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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
(..3..)
Negotiable Instruments Act, 1881.
QUESTION BANK
1. Define Negotiable Instrument. What are various kinds of Negotiable Insturmnent?
2. Define the term Negotiable Instrument. What are various penal provisions under
Negotiable Instrumets Act, 1981?
3 What are the salient features of Negotiable Instruments Act, 1881?
4. “ All cheques are bills of exchange but all bills of exchange are not cheques” Explain.
5. What are the salient features of Negotiable Instruments Act, 2002?
6. Define ‘Negotiable Instrument’ and ‘Promissory Note’. What are essentials of
romissory Note and how it differs from Bill of Exchange.
7. Negotiable instruments are luggage without carrier. What are penal provisions under
N.I. Act?.
8. Define ‘Promissory Note’ and ‘Bill of exchange’. What are the essentials of the
promissory note, and how does it differ from a Bill of Exchange?
Short Notes
1. Promissory Note.
2. Penal Provisions of N.I. Act.
3. Cheque.
4. Dhshonour of cheque.
Contents
I. Introduction:-....................................................................................................................31
(1) Free transferability-.....................................................................................................33
(2) Clear Title- .................................................................................................................33
(3) Sue for recovery:- .......................................................................................................33
(4) As to contents:-...........................................................................................................33
(5) Presumption as to negotiable instrument:- ....................................................................33
(a) Consideration-.........................................................................................................33
(b) Date:- .....................................................................................................................33
(c) Stamp:- ...................................................................................................................34
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
(1) Negotiable Instruments under the Act:- ........................................................................34
(A) Promissory Note (S. 4):- .........................................................................................34
(B) Bill of Exchange (S. 5):-..........................................................................................36
(C) Cheque (S. 6):- ......................................................................................................38
i. Meaning and definition of a Cheque:- .....................................................................38
ii. Essentials of Cheque:-.........................................................................................38
iii. Kinds of cheques:- ...............................................................................................39
(b) Liability under Civil law:-........................................................................................43
(2) Negotiable instruments by custom or usage:-................................................................45
****
Features of the 2002 Amendment in the Negotiable Instruments Act, 1881:- ...........................46
1. Introduction of electronic records:-................................................................................46
2. Electronic clearance of cheques:-...................................................................................46
3. Jurisdiction for filing cases:- .........................................................................................46
4. Preservation of records:- ...............................................................................................46
5. Penalties:- ....................................................................................................................46
6. Notice period increased:- ..............................................................................................47
I. Introduction:-
In ancient times, the routes along with vast commerce were unsecured, and pirates
robbed merchants carrying coins (money) on sea or land. Therefore, to avoid robbery of
coins, an idea of exchange came, whereby letters of credit (i.e. Bill of Exchange) from
the Marchant of one country were issued, requiring the debt to be paid to a third person
who carried the letter of credit, to the place where the debtor resides. A Bill of Exchange
was thus originally an order to pay a trade debt in one country due to a person in another
country not being in danger of carrying money from one country to another.
The Negotiable Instruments Act of 1881 is an Act of the Parliament of India that
defines and amends the law relating to Promissory Notes, Bills of Exchange, and
Cheques. It is a codified law that was enacted on 16 March 1881 and came into force on
1 July 1881. The Act is based on the English Bills of Exchange Act of 1882 but contains
some unique provisions for India.
The Act defines a negotiable instrument as a promissory note, bill of exchange, or
cheque payable either to the order or to the bearer.
The Act lays down the rights and liabilities of the various parties to a negotiable
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instrument, such as the maker, drawer, acceptor, payee, indorsee, and holder. It also
provides for the transfer and negotiation of negotiable instruments. The Act also contains
penal provisions for the dishonour of negotiable instruments and the remedies available
to the holder in case of dishonour.
The Negotiable Instruments Act is an important piece of legislation that plays a
vital role in India's commercial and financial life. It facilitates the smooth and efficient
flow of money and credit in the economy and protects the interests of the parties to a
negotiable instrument.
