Negotiable Instrument Act, 1881 (Amendment Act 2002)
Ques: Define and explain the characteristics of "Indian Negotiable Instrument Act, 1881" in brief.Ans: Negotiable Instrument Act, 1881 lays down laws relating to Bills of Exchange, Promissory Notes Hundis and Cheques.
This Act came into force on very first day of March 1882. This Act has been amended several times, the latest amendment was made in the year 2002. This Instrument Act does not affect the provision of Indian Paper Currency Act 1871.
Definition
Section 13(1) States that a negotiable instrument means Bills of Exchange, a promisory note or cheque payable either to order of bearer.
'Payable to order' means which is expressed to be payable to a particular person, It does not contain prohibiting transfer.
'Payable to bearer' means which is expressed to be payable to the bearer or on which the only or the cost endorsement is made.
It is unconditional order to payment. Under Sec 13(2) Negotiable Instrument may be made payable to two or more persons jointly or alternative to one or two.
Characteristics of Negotiable Instruments
1. Transferability or Negotiability: Every negotiable has a unique feature of transferability means it can easily be transferred from one person to another, There is no need of any formalities like writing a transfer deed, stamping need etc.2. Transferee not Affected by any Defect in the Title of Transferor: The person who obtains a negotiable insturment, also known as transferee, is not affected by any defect in the title of transferor. All the negotiable instruments are issued in good faith.
3. Transfer Infinitum; A negotiable instrument can be transferred without any restriction of number of times, the process of endorsement may from one person to another till the time of its maturity.
4. Right to Sue Upon The Instrument: The Holder of negotiable instrument is entitled to file a suit the instrument in his own name without taking permission of transferor and transferee. He need not give any notice to transferor or transferee.
5. Unconditional promise or Order: The one of the important feature fo negotiable instrument is that it is unconditional in payment.
6. Sum Certain: The Promise or order of negotiable instrument is always for sum certain, means the amount payable or receivable is predetermined.
7. Principle of 'Privity of Contract' Not Applicable: The Principle of 'Privity of contract' states that only a person who is a party to a contract may file a suit on it, it means he has right and bound by it. This principle does not apply to negotiable instrument.
8. Certain Presumptions: Law of Negotiable instrument has certain presumptions under section 18, according to which Negotiable instruments are subject to following presumptions;
(a) Consideration: It shall be presumed that every negotiable instrument was made for consideration and that every such instrument when it has been accepted, endorsed or transferred was for consideration.
(b) Date: It is assumed that every negotiable instrument bearing a date was made on issued on such a date, it is mentioned and every endorsement was made in between date of issue and date of maturity.
(c) Time of Acceptance: It shall be presumed that every accepted bill was accepted within the time of issue and its maturity.
(d) Time of Transfer: It shall further be presumed that every transfer of negotiable instrument was made before its maturity.
(e) Order of Endorsement:
(f) Stamp: Every bill of exchange, other negotiable instrument is duly stamped.
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