Negotiable Instruments Act
In India, the Negotiable Instruments Act was enacted in the year 1881. Before its enactment, the provision of English Negotiable Instrument Act was relevant in India, and the present Act is also based on English Act with certain amendments. It extends to the whole of India apart from Jammu & Kashmir state. The Act works on subject to the provisions of Sections 31 & 32 of Reserve Bank of India Act, 1934.
Section 31 of Reserve Bank of India Act provides that in India, no person other than the Bank or as expressly authorized by this Act, the Central Government shall accept, draw, issue or make any bill of exchange, promissory note, hundi or engagement for the payment of money payable to bearer on demand.
Moreover, this Section provides that no one apart from the Reserve Bank of India or the Central Government can make or issue a promissory note articulated to be payable or demand or after a definite time. Section 32 of RBI Act makes issue of such bills or notes liable to be punished with fine which may extend to the amount of the instrument.
What are Negotiable Instruments?
As per Section 13(a) of the Act, “Negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer, whether the word “order” or “ bearer” appear on the instrument or not.”
Therefore, the term, negotiable instrument refers to a written document which forms a right in favour of some person & which is freely transferable.