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

Negotiable Instruments passes by mere delivery, if it is payable to bearer and by endorsement and delivery, if it is payable to order. The transferee getting the instrument for consideration and in good faith is not affected by any defect of title of his transferor or any prior party.

Presumptions of consideration

Sections 118 and 119 of the Negotiable Instruments Act provide that until the contrary is proved, the following presumptions shall be made in respect of negotiable instruments:

(a) Of consideration - That every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration. If the execution of promissory note is admitted, the burden to prove that promissory notes were not supported by consideration shifts on defendants.

(b) As to date - That every negotiable instrument bearing a date was made or drawn on such date.

(c) As to time of acceptance - That every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity.

(d) As to time of transfer - That every transfer of a negotiable instrument was made before its maturity.

(e) As to order of endorsements - That the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon.

(f) As to stamps - That a lost promissory note, bill of exchange or cheque was duly stamped.

(g) That holder is a holder in due course - That the holder of a negotiable instrument is a holder in due course, provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for an unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.

(h) Presumption on proof of protest - In a suit upon an instrument, which has been dishonored, the court shall on proof of the protest, presume the fact of dishonor, unless and until such fact is disproved.

Cheque

A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. The essential elements of a cheque are as under

1. Drawn on a specified banker - A cheque is drawn on a specified banker.
2. Always payable on demand - The cheque is payable on demand without any day of grace.
3. No acceptance required - The cheque does not require acceptance.
4. Drawn on balance - The cheques are presumed to be drawn on the balance in the hands of the banker. However, the drawer can draw a cheque on credit, if the banker has allowed credit to the drawer.
5. Notice of dishonor not required - If the cheque is dishonored, no notice of dishonor is required. However to initiate prosecution against the drawer for dishonor of cheque for insufficiency of funds, the payee or the holder in due course of the cheque should make a demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. However, prosecution can be initiated against the drawer of the cheque, if he has drawn a cheque for the discharging in whole or in part of any debt or other liability.
6. Revocable mandate - A cheque is a revocable mandate and the drawer may countermand the payment.
7. Drawer's liability not discharged by non-payment - If the payee does not present the cheque within the stipulated time, the drawer is not discharged from liability, unless drawer has sustained damages by non-presentation of the cheque.
8. May be crossed or bearer - A cheque may be crossed or bearer.
9. Presentment for payment - The promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively by or on behalf of the holder. In default of such presentment, the other parties thereto are not liable thereon to such holder.

Dishonor of negotiable instrument

Dishonor by non-payment - A promissory note, bill of exchange, cheque is said to be dishonored by non-payment, when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same. When the presentation of an instrument for payment is excused and the instrument having becoming overdue remains unpaid the instrument is presumed to be dishonored for non-payment.

Notice of dishonor - When a promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment, the holder thereof, or some party there to who remains liable thereon, must give notice that the instrument has been so dishonored to all other parties whom the holder seeks to make severally liable thereon, and to some one of several parties, whom he seeks to make jointly liable thereon. The notice of dishonor is served to inform the party liable on the instrument about the liability which accrues as a result of the dishonor of the instrument. The service of notice is necessary, whatever the nature of the instrument may be. If the holder does not serve the notice of dishonor within a reasonable time from the date of dishonor all the parties who are liable on the instrument and entitled to notice are discharged.

(i) Person who can give notice -The notice of dishonor can be given by the holder, or any of the parties liable on the instrument. The notice may be given by an endorsee or an agent but a stranger cannot give notice.

Any party receiving notice of dishonor must in order to render any prior party liable to himself, give notice of dishonor to such party within a reasonable time, unless such party otherwise receives due notice. If an instrument is deposited with an agent for presentation, the agent is entitled for the same time to give notice to his principal as if he were the holder giving notice of dishonor and the principal is entitled to a further like period to give notice of dishonor.

(ii) To whom notice of dishonor should be given - Notice of dishonor may be given to all other parties whom the holder seeks to make severally liable and to some one of several parties whom he seeks to make jointly liable thereon or to duly authorised agent of the person to whom it is required to be given, or where he has died, to his legal representatives or where he has been declared an insolvent, to his assignee. If there are two or more parties jointly liable as drawers or endorsers, notice to one of them will make all of them liable.

No notice is required to be given to the maker of the dishonored promissory note, or the drawee or acceptor of the dishonored bill of exchange or cheque.

(iii) Form of notice of dishonor - The notice of dishonor may be in any form, but it must inform the party to whom it is given, either in express terms or by reasonable intendment that the instrument has been dishonored and in what way and that he will be held liable thereon. The notice should specifically state that the instrument was presented for payment or acceptance and the instrument has been dishonored.

(iv) Notice how given - The notice must be given within a reasonable time after dishonor, at the place of business or (in case such party has no place of business) at the residence of the party for whom it is intended. If the notice is duly directed and sent by post and miscarries, such miscarriage does not render the notice invalid.

Issuing Legal Notice - based on scanned documents and history of each individual case and instructions received from our clients through ONLINE, the team advices our clients in drafting the legal notice and sending across the same which not only saves money, time and energy but action is taken on time, without attracting further delay.

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