The Negotiable Instruments Act, of 1881 is among the important Indian laws. Furthermore, the law is designed to regulate negotiable instruments like cheques,pr o missory notes and bills of exchange. Additionally, this act also plays a significant role in facilitating trade and commerce. The Negotiable Instrument Act helped in establishing the legal framework for the transfer of money and credit.  In this article, we will discuss in detail the Negotiable Instrument Act 1881.

Negotiable Instruments Act,1881

The Negotiable Instruments Act came into force on March 1, 1882. Furthermore, the Negotiable Instruments Act is established to regulate the use and transfer of negotiable instruments. A negotiable instrument is a written document that guarantees payment of a specific amount of money in demand or at a future date. Furthermore, the negotiable instruments can be transferred from one person to another. In addition to that the negotiable instrument act ensures smooth functioning of the financial transactions in the economy.

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Aims of the Negotiable Instruments Act,1881

There are many objectives for the Negotiable Instruments Act.   They are:

• The act ensures uniformity as it provides a legal framework to handle the negotiable instruments in the country.
• It also facilitates businesses in the country as it provides a secure mode of payment.
• This act safeguards the interest of all parties involved in the financial transaction. Furthermore, the act established the rules for the usage of negotiable instruments in a financial transaction.
• The Negotiable Instruments Act enhances the trust in businesses and individuals as it ensures legal recourse in the case of disputes.

Types of Negotiable Instruments

There are three categories of Negotiable Instruments as per Section 13 of the Negotiable Instruments Act. The three types of Negotiable Instruments are:

• The promissory note,  Section 4 of the Negotiable Instruments Act mentions about promissory note.
• Bills of Exchange under section 5 of the Negotiable Instruments Act.
• Cheques under Section 6 of the Negotiable Instruments Act.

Promissory Note

A written instrument signed by a maker with a promisor to pay a specific amount of money is a negotiable instrument.  The parties to a promissory note are the maker of the promissory note, the payee of the instrument and the holder of the instrument.

• The promissory note must be signed by the maker. Additionally, the person promising to pay a certain amount must sign that note.
• The writing in the promissory note should not be altered in an easy manner
• The note should contain a commitment or undertaking to pay as the admission of debt is insufficient
• The promissory note must include an undertaking to pay money only.
• It should indicate the parties agreeing to undertake the liability of the payment.
• The amount in the promissory note must be certain.

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Bill of Exchange

A Bill of Exchange is another type of Negotiable Instrument. Additionally, it consists of an order signed by the maker of the instrument. Furthermore, it directs a person to pay a specific amount of money. The different types of bills of exchange are 

• Foreign and inland bills: The bills paid and drawn in the same country are inland. Furthermore, one country issues foreign bills and another country executes them.
• In trade bills, one party draws the bill of exchange to settle a credit transaction, and another party accepts it.
• A demand bill requires the payer to pay the bill of exchange on demand.
• Time bills require the payer to pay the bill of exchange at a specific time and date.
• Accommodation bills: Accommodation bills are bills of exchange that act as an agreement to provide financial assistance between parties to the bill.

Cheque

A specified banker draws a cheque as a bill of exchange. Furthermore, it does not express payment otherwise than on demand. Additionally, it includes an electronic image of a truncated cheque. The three parties in the cheque are the drawer, the drawee and the payee. The main characteristics of the cheque are:

• The cheque must have the drawer signature on it
• Payment can only made when demanded 
• It must bear the date of honour. However, if the cheque does not have such a date the cheque is considered invalid.
• According to section 18 of the act, the amount in the cheque must be both in words and numbers.

Different types of cheques are:

• Open cheque: It helps one to withdraw cash from a bank counter
• Bearer Cheque: When the amount is paid to someone’s name mentioned in the cheque, it becomes a bearer cheque
• Crossed cheque: When the maker of the cheque makes parallel lines on the top left corner it becomes a crossed cheque. Furthermore, it is payable only to the payee’s bank account.
• Order cheque: If the cheque is made to a specific person it is considered as an order cheque.

Recent Developments in the Negotiable Instruments Act,1881

The Negotiable Instrument Act 1881 has undergone many amendments to address the emerging issues. Furthermore, the Negotiable Instruments,2018 introduced provisions for interim compensation. Additionally, modern technologies and digital advancements have made the negotiable instruments act relevant in this digital age.

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Conclusion

The Negotiable Instrument Act 1881 plays a major part in the legal framework of our nation. Moreover, it promotes more efficient business transactions. Additionally, this act ensures proper and secure financial transactions. Furthermore, the knowledge of the Negotiable Instruments Act is important for individuals in businesses. In this article, we have discussed in detail about the Negotiable Instruments Act 1881.;