What is a negotiable instrument?

A negotiable instrument means a bill of exchange, promissory note or cheque payable either to order or to the bearer (Sec 13, Negotiable instruments act 1881) whether the words order or bearer appears on the instrument or not. It is not necessary that it should be expressly stated to be payable to the order of a person.

1. If a bill or promissory note of a cheque is payable to a particular person and there is nothing to indicate the intention, then it is not transferable, it is payable to order, and is negotiable.

2. If there is anything to indicate that it is not a negotiable instrument but an ordinary actionable claim, the rules relating to negotiable instruments do not apply to it.

3. Cheque is only a particular form of bill of exchange drawn on a special banker and payable on demand the act, therefore, practically deals with two kinds of instruments, the promissory notes and bills of exchange. The ‘broad distinction’ between the two is that in the former the executant makes the promise himself while in the latter he directs a third party person to pay.

According to Bhashyam and Adiga : a negotiable instrument is one, which when transferred by delivery or endorsement and delivery passes to the transferrer a good title to payment according to its tenor and irrespective of the title of the transferor.

#Books