WHAT IS NEGOTIABLE

INSTRUMENT?
 Sec.13 of the negotiable instrument act, 1881
defines as “A negotiable instrument means a
promissory note, bills of exchange or cheque
payable either to order or to bearer.”
 ‘Negotiable’ means ‘Transferable’ and
‘Instrument’ means ‘Document’.
 It regulates three instruments:
(a) Promissory notes
(b) Bills of exchange
(c) Cheque
PROMISSORY NOTE

 Instrument in writing having an unconditional

undertaking signed by maker.
 Certain sum of money should be mentioned on the
name of the bearer.
Essential Elements
 Writing
 Undertaking to pay
 Unconditional
 Signed
 Certain person
 Specific sum
 Promise to pay must be money only
 Stamping
BILL OF EXCHANGE

 Instrument in writing having an unconditional order

 Signed by the maker, directing a certain person to pay
 Certain sum of money should be mentioned on the name
of the bearer
 DRAWER: The maker of bill of exchange
 DRAWEE: The person directed to pay
 PAYEE: The person named in the instrument to
whom the money is to be paid
CHEQUE
 Bill
of exchange drawn on a specified banker and
not expressed to be payable
 Cannot be payable after some days, it should be
on demand
 Must be dated
TYPES OF CHEQUES

 Crossed cheques

 Open cheques/bearer cheques

 CROSSED CHEQUES
A cheque is crossed generally when:
 Two transverse parallel lines marked across its
face
 Bears an abbreviation “& co.” between the lines
 Bears the words “not negotiable” between the
lines

A cheque is crossed specially when:

 Cheque crossed by two parallel lines and the
name of the banker is written between it.

NOTE: If a cheque is crossed specially more than

once, the banker has a right to refuse the
payment thereof
A cheque crossed by A/C payee when:

 In between the parallel lines “A/C Payee” is mentioned

 Means that the proceeds of the cheque are to be credited

to the account of the payee only

A cheque bearing “not negotiable” when:

 Crossedgenerally or specially may be bear additional

words “not negotiable”

 In this case person shall not be capable of giving better

title to the transfer
OPEN CHEQUE

 Payable
at the counter of drawee banker on
presentment

 Risk of being lost or stolen

NEGOTIATION AND INDORSEMENT

 Any instrument is transferred to any person so as

to continue the holder thereof ,the instrument is
said to be negotiated
 Indorsement means writing anything on the face
or the back of the instrument, for the purpose of
negotiation
 The person who writes in the instrument is
indorser and the person to whom the instrument
is indorsed is indorsee.
PRESENTMENT
 Itmeans ‘exhibiting’ the bill to drawee, he may see
the same, judge whether hw shall accept it or not.
Two types of Presentment are :
 Presentment for acceptance:
 Presentment for payment:
THANK YOU..!