Negotiable instruments recognized by Negotiable Instruments Act 1881 are: (i) Promissory notes (ii) Bills of exchange (iii) Cheques.
A negotiable instrument is a piece of paper which entitles a person to a sum of money and which is transferable from one person to another by mere delivery or by endorsement and delivery.
There were total 142 Sections in the Negotiable Instruments Act 1881 when came into force. The act was amended and amendment Act inserts five new sections from 143 to 147touching various limbs of the parent Act and Cheque truncation through digitally were also included and the amendment Act has been recently brought into force on Feb. 6, 2003.
DISHONOUR OF A NEGOTIABLE INSTRUMENT
When a negotiable instrument is dishonored, the holder must give a notice of dishonor to all the previous parties in order to make them liable. A negotiable instrument can be dishonored either by non-acceptance or by non-payment. A cheque and a promissory note can only be dishonored by non-payment but a bill of exchange can be dishonored either by non-acceptance or by non-payment.
Section 91: Dishonour by non-acceptance
Section 92: Dishonour by non-payment
Section 138: Dishonour of cheque for insufficiency, etc., of funds in the account