Negotiable Instrument Act

The Negotiable Instruments Act, 1881 is a key Indian statute that governs documents such as promissory notes, bills of exchange, and cheques. It establishes the rules for how these instruments are issued, transferred, and enforced, helping make commercial payments reliable and efficient.

A negotiable instrument is a written document that assures or directs the payment of a fixed amount of money. It may be payable immediately or at a specified future date, and it can be passed on to another person, who then obtains the right to receive the payment. Important characteristics include its enforceable nature, the ease with which ownership can be transferred, protection granted to a lawful holder, and the option to make it payable to a named person or to the bearer.

Examples of negotiable instruments include:

1. Promissory Note: a written commitment by one party to pay another.
2. Bill of Exchange: a written direction instructing one party to pay a third party.
3. Cheque: a directive to a bank to release funds from the issuer’s account.