e. Drawer, Drawee, Payee
 Order to pay money only
 Order to pay certain sum
 It must be signed by the drawer
 It must be stamped

14.  Drawer
The maker of a bill is called drawer
 Drawee
The party on whom such bill of exchange is drawn
and who is directed to pay is called the drawee
 Payee
The person to whom the amount of the bill is
payable is called the payee

16. According to section 6 “A cheque is a bill of exchange
drawn on a specified banker and not expressed to be
payable otherwise than on demand”.
 It is signed by the person who has deposited money
with the banker
 It is always drawn on a specified bank
 It is payable on demand

17.  In Writing
 Requisites of bill of exchange
 Unconditional
 Signature of the Drawer
 Certain Sum of Money
 Payable On Demand
 Only Money
 No stamped
 Drawn upon a specified Banker
 Payable to bearer

18. There are two kinds of cheques:
 Bearer Cheque
A cheque which is payable to any person who
presents it for payment at the bank counter is
called ‘Bearer cheque’.
 Crossed Cheque
When a cheque is crossed, the holder
cannot encash it at the counter of the bank.

19. There are three types of crossing
1. General Crossing
2. Special Crossing
3. Restrictive Crossing