Negotiable Instrument Act

 Instrument law in India involves considerable legal jargon and documents. Therefore, it is essential to know about instrument law pertaining to indorsements in India. Anything that is written, printed upon or on the back of a deed of writing is considered as an indorsement. Every day, we deal with indorsements for some purpose or the other.

Did you know that there are over 1,639 unauthorized colonies in Delhi? Imagine what the statistics are in other states! The State Government has admitted in an RTI reply that there is no Indian law to restrict the growth of illegal colonies. Further, it has said that the lack of Indian laws pertaining to unauthorized colonies has failed the purpose of planned development. Also, the urban development department said that no legal action has been taken till date against anyone, for the commission of such offence.

Goods and services are exchanged for cash as well as credit. However, it is quite inconvenient and risky to make cash payments where huge amount of money is involved. Businessmen often use specific types of documents to overcome this limitation. These are known as negotiable instruments. A negotiable instrument is a type of contract for payment of money that is not bound by any condition and which is capable of being transferred by negotiation. The Negotiable Instruments Act, 1881, regulates law relating to negotiable instruments in India.

Section 14 of the Negotiable Instruments Act defines negotiation as, “When a Promissory Note, Bill of Exchange or Cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.” The holder of the instrument also gets the right to recover the amount mentioned on it. Negotiation may be carried out by delivery or delivery and endorsement. On the other hand, an assignment can be defined as, when the possession of a negotiable instrument is transferred by writing a discrete deed of transfer.