The Key Provisions of the Negotiable Instruments Act
The Act contains provisions relating to the following:
Definition of negotiable instruments and the rights and duties of parties to such instruments
The rights and liabilities of holders, endorsements, and the powers of holders to negotiate instruments
The provisions relating to the crossing, acceptance, and payment of cheques
The provisions relating to the discharge of parties to negotiable instruments and the effect of discharge
The provisions relating to the material alterations of negotiable instruments and the rights and liabilities of parties in such cases
The provisions relating to the liability of parties to bills of exchange for fraud, forgery, and other offences
The Act defines a negotiable instrument as a written document that gives the holder the right to demand payment of a certain sum of money from the maker or issuer of the instrument. Negotiable instruments include promissory notes, bills of exchange, and cheques.
The Act specifies the rights and duties of the parties to a negotiable instrument, including the maker or issuer, the payee, and any endorsers or transferees. For example, the Act stipulates that the maker or issuer of a negotiable instrument is primarily liable for payment, but that the payee or holder of the instrument can also sue any endorsers or transferees for payment if the maker or issuer does not pay.
The Act also contains provisions relating to the negotiation of negotiable instruments. For example, it specifies the conditions under which a negotiable instrument can be transferred from one person to another, and it sets out the rules for endorsement (the process by which a negotiable instrument is transferred from one person to another).
The Act includes specific provisions relating to cheques, including the rules for crossing a cheque (marking it as not payable to the bearer), the liability of parties for dishonoured cheques, and the rules for acceptance and payment of cheques.
The Act also includes provisions relating to the discharge of parties to negotiable instruments, which refers to the release of a party from their liability to pay under the instrument. For example, the Act specifies the circumstances under which a maker or issuer of a negotiable instrument can be discharged from their liability to pay.
The Act also addresses the issue of material alterations, which refers to any changes made to a negotiable instrument that affect the rights or liabilities of the parties to the instrument. The Act sets out the rules for determining the liability of parties in cases of material alteration.
The Act does not apply to certain types of instruments, such as instruments that are not written, instruments that are not payable to order or to bearer, instruments that are not transferable, and instruments that are not payable on demand or at a definite time.
The Act provides for the creation of negotiable instruments by the simple act of writing, and it specifies the minimum requirements for the content of such instruments. For example, a promissory note must contain an unconditional promise to pay a certain sum of money, and a bill of exchange must contain an unconditional order to pay a certain sum of money.
The Act specifies the rules for determining the validity of negotiable instruments, including the requirements for the signatures of the parties and the formalities that must be observed.
The Act allows for the enforcement of negotiable instruments by the holder or any party to the instrument, either through legal proceedings or through alternative dispute resolution methods such as arbitration.
The Act also provides for the defence of certain parties to negotiable instruments, such as makers or issuers who can prove that they have been discharged from their liability to pay under the instrument.
Adv Sarika Khude
Rajgurunagar Pune