The Negotiable Instruments Act has been amended several times since its
enactment in 1881. The most recent amendments were made in 2002 and 2018. The
amendments have been made to align the Act with the changing business practices and
legal requirements. The 2002 and 2018 amendments to the Negotiable Instruments Act
of 1881 aimed to enhance the efficiency and security of financial transactions. In 2002,
provisions were introduced to facilitate electronic payment systems and discourage using
negotiable instruments. The amendment in 2018 was made to address issues related to the
prosecution and resolution of dishonoured cheques. This topic will discuss the Negotiable
Instruments Act, as amended in 2002 and 2018.
II. DEFINITION OF NEGOTIABLE INSTRUMENTS (S. 13):-
S. 13 of the Negotiable Instrument Act, 1881, provides that negotiable instruments
include a ‘Promissory Note, Bill of Exchange, and Cheque, whether payable to bearer or
order’.
Thus, the definition covers only three types of instruments: a Promissory Note, a
Bill of Exchange, and a Cheque. However, though the section speaks of only three kinds
of instruments, it does not mean that there can not be any other negotiable instrument
than these three. Every document that entitles a person to a sum of money and is
transferable by delivery is entitled to be a negotiable instrument. Thus, documents
such as dividend warrants, share warrants, railway receipts, and motor receipts are held to
be negotiable instruments by trade usage or by the provisions of the Companies Act.
However, documents such as share certificates, bills of lading, deposit receipts,
money orders, or postal orders are not considered negotiable instruments. This is because
they do not give a better title to the transferee, which is one of the essential ingredients of
a negotiable instrument.
III.
ESSENTIAL INGREDIENTS OF NEGOTIABLE INSTRUMENTS.
The following are the main characteristics of the negotiable instrument-
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(1) Free transferability-
The property in a negotiable instrument passes from one person to another
merely by delivery of its possession, in case of the instrument being payable to the
bearer. However, in a negotiable instrument, the property passes by endorsement and
delivery if it is payable to order.
(2) Clear Title-
The general principle as to transfer of property is that ‘no one can transfer a
better title than he himself has’ (Nemo dat quod- habet). However, a negotiable
instrument constitutes an exception to this principle. Therefore, a person who takes a
negotiable instrument in good faith and for value becomes the true owner even though he
takes it from someone with a defective title, such as a thief or finding.
(3) Sue for recovery:-
On default in payment, a person in possession of a negotiable instrument
can sue in his own name for recovery of its amount.
(4) As to contents:-
The negotiable instrument should contain the following:-
(a) It should be in writing.
(b) It should be signed by the drawer (maker).
(c) There must be a promise to pay.
(d) Such an order to pay must be unconditional.
(e) It must call for payment of money and money only.
(f) The sum of payment should be specific.
(5) Presumption as to negotiable instrument:-
There are certain presumptions as to negotiable instruments unless the
contrary is proved. It means they are presumed as true unless and until cogent evidence to
rebut these presumptions is brought. They are-
(a) Consideration-
Every negotiable instrument is presumed to have been made for
consideration. However, the defendant may object to consideration and prove the
contrary. The burden of proving ‘no consideration’ lies with the defendant. Whenever
presumption is drawn in favour of one party, the burden of proving the contrary lies with
the other party. The person having presumption in his favour need not prove that fact.
(b) Date:-
The negotiable instrument bearing a specific date is presumed to have been
made on that date.
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(c) Stamp:-
The stamp on the instrument is presumed to be proper and authorised.
(d) Holder in due course:-
Every holder of a negotiable instrument is presumed to be a holder in due course.
However, these presumptions are no longer valid in cases of instruments
obtained by fraud, illegal consideration, threat, etc.
IV.
