1. NEGOTIABLE INSTRUMENT SEC 13 OF NI ACT STATES THATA NEGOTIABLE INSTRUMENT MEANS A PROMISSORY NOTE,BILL OF EXCHANGE OR CHEQUE PAYABLE EITHER TO ORDER OR BEARER

2. ESSENTIAL FEATURES EASILY TRANFERABLE FROM PERSON TO PERSON THE OWNERSHIP OF PROPERTY IN THE INSTRUMENT MAY BE PASSED ON BY MERE DELIVERY IN CASE OF BEARER BY ENDORSEMENT AND DELIVERY IN CASE OF AN ORDER INSTRUMENT. TRANFERABILITY IS AN ESSENTIAL FEATURE.

3. ALL TRANSFERABLE INSTRUMENTS ARE NOT NI A NI CONFERS ABSOLUTE AND GOOD TITLE ON THE TRANSFEREE WHO TAKES IN GOOD FAITH,FOR VALUE. THE RIGHT IS VALID EVEN IF THE TRANSFEROR HAD DEFECTIVE TITLE.

4. THUS A PERSON WHO TAKES A NEGOTIABLE INSTRUMENT FROM ANOTHER PERSON,WHO HAS STOLEN IT FROM SOMEBODY ELSE,WILL HAVE ABSOLUTE AND UNDISPUTED TITLE TO THE INSTRUMENT PROVIDED HE RECEIVES THE SAME FOR VALUE AND IN GOOD FAITH WITHOUT KNOWING THAT THE TRANSFEROR WAS NOT THE TRUE OWNER OF THE INSTRUMENT. THE PERSON IS KNOWN AS HOLDER IN DUE COURSE AND PROTECTED BY LAW.

5. THE HOLDER OF A NEGOTIABLE INSTRUMENT WHO IS A HOLDER IN DUE COURSE,HAS THE RIGHT TO SUE UPON THE INSTRUMENT IN HIS OWN NAME.THUS HE CAN RECOVER THE AMOUNT OF THE INSTRUMENT FROM THE PARTY LIABLE TO PAY THEREON.

6. TRANSFERABILITY AND NEGOTIABILITY IN CASE OF ANY GOODS OR COMMODITY,WHICH IS TRAFERABLE FROM PERSON TO PERSON THE GENERAL RULE IS THAT THE TRANSFEROR CANNOT TRANSFER TITLE BETTER THAN WHAT HE HIMSELF POSSESSES. A NEGOTIABLE INSTRUMENT IS AN EXCEPTION TO THIS GENERAL RULE.

7. PROMISSORY NOTE A PROMISSORY NOTE IS AN INSTRUMENT IN WRITING(NOT BEING A BANK NOTE OR CURRENCY NOTE) CONTAINING AN UNCONDITIONAL UNDERTAKING,SIGNED BY THE MAKER,TO PAY A CERTAIN SUM OF MONEY ONLY TO,OR ORDER OF CERTAIN PERSON,OR TO THE BEARER OF THE INSTRUMENT(SEC 4)

8. Rs50000.00 Date………………. ON DEMAND I PROMISE TO PAY TO SRI XYZ OR ORDER THE SUM OF RUPEES……………………….. TOGETHER WITH INTEREST AT THE RATE OF… FOR VALUE RECEIVED STAMP SIGNATURE ADDRESS

9. BILL OF EXCHANGE U/S 5 A BILL OF EXCHANGE IS AN INSTRUMENT IN WRITING CONTAINING AN UNCONDITIONAL ORDER,SIGNED BY THE MAKER,DIRECTING A CERTAIN PERSON TO PAY A CERTAIN SUM OF MONEY ONLY TO, OR TO ORDER OF,A CERTAIN PERSON OR TO THE BEARER OF THE INSTRUMENT MAKER IS THE DRAWER,PERSON DIRECTED TO PAY ISDRAWEE AND THE BENEFICIARY IS THE PAYEE

10. CHEQUE U/S 6 A CHEQUE IS A BILL OF EXCHANGE DRAWN ON A SPECIFIED BANKER AND NOT EXPRESSED TO BE PAYABLE OTHERWISE THAN ON DEMAND AMEDMENT 2002 HAS ENLARGED THE DEFINITION TO INCLUDEELECTRONIC IMAGE OF TRUNCATED CHEQUE AND ACHEQUE IN ELECTRONIC FORM

11. HOLDER IN DUE COURSE A NEGOTIABLE INSTRUMENT IS TRANFERABLE FROM PERSON TO PERSON.THE NI ACT CONFERS UPON THE PERSON,WHO ACQUIRED IT BONA FIDE AND FOR VALUE,THE RIGHT TO POSSESS GOOD TITLE TO THE INSTRUMENT.SUCH PERSON IS CALLED HOLDER IN DUE COURSE

