Q.

1 What are the presumptions as to

Negotiable Instruments?
Ans. Presumptions as to negotiable instruments: -
Until the contrary is proved, the following
presumptions shall be made:-
(a) Of consideration:- that every negotiable
instrument was made or drawn for
consideration, and that every such
instrument, when it has been accepted,
indorsed, negotiated or transferred for
consideration;
(b) as to date:- that every negotiable instrument
bearing a date was made or drawn on such
date;
(c) as to time of acceptance:-that every accepted
bill of exchange was accepted within a
reasonable time after its date and before its
maturity;
(d) As to time of transfer: - that every transfer of
a negotiable instrument was made before its
maturity.
(e) as to order of indorsements:-that the
endorsements appearing upon a negotiable
instrument were made in the order in which
they appear then on;
(f) that holder is a holder in due course:-that
the holder of a negotiable instrument is a
holder in due course : provided that, where
the instrument has been obtained from its
lawful owner, or from any person in lawful in
lawful custody thereof, by means of an
offence or fraud, or has been obtained from
the maker or acceptor thereof by means of an
offence or fraud, or for unlawful
consideration, the burden of proving that the
holder is a holder in due course lies upon him;
(g) As to stamp: - that a lost promissory note, bill
of exchange or cheque was duly stamped.
Q.2 Explain meaning of cheque. Describe
different characteristics of cheque.
Ans. As per negotiable instrument act 1881, A “cheque”
is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand and
it includes the electronic image of a truncated cheque
and a cheque in the electronic form.

There are three parties in Cheque Transaction – Drawer,

Drawee and Payee.

 Drawer (Maker of Cheque) – The person who

issues the cheque or holds the account with bank.
 Drawee – The Person who is directed to make the
payment against cheque. In case of cheque, it is
bank.
 Payee – A person whose name is mentioned in the
cheque or to whom the drawee makes payment. If
drawer has drawn the cheque in favour of self
then drawer is payee.

9 essential elements or characteristics of

cheque are:-
1. It must be in writing: A cheque must be in writing. An
oral order to pay does not constitute a cheque.

2. It should be drawn on banker: It is always drawn on a

specified banker. A cheque can be drawn on a bank
where the drawer has an account, saving bank, or
current.

3. It contains an unconditional order to pay: A cheque

cannot be drawn so as to be payable conditionally. The
drawer’s order to the drawee bank must be
unconditional and should not make the cheque payable
dependent on a contingency. A conditional cheque shall
be invalid.

4. It should be signed by the drawer and should be

dated: A cheque does not carry any validity unless signed
by the original drawer. It should be dated as well.

5. It is payable on demand: A cheque is always payable

on demand.

6. Validity: A cheque is normally valid for 3 months from

the date it bears. Thereafter it is termed as stale cheque.
A post-dated or antedated cheque will not be invalid. In
both cases, the validity of the cheque is presumed to
commence from the date mentioned on it.

7. It may be payable to the drawer himself: Cheque may

be payable to the drawer himself/herself. It may be
drawn payable to bearer on demand unlike a bill or a
pro-note.

8. Banker is liable only to the drawer: The banker on

whom the cheque is drawn shall be liable only to the
drawer. A holder or bearer has no remedy against the
banker if a cheque is dishonored.

9. It does not require acceptance and stamp: Unlike a

bill of exchange, a cheque does not require acceptance
on part of the drawee. There is, however, a custom
among banks to mark cheque as ‘good’ for the purpose
of clearance. But this marking is not an acceptance.
Similarly, no revenue stamp is required to be affixed on
cheque.