KINDS OF NEGOTIABLE INSTRUMENTS:-
(1) Negotiable Instruments under the Act:-
Negotiable Instrument Act 1881 provides for three types of negotiable
instruments, viz-
(A) Promissory Note (S. 4):-
A promissory Note is an instrument in writing (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, the order of a certain person or to the bearer of the
instrument.
Illustrations
A sign instrument in the following terms;
(i) I promise to pay B or order Rs 500.
(ii) I acknowledge myself to be indebted to B in Rs 1000, to be paid on demand, for value
received.
(iii) Mr. B.I.O.U. Rs 1,000.
(iv) I promise to pay B Rs. 500 and all other sums which shall be due to him.
(v) I promise to pay B Rs 500, first deducing there out any money which he may owe to
me.
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(vi) I promise to pay B Rs 500 seven days after my marriage with C.
(vii) I promise to pay B Rs 500 on D’s death, provided D leaves me enough to pay that
sum.
(viii) I promise to pay B Rs 500 and to deliver my black horse to him on 1st January next.
The instruments respectively marked (i) and (ii) are promissory notes. The
instruments respectively marked (iii) to (viii) are not Promissory Notes.
A promissory note is a legally binding financial instrument that outlines a promise
made by one party (the "promisor") to pay a specified sum of money to another party (the
"payee") at a designated future date or on demand. This document serves as evidence of a
debt or obligation.
The promissory note has the following details:
1. Parties involved: It identifies the promisor (the person making the promise to pay)
and the payee (the person receiving the payment).
2. Principal amount: This is the initial amount of money borrowed or owed, stated in
numerical and written form.
3. Interest rate (if applicable): If interest is charged on the borrowed amount, the
promissory note specifies the rate and how it will be calculated.
4. Maturity date: This is the date when the promisor is obligated to repay the principal
amount. In some cases, a promissory note may be payable on demand, meaning the payee
can request payment at any time.
5. Repayment terms: This section outlines the schedule of payments, if applicable. It may
specify whether payments will be made in installments or as a lump sum.
6. Collateral (if any): If the note is secured by collateral (assets pledged by the promisor
to secure the debt), this is described in the document.
7. Events of default: This section outlines conditions or circumstances under which the
promisor would be considered in breach of the agreement, potentially leading to legal
consequences.
8. Governing law: Specifies which jurisdiction's laws will apply in case of any disputes
or legal issues arising from the promissory note.
9. Signatures: Both the promisor and payee must sign the promissory note to indicate
their agreement to the terms outlined.
Promissory notes are widely used in various financial transactions, including loans
between individuals, business transactions, and legal contexts. They provide a clear
record of the terms and conditions agreed upon, which can be valuable in case of disputes
or for legal enforcement if necessary.
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(B) Bill of Exchange (S. 5):-
A ‘Bill of Exchange’ is-
(i) an instrument in writing,
(ii) containing an unconditional order,
(iii) signed by the maker,
(iv) directing a certain person,
(v) to pay a certain sum of money only-
(a) to a certain person, or
(b) to the order of a certain person, or
(c) to the bearer of the instrument.
In other words, a bill of exchange is a financial instrument that serves as a written order
from one party (the drawer) to another party (the drawee) to pay a specific sum of money
to a third party (the payee) at a predetermined future date. It is a widely used tool in
international trade and commerce. It provides a secure and standardised method for
parties to engage in transactions, especially when they may not have established a high
level of trust.
Important features of a bill of exchange:
1. Parties involved:
Drawer: The person or entity who initiates the bill and is entitled to receive payment
from the drawee.
Drawee: The party upon whom the bill is drawn and who is obligated to make the
payment. This is typically the buyer or debtor.
Payee: The party to whom the payment is ultimately made and who is typically the
seller or creditor.
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
2. Amount and currency:
The specific amount of money that is to be paid, as well as the currency in which
the payment should be made.
3. Date of payment:
The date on which the payment is due. This is known as the maturity date.
4. Place of payment:
The location where the payment is to be made.
5. Terms and conditions:
Any specific conditions or instructions related to the payment.
