Negotiable Instrument Act - 1

Preamble of the Negotiable Instrument Act is an act to define the law relating to promissory notes, bills of exchange and cheques.

As defined under the Negotiable Instrument Act, a promissory note, bill of exchange or cheque drawn or made in India, and made payable in or drawn upon any person resident in India shall be deemed to be an inland instrument. 

When the last day of grace falls on a day which is a public holiday, the instrument is due and payable on the preceding business day.

Where the endorser does not want the endorsee or any subsequent holder to incur any expense on his account on the instrument, the endorsement is ‘sans frais’.

Preamble of the Negotiable Instrument Act defines a negotiable instrument as a promissory note, bill of exchange and cheque payable either to order or to bearer.

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 generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.

A valid promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.
“I promise to pay A or order Rs. 1000” is a valid promissory note. 

A valid promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. "Mr. B, I will pay you one thousand rupees on demand" is a valid promissory note.

This crossing can be made in both general and special crossing by adding the words 'account payee' or 'A/C payee only'.

Where the amount ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount ordered to be paid.

Where an instrument owing to its faulty drafting may be construed either as a promissory not or a bill of exchange is known as an ambiguous instrument. The holder of such instrument may, at his election, treat it as either a bill of exchange or a promissory note.

Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course.

A negotiable instrument may be dishonoured by non-acceptance or non-payment. It is only the bills of exchange which may be dishonoured by non-acceptance. Of course, any type of negotiable instrument - promissory note, bill of exchange or cheque - may be dishonoured by non-payment.

In a promissory note or a bill of exchange, the expressions “at sight” and “on presentment” mean "on demand".
The expression “after sight” in a promissory note means after presentment for sight, and in a bill of exchange after acceptance or noting for non-acceptance or protest for non-acceptance.

A negotiable instrument made, drawn, accepted, indorsed or transferred without consideration or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.