NEGOTIABLE INSTRUMENTS ACT

NEGOTIABLE INSTRUMENTS ACT

Instruments Act, 1881 is an act in India dating from the British colonial rule, that is still in force largely unchanged.

The Act was originally drafted in 1866 by the 3rd India Law Commission and introduced in December, 1867 in the Council and it was referred to a Select Committee.

Meaning and Definition

A Negotiable Instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.


It must be freely transferable either by delivery (when it is payable to the bearer of the document) or by endorsement and delivery (when the document is payable to order).

The transferee taking the instrument in good faith and for consideration gets a good title to the same even if the title of the transfer or is defective.

The party holding the instrument should be entitled to maintain a suit thereon in case the instrument gets dishonored while in his custody.