6. Types of bills of exchange:
There are the following types of bills-
1. Sight Bill: Payment is due immediately upon presentation of the bill to the drawee.
2. Usance Bill: Payment is due at a specified future date after the bill is presented.
3. Clean Bill: A bill that does not require any accompanying documents, such as invoices
or shipping documents.
4. Documentary Bill: A bill that is accompanied by relevant documents (like invoices,
shipping documents, etc.) representing the goods or services being transacted.
Bills of exchange play a crucial role in international trade because they allow
businesses to establish credit relationships across borders. They are also used in domestic
transactions, but their importance is particularly pronounced in the context of cross-
border trade.
Bills of exchange can be used in commerce and as a source of short-term
financing. They can be discounted (sold at a reduced value) to banks or financial
institutions, allowing the drawer to receive a portion of the payment before the bill's
maturity date.
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
(C) Cheque (S. 6):-
i. Meaning and definition of a Cheque:-
S. 6 of the Act defines a Cheque as “A Cheque is a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than on demand, and it
includes the electronic image of a truncated cheque and a cheque in the electronic
form.”
A cheque, a Bill of Exchange, possesses all the essentials of the bill and
should also meet the requirements under this section. According to S. 6 (a) "a cheque
in the electronic form" means a cheque which contains the exact mirror image of a
paper cheque and is generated, written, and signed in a secure system ensuring the
minimum safety standards with the use of digital signature (with or without
biometrics signature) and asymmetric cryptosystem. S. 6 (b) explains ‘a truncated
cheque’ is a cheque which is truncated during the course of a clearing cycle, either by
the clearing house or by the bank, whether paying or receiving payment, immediately
on the generation of an electronic image for transmission, substituting the further
physical movement of the cheque in writing.
ii.
Essentials of Cheque:-
The cheque is a Bill of Exchange; hence, all the essentials of the bill are essential
requirements of the cheque. In addition, S. 6 lays down two more requirements for the
cheque. Therefore, it is said that “all cheques are bills of exchange, but all bills of
exchange are not cheques”. The requirements under S. 6 are as follows viz-
(1) It is drawn on a specific banker:-
According to Halsbury’s Law of England, ‘a banker’ is an individual, partnership,
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or corporation whose sole or predominating business is banking, i.e. the receiving money
on a current or deposit account and the payment of cheques drawn upon and collection of
cheques paid in by the customer.
A Government treasury is not a banker.
(2) Payable on demand:-
A cheque must contain an unconditional order from a specified banker for
payment on demand of a certain sum of money to or to the order of a specified person or
to the bearer of a cheque
.
iii. Kinds of cheques:-
The cheque may either be open or crossed.
(1) Open / Barer cheque:-
Ordinary cheques are known as ‘open cheques’. They are paid over the
counter of the bank. They are also called “Barer Cheques”. Such cheques are liable to
great risks. They may be lost or stolen, and the finder can get them cashed. Such cheques
may also be paid by forging the signature of the payee. If such a cheque is negotiated,
any holder, in due course, will acquire a good title to the instrument. Even the banker
paying the amount on such a cheque (lost or forged) gets absolute discharge by such
payment. The only remedy for the true owner in such circumstances is to find the person
who stole it and sue him for compensation. The practice of crossing was introduced to
prevent such cheque loss from getting into the wrong hands.
(2) Crossed cheque:-
When a cheque bears two parallel transverse lines across its face, it is said
to be crossed.
Specimens of the crossed cheque:-
BANK OF MAHARASHTRA
Mumbai,
A/C NO. 1000
16th January, 2011.
Pay to ……XYZ…………or Bearer
Rupes ..five thousand …only.
Rs. 5000/-
Sd/ AB C
The two parallel transverse lines are usually drawn on the top left-hand
corner of the cheque. However, no strict rule exists; parallel lines may be drawn
anywhere on the cheque. After crossing the cheque, it can no longer remain payable to
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
the payee or holder at the bank counter. The payment of crossed cheques can be obtained
only through a banker on the holder's account, even if any wrongful person secures
payment that can be traced because of his account in a bank.
