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Section 13 of Negotiable Instruments Act, 1881

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Section 13 of Negotiable Instruments Act, 1881 defines a Negotiable Instrument.

From the Act

A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Explanation (i).-A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation (ii).-A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation (iii).-Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be pay-able to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.]

3[(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or -some of several payees.]

Notes

  • Treasury bill or note are not recognized as negotiable instruments according to Indian Law but are accepted according to English Common Law.
  • Money orders and postal orders are not negotiable instruments.
  • Travelers cheque is not a negotiable instrument because it is not transferable.
  • Life Insurance Policy is not a negotiable instrument because it is not transferable.

Related Cases / Recent Cases

  • Dalmia Cement (Bharat) Ltd vs The Galaxy Traders & Agency Ltd
  • Amarchand & Co vs Ramdas Vithalbhai AIR 1983 Bom 255: High Court of Bombay is of the view that a railway receipt is a negotiable instrument.
  • Shri Shyam Stores vs Union of India AIR 1971 A&N 59: High Court of Nagpur is of the view that a railway receipt is a negotiable instrument.
  • Dominion of India vs Gaya Prasad AIR 1956 All 785: High Court of Allahabad is of the view that a railway receipt is a negotiable instrument.
  • Commissioner, Port of Calcutta vs General Trading Corporation AIR 1964 Cal 290: High Court of Calcutta is of the view that a railway receipt is not a negotiable instrument.
  • Morvi Mercantile Bank Ltd vs Union of India AIR 1966 SC 395: Supreme Court of India accepted the controversy as to railway receipt but did not resolve the conflicting opinion. It said that mere indorsement of a railway receipt by a consignor in favor of another will not be itself pass title in the goods to the consignee.
  • Thairwall vs Great Northern Railway (1940) 2 KB 509: Dividend Warrant shall be regarded as a negotiable instrument and equivalent to that of a cheque. An indemnity bond should be given so that the company would send a duplicate of it, when it is missing.
  • J Mascarvenhas vs Mercantile Bank AIR 1934 PC 22: Debentures which are transferable by endorsement are comparable to promissory notes and are hence they constitute negotiable instruments.
  • Calcutta Safe Deposit vs Ranjit AIR 1971 Cal 78: Bearer debenture is a negotiable instrument.
  • Mercantile Bank of India vs Mascarvenhas AIR 1932 PC 22: Debentures of Bombay Improvement Trust payable to order are negotiable instruments, according to Privy council.
  • Hiralal Chetterjee vs Raj Kumar Mukherjee 12 CIJ 470; Hunsraj vs Ruttonji, 24 Bom. 65: Government Promissory Notes are Negotiable instruments.
  • Dena Bank vs K K Alex (1988) 63 Comp Cas 122 (Ker): Bank was held responsible for travelers cheques that ware lost and were en -cashed before the bank circular to stop honoring of the cheque reached its branches.

See Also