Banking Industry

Negotiable Instruments Act 1881

* Came into Force on 1st March 1882;

Total Sections: 147.

* Total Amendments: 23- last one in 2002.

* Imp. Sec. Related to Banking: 56

3 to 18,20,22 to 25,26,31,45(A),63,83,85,85(A),87,91,92,99 to 101,118,119,123 to 131, 131(A),138 to 147

Sec.3: Banker – Not Defined

Banker includes any person acting as a banker and any post office savings bank.

Sec. 5 (b) of BRA 1949 defines Banking &

Sec .5 (c ) defines Banking Company

5(b) Banking :- Accepting for the purpose of lending or investment, of deposits of money from public, repayable on demand or otherwise and withdrawable by cheque , draft, order or otherwise.

5 (c ) Banking Company:- Means any Company which transacts the business of Banking in India.

Sec.13(1): Negotiable Instrument : means Promissory Notes, Bill of Exchange and Cheque payable either to order or to bearer .

Sec.13(2): N.I. may be made payable to two or more payees ‘jointly', or ‘one of two’ or one or some of several payees.

Sec.14: Negotiation : When P/N,B/E or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be ‘negotiated’.

Essential Features of Negotiability

1. Ownership passes – Bearer – By Delivery only & Order – By endorsement and Delivery.

2. Transferee of N.I., fulfilling conditions of being ‘Holder IN Due Course’(Sec.9 of N.I. Act) gets better title than transferor.

3. Holder In Due Course can sue upon N.I. in his own name.

Sec.4: Promissory Note: (a) In writing (b) signed by maker ( c) not being bank note or currency note (d) containing unconditional undertaking (e) to pay a certain sum of money only

(i) to a certain person (ii) to the order of certain person (iii) to the bearer of the instrument

(RBI Act Sec.31 – Restricts any person except RBI or Central Govt.)

(A) Two Parties – Promisor & Promisee

(B) Does not require acceptance.

(C) Demand P/N or usance P/N.

(D) Cannot be Crossed.

(E)...