A real effect of a crossing is a direction to the paying banker to pay the
proceeds of the cheque to a banker or a particular banker, as the case may be, and, in all
other respects, the cheque remains as negotiable as any other cheque would be.
Kinds of crossing:-
There are basically two kinds of crossing viz- (1) General and (2) Special.
However, either of these kinds may take several forms.
(1) General Crossing (S. 123):-
The cheque is generally crossed when there are no words between the lines
of crossing or when there are some words but not the bank's name. These lines may be
blank or contain “ & Company”, etc., but this makes no difference.
General crossing may be made by following the ways.
&
co
.
BANK OF MAHARASHTRA
Mumbai
A/C NO. 1000
16th January, 2011.
Pay to ……XYZ…………or Bearer
Rupes ..five thousand …only.
Rs. 5000/-
Sd/- ABC
Many a time, instead of “& co.”, “Not Negotiable” or “A/c Payee only” is written
in cross lines.
(2) Special Crossing (Ss. 124 and 127):-
Where the lines of crossing bear the name of a bank either with or without
any additional words (like ‘not negotiable’), etc., the cheque is said to be crossed
specially to that banker. Its effect is that the payment can be obtained only through the
particular banker whose name appears between the lines.
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
Bank of India
BANK OF MAHARASHTRA
Mumbai,
A/C NO. 1000
16th January, 2011.
Pay to ……XYZ…………or Bearer
Rupes ..Five thousand …only.
Rs. 5000/-
Sd/- ABC
3) Account Payee Crossing:-
Sometimes, the lines of crossing contain the words “account payee only”. It
is a form of general crossing. This practice of adding words is not recognised by law. The
effect of such crossing may be two-fold. It may affect the cheque's negotiability and the
collecting banker's duty. The phrase ‘account payee only’ is a direction to the collecting
banker that the cheque amount shall be received only for the payee and credited to his
account. If the collecting banker receives payment of such a cheque on behalf of any
person other than the payee, the banker will be guilty of negligence.
Facts—The cheque was payable to ‘X’ and crossed ‘account payee. ' It came to the hands
of ‘Y’ as bearer. The receiving banker did not inquire whether X had title to the cheque
or not. Y had no title.
Held:- The Bank was guilty of neglect.
4) Not negotiable crossing (S. 137):-
The cheque ‘not negotiable’ crossed can also be transferred like any other
cheque. But it provides more protection than general and special crossings. It is like a
warning upon the paying and collecting bankers. Both of them should be very careful
when handling this type of cheque transaction. ‘Not negotiable’ remark may give a
warning that ‘take care, this cheque may be stolen.
iv. DISHONOUR OF CHEQUE AND ITS EFFECTS:-
(a) Penal liability (S. 138):-
The NIA contains penal provisions for the dishonor of cheques, and its procedure
is as follows-
1 (1915) 84 LJKB 1846.
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
(i) Penal liability for dishonour of a cheque (S. 138)-
The Act has provided penal sanction for the dishonour of cheques under S. 138 of
the Act. It provides that A drawer of a dishonoured cheque shall be deemed to have
committed an offence for which he shall be punished with imprisonment for a term which
cheque or with both, provided-
1. The cheque has been presented to the bank within a period of six months from the
date on which it is drawn or within the period of its validity, whichever is earlier.
2. It is drawn on a bank for the discharge of any legally enforceable debt or other
liability.
3. The cheque is returned by the bank unpaid.
4. The cheque has returned unpaid because the amount available in the drawer’s account
is insufficient to pay it.
bank's receipt of the information.
5. The drawer failed to pay within 15 days of receiving the notice.
Bombay High Court also laid down the above ingredients of an offence under S. 138 in a
Case, i.e. Smt. Kiran Yugalkishore Bhattad v. Smt. Sushila Ramchandra
Kattamwar (2011 ACD 93 BOM).
