m The term ³Negotiable Instrument´ consist of two

words ± Negotiable and Instrument.

m Ê
  
transferable by delivery or by
endorsement and delivery.
m m

 
 a written document by which a
right is created in favour of some person or entity.
m Negotiable Instruments means µ



    
m 2ccording to the act, ³2 negotiable instrument
means a promissory note, bill of exchange or
cheque payable either to order or to bearer.´
m Payable to order means bill or cheque is payable
to a particular person or his order.
m Payable to bearer means payable to any person
whosoever bears it.
m In writing.
m Promise or order to pay.
m Promise must be unconditional.
m Freely Transferable.
m Payable to order or bearer.
m Better title to a transferee.
 2ccording to the act, there can be three types of
negotiable instruments :-
1. Promissory Note
2. Bill of Exchange
3. Cheque
m 2 promissory note is an instrument in writing
containing an unconditional undertaking signed by
the maker, to pay a certain sum of money only to,
or to the order of, a certain person, or to the
bearer of the instrument.

m So by promissory note the maker promised to pay

a certain amount to a certain person.
m 6  The person who makes the
promissory note is called the maker.

m 6  The person to whom or to whose

order the payment is to be made, is called payee.


as. 5000/- Pune November 25, 2008

Three moths after the date, I promise to pay Mr. X of

Mumbai or order a sum of aupees Fifty Thousand for
value received.

To
Mr.  

2ddress«««..
««««« Stamp
Mumbai Signature of Mr Y
8
m It must be in writing.
m It must be contain a promise or undertaking to pay.
m The promise to pay must be unconditional.
m It must be signed by the maker.
m The maker must be a certain person.
m Payee must be certain.
m The sum payable must be certain.
m The amount payable must be in legal tender money of
India.
m Other formalities like proper stamping should be there.
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m £   The person who draws a bill of
exchange.
m £  the person on whom the bill of exchange
is drawn. He is also called acceptor of the bill.
m   the person named in the instrument to
whom or to whose order the money is directed to
be paid by the instrument.
 

as. 5000/- Pune November 25, 2008

Three moths after the date, Pay to Mr. X of Mumbai or

order a sum of aupees Fifty Thousand for value
received.

To
Mr.
2ddress«««..
««««« Stamp
Mumbai Signature of Mr Y

£
 £ 
m It must be in writing.
m It must contain an order to pay.
m The order to pay must be unconditional.
m It must be signed by the drawer.
m The drawer, drawee and payee must be certain.
m The sum payable must be certain.
m The bill must contain an order to pay money only.
m Other formalities like proper stamping should be
there.



  

 

1. Number of parties There are three parties There are only two
viz., Drawer, Drawee parties viz., Maker and
(acceptor) and payee. payee.
2.Order & Promise 2 bill contains an order. 2 Pro-note contains an
promise.
3. 2cceptance It requires acceptance to It does not require any
become a valuable acceptance.
instrument.
4.Same identity of The drawer and payee The maker and the
Drawer and payee. may be the same payee cannot be the
person. same person.
5.Nature of relationship Drawer (maker) of the The maker of a pro-note
bill is creditor and the is debtor and the payee
drawee( payee) is is creditor.
debtor.
Nature of Liability The liability of a drawer The liability of a maker is
is secondary and primary and absolute.
conditional.
Payable to bearer It can be payable to It can not be payable to
bearer. bearer.
  $ 

  
 
 




    




    
  
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Drawee 2 cheque is always 2 bill may be drawn on
drawn on a specified any one including a
banker only. banker.
Payable on demand 2 cheque is always 2 bill may be drawn
payable on demand. payable on demand or
on the expiry of a certain
period.
2cceptance 2 cheque requires no 2 bill must be accepted
acceptance. before payment can be
claimed.
Days of grace No days of grace are Three days grace are
allowed. allowed from the due
date for calculating the
maturity of bill.
Crossing 2 cheque can be 2 bill can not be crossed.
crossed either generally
or specially.
Stamping It does not require a It requires a stamp.
stamp.
m 2 cheque is said to be crossed when It bears
across its face two parallel lines which are usually
drawn on the left hand top corner of the cheque.

m 2 crossed cheque is payable only through a

collecting banker and not directly at the counter of
the bank, so that the party who receives the
payment of the cheque can be easily traced.
m ‰


where a cheque bears across
its face, two parallel lines, either with or without
any words, that shall be deemed to be crossed
generally. The words used are µ& Co.¶ , µNot
Negotiable¶ or a combination of both. The payment
of such a cheque can not be collected at cash
counter.
m  

·here a cheque bears
across its face an addition of a name of a banker,
either with or without the words, the cheque is
deemed to be crossed specially. The payment of a
specially crossed cheque can be obtained only
through the particular banker whose name
appears across the face of the cheque between
lines.
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m a  

± 2n endorsement
which, by express words, prohibits the endorsee
for further transferring the instrument or restrict
the endorsee to deal with the instrument is
called µrestrictive endorsement.¶

m 

      ¶- ·hen the
endorser expressly excludes his own liability on
the negotiable instrument in case of dishonor of
the instrument, the endorsement is known as
µwithout recourse¶ endorsement.
m 2 cheque is said to be bounced or dishonoured
by non-payment when the drawee of the cheque
makes default in payment.
m So we can say the when the payee goes to the
bank for discounting the cheque, and bank refuse
to cash the cheque, it is called bouncing of the
cheque.
m   
when customer give instructions to bank
not to pay a particular cheque.
m £     
m m

  
m m

  
m £  
 when the banker suspects or has a reason
to believe that the title of the person presenting the cheque
is defective.
m D  If bank received notice of customer of
loss of particular cheque.
m  ! 
when there is material alteration in
cheque not authenticated by his customer.
m £ 


  ·hen the signature of drawer does
not tally with specimen signature kept by bank.
m m
 

when funds in the customer¶s
account are insufficient to pay the cheque
presented.
m    when the book is presented after
6 months from the date of its issue.
m    when the cheque is
presented before the actual date of its issue.
m 
   when there is no date on the
cheque.