IMPORTANT PROVISIONS

OF N.I.ACT
Presented by

DR.S.C.BIHARI
I B S, HYDERABAD

NEGOTIABLE INSTRUMENTS AS
PER N.I.ACT
The Act does not define a negotiable
instrument.
Section 13states, "a negotiable
instrument means a promissory note,
bill of exchange or Cheque payable to
order or bearer."
This section does not rule out any
other instrument that satisfies the
essential features of negotiability.

IMPORTANT PROVISIONS OF
N.I.ACT,1881
Promissory Note - A promissory note is
an instrument in writing (not being a banknote 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. [Section
4].

IMPORTANT PROVISIONS OF
N.I.ACT,1881

Bill of Exchange It is an instrument

in writing containing an unconditional
order, signed by the maker, directing a
certain person to pay a certain sum of
money only to, or to the order of, a
certain person or to the bearer of the
instrument. [section 5].
A Cheque is a special type of Bill of
Exchange. It is drawn on banker and
is required to be made payable on
demand.

IMPORTANT PROVISIONS OF
N.I.ACT,1881

Provisions in respect of Cheques Cheque includes electronic image of

a truncated Cheque and a Cheque in
electronic form. [section 6].
This definition is amended by
Negotiable Instruments Amendment
Act, 2002, making provision for
electronic submission and clearance
of Cheque.

IMPORTANT PROVISIONS OF
N.I.ACT,1881

Section.09.Holder in due course :

A person who for consideration,
Became the possessor of a promissory
note, bill of exchange or Cheque if payable
to bearer or the payee or the endorse if
payable to order
Before the amount mentioned became
payable and
Without having sufficient cause to believe
that any defect existed in the title of the
person from whom he derived his title.

IMPORTANT PROVISIONS OF
N.I.ACT,1881
Section.10.Payment in due course:
payment In accordance with the
apparent tenor of the instrument.
In good faith and without negligence.
To any person in possession of the
instrument.
Under circumstances which do not afford
a reasonable ground to believe that the
person receiving the payment is not
entitled for the same.

DUTIES OF PAYING BANKER

As per Sec. 31 of N.I Act,
The drawee of a Cheque:
(i) having sufficient funds of the drawer
in his hands
(ii) properly applicable to the payment
of such Cheque
(iii) must pay the Cheque when duly
required to do so and
(iv) in default of such payment must
compensate the drawer for any loss
or damage by such default.

PROTECTION TO COLLECTING BANKER

As per Sec.131 of the Act

A banker who has
(i) in good faith and without negligence
(ii) received payment for a customer
(iii) of a Cheque crossed generally or
specifically to himself shall not, in
case the title of the Cheque proves
defective, incur any liability to the
true owner of the Cheque, by reason
only of having received the
payment.

BOUNCING OF CHEQUES CRIMINAL

LIABILITY (Section 138 142)
Section138-Punishment imprisonment up to 2
years or penalty up to double the amount of the
cheque or both.
Section 139 The cheque in question is deemed
to have been received for consideration.
Section 140 The defence of the drawer in the
Court of Law regarding intention would not be
considered by the Court
Section 141 When a cheques issued by a
Company is bounced, all the persons responsible
for conducting the business of the Company are
liable on the bounced cheques
Section 142 Cognizance of offences Normally
Courts take cognizance of a criminal offence only
when it is routed through police.

Thanks for your

attention
Dr. S. C. Bihari
Tell:08417-236660 to 65(Extn: 6214)
Mail:scbihari@gmail.com