1. The Negotiable Instrument Act,1881

2. INTRODUCTION Section 13 of the Negotiable Instrument Act 1881: “A negotiable instrument means a promissory note, bill of exchange or cheque payable to bearer.” Section 13 of the Negotiable Instrument Act 1881: “A negotiable instrument means a promissory note, bill of exchange or cheque payable to bearer.”

3. Promissory Note Elements of a Promissory Note: Writing Writing Unconditional Unconditional Signed Signed Certain person Certain person Specific sum Specific sum Money Money

4. Specimen of Promissory note Rs.5000.00 On demand I promise to pay ABC, the sum of Rs.5000 (Rupees five thousand) only with interest at 9% p.a for the value received On demand I promise to pay ABC, the sum of Rs.5000 (Rupees five thousand) only with interest at 9% p.a for the value received Signed Signed Date:30 feb 2006 XYZ

5. Bill of exchange Elements of bill of exchange: Writing Writing Unconditional Unconditional Parties Parties Signed Signed Specific sum Specific sum Money Money

6. Specimen of bill of exchange Rs.5000.00 Mumbai Date:28 feb 2006 Date:28 feb 2006 Sixty days after date pay to ABC the sum of five thousand rupees only for value received. Accepted, Signed PQR XYZ (here XYZ is the ‘drawer’ PQR is ‘drawee’ ABC is ‘payee’.)

7. Parties To A Bill Of Exchange Drawer Drawer Drawee Drawee Acceptor Acceptor Payee Payee Holder Holder Indorser Indorser Indorsee Indorsee Drawee in case of need Drawee in case of need

8. Parties To A Cheque Maker Maker Drawee Drawee Payee Payee Holder Holder Indorser Indorser Indorsee Indorsee

9. Parties To A Promissory Note Maker Maker Payee Payee Holder Holder Indorser Indorser Indorsee Indorsee

10. Parties Maker/Drawer:- Maker/Drawer:- The person who makes a promissory note is called a maker and a person who draws a cheque or a bill of exchange is called a drawee. The person who makes a promissory note is called a maker and a person who draws a cheque or a bill of exchange is called a drawee. Payee :- Payee :- The person named in the bill, note or cheque, to whom or to whose order the money is to be paid. The person named in the bill, note or cheque, to whom or to whose order the money is to be paid.

11. Parties Drawee/Acceptor:- Drawee/Acceptor:- The person on whom the bill of exchange or cheque is drawn and who is directed to pay is called the drawee. In case of a cheque the drawee is always a banker. In case of a bill of exchange the drawee becomes the acceptor when he accepts the bill. The person on whom the bill of exchange or cheque is drawn and who is directed to pay is called the drawee. In case of a cheque the drawee is always a banker. In case of a bill of exchange the drawee becomes the acceptor when he accepts the bill.

12. Parties Indorser Indorser The person who indorses the bill, note or cheque to another The person who indorses the bill, note or cheque to another Indorsee Indorsee The person to whom the bill, note or cheque is indorsed The person to whom the bill, note or cheque is indorsed

13. Parties Drawee in case of need Drawee in case of need When in the bill or in any indorsement thereon the name of any person is given in addition to the drawee to be referred to in case of need. When in the bill or in any indorsement thereon the name of any person is given in addition to the drawee to be referred to in case of need.

14. Specimen of drawee in case of need Rs 2000 PUNE 27 th Feb 2006 Three months after the date pay to john or order, the sum of rupees two thousand for value received To Ram, Chinchwad, Pune In case of need Hari Pimpri, Pune

15. Parties Holder Holder Any person entitled in his own name Any person entitled in his own name i. to the possession there of ii. to receive or recover the amount due from the parties When a note, bill or cheque is lost or destroyed its holder is the person so entitled at the time of such loss or destruction

16. Parties Holder in due course Holder in due course Any person is a holder in due course if he fulfils the following conditions Any person is a holder in due course if he fulfils the following conditions a) For consideration he became (i) the possessor of the negotiable instrument. (ii) the payee or indorsee of the instrument b) He became the holder of the of the instrument before its maturity c) He became the holder of the instrument in good faith.

17. Liability Of Parties Liability of the drawer Liability of the drawer Liability of the drawee of the cheque Liability of the drawee of the cheque Liability of the maker of the note of acceptor of the bill Liability of the maker of the note of acceptor of the bill Liability of the indorser Liability of the indorser