Negotiable Instruments Act 1881 | CS Executive New Syllabus

The Negotiable Instrument Act is a fascinating area of economic, business, and commercial law, as discussed below:

In India, the Negotiable Instruments Act was passed in 1881 and went into effect on March 1, 1881. The provisions of the English Negotiable Instrument Act were applicable in India prior to its enactment, and the current Act is based on the English Act with some modifications. Except for the state of Jammu and Kashmir, it covers the entirety of India. Sections 31 and 32 of the Reserve Bank of India Act, 1934 govern the operation of the Act.

What is a Negotiable Instrument?

A promissory note, bill of exchange, or cheque payable to the order or the bearer is referred to as a “negotiable instrument.”

Explanation (i)— A promissory note, bill of exchange or cheque is payable to the order that is expressly payable to that order or to a specific individual, and it does not contain words preventing transfer or suggesting an expectation that it will not be transferable.

Explanation (ii) — A promissory note, bill of exchange, or cheque that is expressly payable to the bearer or on which the only or last endorsement is an endorsement in blank is payable to the bearer.

Explanation (iii) — When a promissory note, bill of exchange, or cheque is expressed to be payable to the order of a designated individual and not to him or his order, it is nonetheless payable to him or his order at his choice, whether originally or by endorsement.

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