Negotiable Instruments Act 1881

The Negotiable Instruments Act 1881 came into force w.e.f 1.3.1882. It has 147 sections. Sec 138 to 142 were added on 1.4.1989 and Sec 143 to 147 was added in December 2002. The NI Act, 1881 is applicable to the whole of India.

What is “Negotiable Instrument”?

As per Sec.13 of Negotiable Instruments (NI) Act a “Negotiable Instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Negotiable Instruments include:

1.    Promissory Note;

2.    Bill of Exchange; and

3.    Cheque.

→NEGOTIABILE INSTRUMENTS		→NOT-NEGOTIABLE INSTRUMENTS
1	Bank Draft	1	Fixed Deposit Receipt
2	Govt. Promissory Note	2	Share Certificate
3	Bill of lading	3	Withdrawal Slip from SB Account.
4	Share warrants & Dividend warrants	4	LIC Policy
5	Treasury Bills	5	Airway Bill
6	Hundi	6	Document of Title to immovable property
7	Certificate of Deposit & Commercial Paper	7	Currency Note: This itself is money (Sec 21 of Indian Currency Act)

As per Sec.11 of Indian Contract Act, 1872 a minor, a person of unsound mind (lunatic) and an un-discharged insolvent are not eligible for making a valid contract. However, u/s 26 of NI Act “a minor may draw, endorse and negotiate a negotiable instrument so as to bind all parties except himself.”