Q. Define Negotiable instrument according to the Negotiable
instrument Act, 1881.
According
to section 13 of the Negotiable Instruments Act, 1881, "a Negotiable
Instruments means a promissory note, bill of exchange, or cheque, payable
either to order or to bearer whether the words ‘order’ or ‘bearer’ appear on
the instrument or not."
According
to section 14 of the Negotiable Instruments Act, 1881, “when a promissory note,
bill of exchange, or cheque is transferred to any person so as to constitute
that person the holder thereof, the instrument is said to be negotiated”
Q. What are the instruments that fall under the purview of this
Act?
According
to the Negotiable Instruments Act, 1881 there are just three types of
negotiable instruments i.e.,
(a)
Promissory note,
(b)
bill of exchange and
(c
) cheque.
Promissory
Note: A ‘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 the order of certain person, or to the bearer of the
instrument (Section 4 of NI Act).
Bill
of exchange: According to Section 5 of NI Act, a bill of
Exchange is “an instrument in writing containing an unconditional order, signed
by the maker, directing a certain person to pay a certain sum of money only to,
or to order of, a certain person or to the bearer of the instrument”.
Cheque: A
cheque is a bill of exchange drawn on a specified banker and not expressed to
be payable otherwise than on demand (Section 6 of NI Act). A cheque is a bill
of exchange which is always (i) Drawn on a banker specified therein and (ii)
Payable on demand.
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