The currency is excluded from NI act and governed by Indian Currency Act. However, Currency notes are money and they don’t fulfill the conditions of the Promissory note. I promise to pay the bearer a sum of _Rupee/ Rupees. Is Currency Note a promissory note?Īlthough currency Notes bear the following: The maker is who promises to pay and the payee is who is promised to pay. Demand Promissory Note has to be paid immediately on demand and Usance Promissory Note has to be paid after certain time period. Demand Promissory Note or Usance Promissory Note. There are two types of the promissory notes viz. The money has to be paid to the certain person.Īs per section 4 of the Negotiable Instruments Act, 1881, an instrument in writing containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of instrument is called Promissory note.PN has an unconditional undertaking called promise.When a person issues a promissory note, he/ she would have to stamp it as per the Indian Stamp Act and normally a revenue stamp is affixed on the PN signed by the promissory. But it does not mean that we write “I owe You” and it becomes a PN. PN means a paper with a writing which has a promise. Forgery / theft / deceit do not convey any title.If the instrument bears A/C payee crossing and restricted endorsement then NO person can be a holder in due course.If the instrument bears not-negotiable crossing, then the NO person can be a holder in due course.Holder in Due course must obtain the instrument in Good Faith.This is the basic difference between the Holder and Holder in Due course. Holder in due course means a person who must have the possession of the instrument. A holder can cross a cheque if it is not already crossed.

The holder has the right to obtain a duplicate of instrument is lost.If it is stolen, then also payee or last endorsee is holder because a thief cannot become holder.If it is damaged the payee or last endorsee is the holder.If it is a bearer cheque, the person in whose name it is made is a holder.If there is a forged endorsement then, last endorsee is the holder.If the payee or endorsee dies, then the legal heir is the holder.Please note that holder may be or may not be with possession of the Instrument.Normally a payee or endorsee is a holder. Holder is the person who is entitled in his own name to the possession of a negotiable instrument. Various other sections such as 123-131 deal with crossing of cheques.Section 9 deals with holder and holder in Due course.Initially it did not have provisions regarding the Demand Draft, which were later inserted by amendment. There are 147 different sections in this act. The act has provisions of Negotiable Instruments such as Promissory Notes, Checks, Drafts, Bills of exchanges etc. J & K was brought in the ambit of the act in 1956. This act is applicable in entire India, including Jammu & Kashmir. Negotiable Instruments Act 1881 had been passed in 1882 and was modified in 19, as some more sections were added into the age old law.

Negotiable instruments covered under NI Act Kindly note that a Currency Note is not a negotiable instrument as per section 21 of the Indian Currency Act. As per section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means a promissory note, bill of exchange or a cheque, payable either to order or to bearer. The transfer should be without restriction and in good faith. Negotiability means transfer of an instrument from a person / entity to another person / entity.

Difference between a Crossed cheque and A/C Payee cheque.

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Negotiable instruments covered under NI Act.

Negotiable instruments quiz