12. ACCORDING TO SEC 9 OF THE NI ACT HOLDER IN DUE COURSE MEANS ANY PERSON WHO,FOR CONSIDERATION,BECAME THE POSSESSOR OF A PROMISSORY NOTE,BILL OF EXCHANGE OR CHEQUE,IF PAYABLE TO BEARER OR THE PAYEE OR ENDORSEE THEREOF IF PAYABLE TO ORDER,BEFORE THE AMOUNT MENTIONED IN IT BECAME PAYABLE,AND WITHOUT HAVING SUFFICIENT CAUSE TO BELIEVE THAT DEFECT EXISTED IN THE TITLE OF THE PERSON FROM WHOM HE DERIVED HIS TITLE.

13. PRIVILEGES OF HOLDER IN DUE COURSE ALWAYS POSSESSES BETTER TITLE THAN THAT OF HIS TRANFEROR OR ANY OF THE PREVIOUS PARTIES AND CAN GIVE TO THE SUBSEQUENT PARTIES THE GOOD TITLE THAT HE POSSESSES.(SECTION 53 STATES A HOLDER OF A NEGOTIABLE INSTRUMENT WHO DERIVES TITLE FROM A HOLDER IN DUE COURSE HAS THE RIGHT THEREON OF THAT HOLDER IN DUE COURSE)

14. ACCORDING TO SECTION 36EVERY PRIOR PARTY TO A NEGOTIABLE INSTRUMENT I.E THE MAKER,ACCECPTOR OR ENDORSER,IS LIABLE THEREON TO A HOLDER IN DUE COURSE UNTIL THE INSTRUMENT IS DULY SATISFIED.IT MEANS THE HOLDER IN DUE COURSE CAN RECOVER THE AMOUNT FROM ANY OR ALL OF THE PREVIOUS PARTIES TO THE INSTRUMENT.

15. A PERSON LIABLE ON A NI CANNOT DEFEND HIMSELF AGAINST A HOLDER IN DUE COURSE ON THE GROUND THAT THE INSTRUMENT WAS OBTAINED FOR AN UNLAWFUL CONSIDERATION(SECTION 58) A DRAWS A BILL OF EXCHANGE ON B WHO LOST IN GAMBLING.BACCECPTS.A ENDORSES TO C.NOW C BEING THE HOLDER IN DUE COURSE HAS A RIGHT TO RECOVER FROMB WHO CANNOT PLEAD THAT CONSIDERATION WAS GAMBLING.

16. PAYMENT IN DUE COURSE SECTION 10 STATES PAYMENT IN DUE COURSE MEANS PAYMENT IN ACORDANCE WITH THE APPARENT TENOR OF THE INSTRUMENT IN GOOD FAITH AND WITHOUT NEGLIGENCE TO ANY PERSON IN POSSESSION THEREOF UNDER CIRCUMSTANCES WHICH DONOT AFFORD A REASONABLE GROUND FOR BELIEVING THAT HE IS NOT ENTITLED TO RECEIVE PAYMENT OF THE AMOUNT THEREIN MENTIONED.

17. NI ACT PROVIDES PROTECTION TO THE BANKER PROVIDED THE PAYMENT IS MADE AS REQUIRED IN THE ACT.SUCH PAYMENT IS CALLED PAYMENT IN DUE COURSE. PAYMENT AS PER THE APPARENT TENOR I.E. AS PER THE INTENTION OF THE PARTIES AS APPARENT FROM THE DOCUMENT.IF A CROSSED CHQ PAID CASH OR BEFORE DATE IT NOT AS PER THE APPARENT TENOR.

18. SOME EXAMPLES OF PAYMENT NOT IN DUE COURSE A CHQ DATED 10 TH MARCH 2011 PAID ON 9 TH MARCH. CHQ BEARING SPECIAL CROSSING OF DENA BANK PAID TO UCO BANK CHQ CONTAINING FORGED SIGNATURE PAID. CHQ HAVING ALTERATIONS NOT AUTHENTICATED. CHQ COUNTERMANDED, PAID BY THE BANK. A PEON COMES WITH VERY LARGE VALUE CHQ TO ENCASH WHICH IS NOT A NORMAL PRACTICE AND SWINDLE THE MONEY.

19. PAYMENT IN GOOD FAITH AND WITHOUT NEGLIGENCE-BANKER SHOULD PAY HONESTLY AND NOT FRAUDULENTLY-ANY DOUBT ABOUT THE PAYEE OR PRESENTER SHOULD BE ENQUIRED. BANKER SHOULD TAKE ALL PRECAUTION AND ACT AS REASONABLE PERSON WILL ACT IN THE SITUATION,CHQ IS COMPLETE-SIGNATURE TALLIES,ALTERATIONS ARE DULY AUTHENTICATED ETC