However, a cheque needs to be presented for payment within 3 months from
(ii) Presumption (S. 139)-
Unless the contrary is proved, it is presumed that the holder of a cheque received the
cheque of the nature referred to in S. 138 for the discharge, in whole or in part, of any
debt or other liability.
(iii) The punishment of offences by companies (S. 141)-
This section states that if a company is guilty of an offence under the NIA, then
every person who, at the time of the offence, was in charge of, and was responsible to the
company for, the conduct of the business of the company, shall be deemed to be guilty of
the same offence.
2 Before Amendment in Negotiable Instrument Act, in 2002 the punishment of imprisonment was upto one year.
3 Before Amendment in Negotiable Instrument Act, in 2002 the period of service of notice was 15 days.
4 Laws (SC) 2011-2-14
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
The Supreme Court held that the words “every person, who at the time the offence was
committed” under S. 141 are not without significance. These words indicate that a
director's criminal liability must be determined on the date the offence is alleged to have
been committed.
(iv) Cognizance of offences/Procedure for action (S. 142)-.
This section states that the Court shall take cognisance of the offence punishable
under section 138 only when the drawee makes a written complaint. The complaint must
be made within 30 days from the expiry of the cheque bounce notice period.
(v) Summary Trial (S. 143)-.
This section states that if the Court is satisfied that the accused has committed an
offence under section 138, it may try the case summarily if it thinks fit.
The Issues before the court were: can the court close the proceeding against the accused
if the cheque amount with interest is paid by the accused and can summons tiral
procedure be followed in such cases?
The Supreme Court held that where the cheque amount with interest and cost as
assessed by the court is paid by a specified date, the court is entitled to close the
proceedings. It further observed that the normal rule for the trial of these cases is to
follow the summary procedure, and the summons trial procedure can also be followed,
where a sentence exceeding one year may be necessary.
(vi) Evidence on affidavit (S. 145)-
This section states that any Court may, at any stage of a proceeding under this
Chapter, receive the evidence of any person by affidavit.
(vii) The bank's slip prima facie evidence of certain facts (S. 148)-
This section states that the production of a bank's slip shall be prima facie
evidence of the following facts:
-that the cheque was presented to the bank for payment.
-that the bank refused to pay the cheque.
-that the cheque was dishonored for insufficiency of funds in the drawer's account.
(b) Liability under Civil law:-
The chequeholder may file a suit for recovery of the amount in a civil court
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
under normal recovery proceedings. However, enforcement of the liability through civil
court does not disentitle the aggrieved person from prosecuting the offender under S. 138
of the Negotiable Instruments Act 1881.
(c) Differences between Bill of Exchange, Promissory Note, and Cheque:-
Bill of Exchange, Promissory Note, and Cheque are all negotiable instruments
used in financial transactions, but they serve different purposes and have distinct
characteristics. We will discuss the differences between them as follows:
1. Nature:
Bill of Exchange: It is a written order issued by one party (drawer) to another (drawee)
to pay a specific sum of money to a third party (payee) either on demand or at a future
date.
Promissory Note: It is a written promise made by one party (promisor) to pay a
specific sum of money to another party (promisee) either on demand or at a future date.
Cheque: It is an unconditional written order issued by an account holder to their bank
to pay a specific amount of money to a specified person or entity.
2. Parties Involved:
Bill of Exchange: Involves three parties - drawer, drawee, and payee.
Promissory Note: Involves two parties - promisor and promisee.
Cheque: Involves three parties - drawer (account holder), drawee (bank), and payee.
3. Promise or Order:
Bill of Exchange: It contains an order to pay, instructing the drawee to pay the payee.
Promissory Note: It contains a promise to pay, a commitment by the promisor to
make a payment to the promisee.
Cheque: It is an order to pay. The drawer orders the drawee (bank) to pay the payee.
