Negotiable Instruments: The Reserve Bank of India Act, 1934
Negotiable Instruments: The Reserve Bank of India Act, 1934
There are certain documents which are freely used in commercial transactions and monetary dealings.
These documents, if they satisfy certain conditions, are known as "negotiable instruments". The word
"negotiable" means "transferable from one person to another in return for consideration" and
"instrument" means a "written document by which a right is created in favour of some person."
Thus, a negotiable instrument is a document which entitles a person to a sum of money and which is
transferable from one person to another by mere delivery or by indorsement and delivery. The terms
'delivery' and 'indorsement' have been explained in a subsequent Chapter.
The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881,
which deals with promissory notes, bills of exchange and cheques, as also hundis (a bill of exchange
in a vernacular language). It is based, except where conditions in India require a departure, mainly
upon the English Law as to negotiable instruments and judicial decisions.
The Act extends to the whole of India. It does not affect any local usage relating to any instrument in a
vernacular language. The local usages may however be excluded by any words in the body of the
instrument (Sec.l).
The Act came into force on first day of March, 1882.
The latest amendment to the Act was made in 1988.
References to Sections in Chapters 6-1 to 6-10, unless otherwise indicated, are to the Negotiable
Instruments Act, 1881.