Negotiable Instruments Act, 1881
Negotiable means Freely Transferable and Instrument means Written Document. So Negotiable Instruments Act, 1881 deals with those written documents which can be freely transferred from one person to another. It deals with to promissory notes, bills of exchange and Cheques
CHARACTERISTICS OF NEGOTIABLE INSTRUMENT
Freely transferable: The property in a negotiable instrument passes from one person to another by the delivery if the instrument is payable to the bearer and by endorsement and delivery if it is payable to order.
Title of holder is free from all defects: A person taking an instrument bona fide and for value is known as holder in due course gets the instrument free from all defects in the title of the transferor. He is not in any affected be any defect in the title of the transferor or any prior party.
Recovery: The holder in due course can sue upon a negotiable instrument in his own name for the recovery of the amount. Further he need not to give notice of transfer to the party liable on the instrument to pay.
Presumptions: Unless contrary is proved Sec 118 and 119 provide certain presumptions that apply to all negotiable instrument.
• Consideration: Every negotiable instrument is presumed to have been made, drawn, accepted, negotiated or transferred for consideration.
• Date: Every negotiable instrument bearing a date is presumed to be made on that date.
• Time of acceptance: When a bill of exchange has been accepted it is presumed that it was accepted within a reasonable time of its date and before its maturity.
• Time of transfer: Every transfer of a negotiable instrument is presumed to have been made before the maturity.
• Order of endorsement: The endorsements appearing upon a negotiable instrument are presumed to have been made in the order in which they appear.
• Stamp: When an instrument has been lost it is presumed that it was duly stamped.
• Holder Presumed to be Holder in Due Course: Every holder is presumed to be a holder in due course.
As per section 4 of the Negotiable Instrument Act, 1881 A promissory note is an instrument (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or to order of a certain person or to the bearer of the instrument.
As per Section 5 of Negotiable Instrument Act, 1881 Bills of Exchange is “An instrument in writing containing a unconditional order signed by the maker directing a certain person to pay a certain sum of money only to, to the order of a certain person or to the bearer of the instrument”.
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