The Negotiable Instruments Act, 1881 provides a robust legal framework that safeguards both banks and customers during transactions involving cheques, bills of exchange, and promissory notes. Its provisions ensure trust, reliability, and legal recourse in case of disputes, making it a cornerstone of the Indian banking system. Purpose of the Act The primary intent of…
Any alteration in the original state of a cheque such as date, amount, payee’s name, changing the word ‘order’ to bearer appearing after payee’s name or in endorsement is called material alteration. All material alteration must have drawer’s approval with his full signature (not initials) where the alterations are made. One of the mandatory features of…
Negotiable Instrument Fundamentals A negotiable instrument is a written and signed document that promises or orders payment of a specific sum of money, either on demand or at a future date, to a designated person or to the bearer. Examples include cheques, bills of exchange, and promissory notes. These instruments are transferable, allowing for change…
The Negotiable Instruments Act, 1881 is a landmark Indian law that laid the foundation for the legal framework governing financial documents such as promissory notes, bills of exchange, and cheques. Enacted during the British era, the Act was designed to bring uniformity, certainty, and trust to commercial transactions by standardizing the rules around the use…
The Negotiable Instrument Act, of 1881 was enacted on 9th December 1881 to define and amend the law relating to Negotiable Instruments i.e. Promissory Notes, Bills of Exchange, and Cheque. The act came into force on the first day of March 1882. The Act extends to the whole of India but nothing herein contained affects…
According to Section 19. of the NI Act 1889, A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand. Section 31 of the Negotiable Instruments Act, 1881 covers the liability of the drawee of a cheque. The section states that the drawee of…
Crossing a cheque gives financial institution-specific instructions on how to handle cash. Since Crossed Cheques can only be paid through a bank account. When simply two parallel transverse lines either with or without any words appearing on the face of a cheque, that cheque is called a crossed cheque. Normally cheques are crossed on the…
A Bill of exchange is a written, unconditional order by one party (the drawer) to another party (the drawee) to pay a specified sum of money to a third party (the payee) at a predetermined date or on demand. The bill of exchange serves as a promise to pay and acts as a credit instrument,…
A negotiable instrument like a cheque, bill of exchange, or promissory note is called a forged instrument when forgery takes place in the signature of the drawer, the signature of the endorser, alteration in name of the payee, alteration in amount, alteration in date, etc. If the forged endorsement is a nullity, then it will…
A banker collects a cheque for his customer in the capacity of an “agent for collection”, the banker collects the cheque on behalf of his customer, which also when presented to him. If a customer gives an open cheque i.e. a cheque uncrossed, the banker has to cross the cheque before it is sent for…