P1C202U3L17

MBA 202-18 UNIT 3 LESSON 17

Legal Environment for Business

Unit 3 L17

Negotiable instrument

Dr. Ramanpreet Kaur

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UNIT 3 LESSON 17 Learning Objectives
Negotiable instrument act, 1881
L14-Introduction to Partnership Act, admission of partner Meaning and definition of negotiable instruments
L15- Retirement and death of partner Negotiable instruments: payable to order or bearer
L16-Dissolution of partnership firm Characteristics of a negotiable instrument
Types of negotiable instruments
L17- Introduction to Negotiable Instruments-
L18- Cheque and Rules Regarding the Crossing of Cheques
L19- Dishonour of cheques
L20- Liability of banker and drawer
L21- Casestudy3

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UNIT 3 LESSON 17 SLIDE 1 Negotiable Instrument Act, 1881

Meaning:
This Act is enacted to define and amend
laws relating to promissory note, bills of
exchange and cheque.
This Act is applicable to whole of India
including Jammu and Kashmir.
This act came into force on 1 st March
1882.

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 ASPIRE. ACHIEVE. ASCEND

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UNIT 3 LESSON 17 SLIDE 2 Negotiable Instrument Act, 1881

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 P1C202U3L17S3 Bill of exchange
UNIT 3 LESSON 17 SLIDE 3
Bill of Exchange can be understood as a written negotiable instrument,
that carries an unconditional order to pay a specified sum of money to
a person or the holder of the instrument, as directed in the instrument
by the maker. The bill of exchange is either payable on demand, or after
a specified term

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P1C202U3L17S4 Characteristics of Negotiable Instruments
UNIT 3 LESSON 17 SLIDE 4

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Characteristics of Negotiable Instruments

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A Promissory Note is a unique financial instrument which binds the borrowers by law to pay
the lender the specified sum of money at a specified date or on demand. Promissory Notes are
negotiable instruments issued under the Negotiable Instruments Act and can be of different
types, such as with single or joint borrowers, to be paid on demand or on installments,
payment to be made in a lump sum, with interest or without interest.

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Simple Promissory Note: This Promissory note is for a lump sum repayment on a particular date as per the terms and condition mentioned.
In this Interest rate may or may not be charged on the loan amount, depending on the agreed terms and condition.
Demand Promissory Note: As the name suggests Demand, it is clearly explicit that it is totally based on demand and made on demand. This
Promissory note is one in which payment is due when the lender asks for the money back after the finish of the stipulated time period.
Secured Promissory Note: A Secured Promissory Note is a type in which there is an obligation to pay the amount which is taken as a loan
which is secured or we can say that for which collateral has been put down and if the person who takes loan fails to pay within the
stipulated period of time then that collateral is being seized.
Unsecured Promissory Note: An Unsecured Promissory note is an obligation on the person who has taken loan for payment but there is no
requirement of Collateral or seizure of property earlier as a security. In this type, if the Payer fails to pay the required sum of money within
the stipulated period of time, the Payee has a full right to go for legal action and file lawsuit against him but if it is found that the property
available to the person who has taken loan is not sufficient to make repayment then its totally Bad luck of person who have given loan to
that person.
Drawer: A drawer is a person who agrees to pay the drawee a certain amount of money on the maturity of the promissory note. He/she is
also known as maker.
Drawee: She/He is an individual, in whose favour the note is prepared. In usual cases the drawee is also the payee until and unless the
promissory note is transferred specifically in favour of the payee. For e.g. Ram is considered a drawer if he promises to pay Shyam Rs.5000
(Shyam is the drawee). HowevAer, if the same promissory note is transferred in favour of Rohan, then Rohan becomes the payee.
Holder: A holder essentially acts as the custodian of a promissory note. Sometimes a note is endorsed to any other person. The person who
has the promissory note at the date of payment is called the Holder. He could be the payee or anybody else

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End of unit 3 Lesson 17
office hours for any doubts - Tuesday 3 to 4 pm
you can reach me at ramangjimt11@gmail.com
Summary
1. Negotiable instrument act, 1881
2. Meaning and definition of negotiable
instruments
3. Negotiable instruments: payable to order or
bearer
4. Characteristics of a negotiable instrument
5. Types of negotiable instruments
Quiz 1. 01 March 1882
1. When did the Negotiable Instruments Act come into 2. Payee
force? 3. Drawer
2. Person named in the instrument to whom money is
directed to be paid is known as _______________
3. Maker of a bill of exchange is called as ____________
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For further readings

https://devgan.in/nia/chapter_13.php

https://www.taxmanagementindia.com/visitor/acts_rules_chapter_provisions.asp?Ch_ID=504

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