This PPT contains information about India's Negotiable Instruments Act,1881.

1. Negotiable
Instruments Act,
1881

2. What is a
Negotiable
instrument?
Negotiable: Something talked or
discussed about, Something you and
someone have agreed to.
Instrument: A tool of definite
mechanism that serves a purpose.
In negotiable instruments you have a
mechanism that works systematically,
concerning the consideration or
payments in commerce.
Negotiable instruments are a special
class of contracts.
Ex: Promissory notes, Bill of exchange,
cheque.

3. Definition and Salient features:
A negotiable instrument is a piece of paper which entitles a person to a
sum of money and which is transferable from one person to another by
mere delivery or by endorsement and delivery.
Principal Attributes:
• Transferability
• Independent title
• Certainty
• Right to sue.

4. What are the Types of Negotiable Instruments?
• Promissory notes.
• Bill of exchange.
• Check.
• Government promissory notes.
• Delivery orders.
• Customs Receipts.

5. What is
Negotiable
Instruments Act,
1881?
• The Negotiable Instruments Act (1881),
deals with negotiable instruments, such as
promissory notes, bills of exchange,
cheques etc.
• The Act was originally drafted in 1866 by
the 3rd Indian Law Commission and
introduced in December 1867 in the
Council and it was referred to a Select
Committee. Objections were raised by the
mercantile community to the numerous
deviations from the English Law in which it
contained. The Bill had to be redrafted in
1877. After the lapse of a sufficient period
for criticism by the Local Governments,
the High Courts and the chambers of
commerce, the Bill was revised by a Select
Committee

6. What is
Negotiable
Instruments Act,
1881?
• In 1880 by the Order of the Secretary
of State, the Bill had to be referred to a
new Law Commission. On the
recommendation of the new Law
Commission, the Bill was re-drafted
and again it was sent to a Select
Committee which adopted most of the
additions recommended by the new
Law Commission. The draft thus
prepared for the fourth time was
introduced in the Council and was
passed into law in 1881 being the
Negotiable Instruments Act, 1881

7. What is a
Cheque?
• What is a cheque?
A cheque is a written document instructing
a bank or building society to debit your
account and pay someone
• Types of cheques?
i. Open
ii. Cross

8. What is a Cheque
Crossing?
A crossed cheque is a cheque that has been
marked specifying an instruction on the way it is to
be redeemed. A common instruction is for the
cheque to be deposited directly to an account with
a bank and not to be immediately cashed by the
holder over the bank counter. The format and
wording varies between countries, but generally,
two parallel lines may be placed either vertically
across the cheque or on the top left-hand corner
of the cheque. By using crossed cheques, cheque
writers can effectively protect the instrument from
being stolen or cashed by unauthorized persons.
Types of cheque crossing:
• General crossing
• Restrictive or special crossings

9. General crossing
Restrictive or special
crossings

10. What is a Cheque
Dishonor?
• A cheque is said to be honoured, if the banks give the
amount to the payee. While, if the bank refuses to pay
the amount to the payee, the cheque is said to be
dishonoured. In other words, dishonour of cheque is a
condition in which bank refuses to pay the amount of
cheque to the payee.
• Whenever the cheque is dishonoured, the drawee bank
instantly issues a ‘Cheque Return Memo’ to the payee
banker specifying the reasons for dishonour. The payee
banker provides the memo and the dishonoured cheque
to the payee. The payee has an option to resubmit the
cheque within three months of the date specified on the
cheque after fulfilling the reason for the dishonour of
cheque.
• Moreover, the payee has to give a notice to the drawer
within 30 days from the date of receiving “Cheque
Return Memo” from the bank. The notice should state
that the cheque amount will be paid to the payee within
15 days from the date of receipt of the notice by the
drawer.
• However, if the drawer fails to make a fresh payment
within 30 days of receiving the notice, the payee has the
right to conduct a legal proceeding against the defaulter
as per Section 138 of the Negotiable Instruments Act.