Negotiable instruments are written orders or an unconditional promise to pay a fixed sum of money at a certain time period. Promissory notes, bills of exchange, drafts, and certificates of deposit are all different forms of negotiable instruments. The word negotiable means ‘transferable by delivery,’ and the word instrument means ‘a written document by which a right is created in favour of some person.’

Thus, the term “negotiable instrument” literally means ‘a written document transferable by delivery.’ Thus, it has to be noted that a negotiable instrument, firstly is easily transferable from person to person and the ownership of the property may be passed on by mere delivery. Secondly, a negotiable instrument confers absolute faith and good title on a transferee, provided that he takes it in good faith for value and without notice of the fact that the transferor had defective title thereto.

Negotiable instruments may be transferred from one person to another, who is known as a holder. Upon transfer of the negotiation of the instrument, the holder in due course of time obtains full title to the instrument. Negotiable instruments may be transferred by delivery or by endorsement.

The law relating to “negotiable instruments” is contained in the Negotiable Instruments Act, 1881. The Act extends to the whole of India. The Negotiable Instruments Act, 1881, has been amended for more than a dozen times so far.

According to Section 13 of the Negotiable Instruments Act, “a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.” “A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees”.

Liabilities of the partners

 The parties to a negotiable instrument, namely, the maker, drawer, drawee and the payee, enter in to a contract among themselves. It is therefore very essential that they should have a capacity to enter in to a valid contract. Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery and negotiations of a promissory note, bill of exchange or a cheque

Liability of drawer of Bill / Cheque

The ‘drawer’ of the cheque, essentially, as defined by S.7 of the Act, is “The maker of a bill of exchange or Cheque” Thus Section 30 of the Act, goes on to define the liability of the drawer of a bill or cheque. The liability of the drawer here arises only in case of dishonour of the cheque or a bill of exchange and nothing prior to it. A bill of exchange it is seen is dishonoured by non-acceptance or by non-payment, but on the other hand, a cheque, is dishonoured by non-payment only. As soon as this bill or exchange or a cheque has been dishonoured by non-acceptance by the drawee, it is seen that the holder of the has the right to recourse against the drawer. The drawee, as per Section 7 of the Act, is “the person directed to pay”. It also has to be noted that the drawer, becomes liable only when the bill of exchange or the cheque has been dishonoured by the drawee.

Liability of the endorser

Every endorser after dishonour is liable as upon an instrument payable on demand. In the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonour, provided due notice of dishonour has been given to, or received by, such endorser as hereinafter provided. The idea behind this concept of endorsement is essentially on the belief that the bill, cheque or note, will be duly accepted or honoured by the drawee or the maker. On the failure of this event happening, the liability of the endorser occurs. So essentially, it is seen that the role of the endorser is pretty much equivalent to that of a surety, who undertakes the performance by the acceptor of the bill.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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