4. Acceptance:
Bill of Exchange: It requires acceptance by the drawee to become a binding
instrument. The drawee's signature signifies acceptance.
Promissory Note: It does not require acceptance. Once the note is signed, the
promisor's promise is binding.
Cheque: It does not require acceptance. It is effective once it is drawn and signed by
the drawer.
5. Time of Payment:
Bill of Exchange: The payment can be demanded immediately (sight bill) or at a
specified future date (time bill).
Promissory Note: The payment can be demanded immediately (demand note) or at a
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“Law Master’s” Publication “Negotiable Instruments Act” Prof. S.D. Bhosale
specified future date (time note).
Cheque: It is payable on demand.
6. Primary Liability:
Bill of Exchange: The primary liability lies with the drawee after acceptance.
Promissory Note: The primary liability lies with the promisor.
Cheque: The primary liability lies with the drawer.
7. Crossing:
Bill of Exchange: It cannot be crossed.
Promissory Note: It cannot be crossed.
Cheque: It can be crossed to specify that the payment should be made only through a
bank account and not in cash.
8. Transferability:
Bill of Exchange: It can be freely transferred by endorsement.
Promissory Note: It can be transferred, but the promisor's liability remains unchanged.
Cheque: It can be transferred by endorsement or negotiation.
9. Stamp Duty:
Bill of Exchange: Generally, no stamp duty is required.
Promissory Note: In many jurisdictions, stamp duty may be required to be paid.
Cheque: Generally, no stamp duty is required.
10. Usage:
Bill of Exchange: Often used in international trade transactions and credit transactions
between businesses.
Promissory Note: Commonly used in individual-to-individual lending scenarios and
business transactions.
Cheque: Widely used for routine payments and everyday transactions.
It's important to note that these instruments' legal implications and specific details can
vary by jurisdiction, so it's advisable to consult with legal or financial professionals for
specific advice or when dealing with significant financial transactions.
(2) Negotiable instruments by custom or usage:-
The Negotiable Instrument Act 1881 is based on the law of Merchants in England
and recognises only three types of negotiable instruments (the above-mentioned).
However, to suit Indian circumstances, the Act saves certain instruments used as local
usage in oriental languages.
Thus, the following are held as negotiable instruments-
(i) hundi
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(ii) bankers draft and pay orders,
(iii) delivery orders,
(iv) railway receipts,
(v) share warrants,
(vi) bearer debentures,
(vii) share certificate with blank transfer deed, etc.
*****
Features of the 2002 Amendment in the Negotiable Instruments Act, 1881:-
The Negotiable Instruments Act of 1881 in India has undergone several
amendments, including those in 2002 and 2018. We will discuss here some of the
features of the 2002 amendment to the Negotiable Instruments Act of 1881:
1. Introduction of electronic records:-
The 2002 amendment recognised the use of electronic records and digital
signatures in the context of negotiable instruments. This allowed for the electronic form
of cheques and other negotiable instruments. In this way, the Information Technology
Act 2000.
2. Electronic clearance of cheques:-
The amendment facilitated the electronic clearing of cheques, making the
payment process more efficient. This helped reduce the time taken for the clearance of
cheques and facilitated quicker transactions. The definition of “Cheque” was amended to
include the electronic image of a truncated cheque and a cheque in electronic form.
3. Jurisdiction for filing cases:-
The amendment provided clarity on the jurisdiction where cases related to the
dishonour of cheques could be filed. It specified that cases could be filed in a court within
whose local jurisdiction the payee or holder, in due course, maintains an account.
4. Preservation of records:-
The amendment introduced provisions related to the preservation of records in
electronic form. It specified the method and duration for preserving electronic records of
transactions.
5. Penalties:-
The amendment increased the penalties for offences related to dishonour of
cheques from one year to two years. It aimed to strengthen the legal framework and deter
individuals from issuing dishonoured cheques.
