Negotiable Instruments Act, Types of Cheque

Negotiable Instruments Act: The Negotiable Instruments Act, 1881 is an important law governing the use of negotiable instruments in India. It deals with the regulation of bills of exchange, bills of exchange and cheques. The Act was enacted to provide a uniform legal framework for the use of negotiable instruments in India. The law has been amended several times to ensure that it meets changing business practices and legal requirements.

Negotiable Instruments Act

Promissory Notes:

Bill of Exchange:

Cheque

Significance of Negotiable Instrument Act

• The law defines each relevant topic as a means to achieve a better understanding and understanding of the negotiated instruments.
• The Act includes penal provisions to effectively enforce the process of negotiable instruments between two parties. If a party violates or does not fulfill its duty, it can be punished for crimes that carry a prison sentence.
• It protects the rights of the parties if they carefully fulfill their obligations.
• It mentions the terms and conditions of various transaction systems and lays down their special provisions.
• The law overrides any differences or barriers between the parties. In case of disputes, the parties must follow the established regulations and resolve the matter legally.

Cheque and Postdated Cheque

• A postdated Cheque is only a bill of exchange if it is written or drawn; once it is payable on demand, it is a Cheque.
• A postdated Cheque cannot be cashed before the date printed on the face of the document. It remains a bill of exchange under section 5 of the
• Negotiable Instruments Act, 1881 until the date stated on it when it becomes a cheque.
• Since a postdated Cheque cannot be presented to the bank, it could not be returned. The requirements of Section 138 of the Negotiable Instruments Act, 1881 apply only when a post-dated Cheque becomes a "cheque" effective on the date shown on the face of the said cheque.
• However, a postdated Cheque is valid as a bill of exchange until the dates printed on it. However, from the date printed on the face of the said cheque, it shall be deemed to be a Cheque under the Negotiable Instruments Act, 1881 and the violation thereof triggers the condition (a) of Section 138 .

Different Types of Cheques

Open Cheque: It is somewhat comparable with a bearer Cheque in that any person who carries or carries a bearer Cheque can be paid the amount stated on the Cheque.

Crossed Cheque: A crossed Cheque drawn only on the payee's bank account can reduce the risk associated with open Cheques, which are often risky to write and issue. The upper left corner of a Cheque can also be crossed by drawing two parallel lines on it, with or without writing "Account Payee" or "Non-negotiable".

Order Cheque: It is a Cheque in which the word "bearer" can be crossed out or canceled and is made out to a particular person;

Electronic Cheque: It is a Cheque created in a secure system that ensures security requirements through digital signatures and contains an exact mirror image of the original Cheque.

Difference between Promissory Note and Bill of Exchange

• A promissory note contains an unconditional order to pay, while a promissory note contains an unconditional promise to pay.
• Bill of exchange has only two parties, the maker and the payee, while bills of exchange have three parties, namely the maker, the drawee and the payee.
• Acceptance by voucher is not necessary; however, in promissory notes, the payee must accept.
• In promissory notes, the promissory note is secondary and depends on non-payment of the promissory notes; in the bill of exchange, the responsibility of the box or its manufacturer is primary and unconditional.