What is a Negotiable Instrument?
- A negotiable instrument is the written documents transferable by delivery.
- It is a kind of written document/deed which can be used for business or monetary dealing with discharge value.
Features of the Negotiable Instrument
- Written document
- It has the right of ownership
- It creates the right and liabilities to the parties.
- Easy for negotiable/transfer.
- It has legal consideration.
- It indicates its parties such as a drawer, drawee and payee.
- It has the nature to discharge unconditionally.
Objectives of the Negotiable Instrument Act 2034
- To make systematic banking transactions by using the negotiable instrument.
- To define a negotiable instrument and its nature.
- To regulate or make legal provisions relating to the use of the negotiable instrument.
Types of Negotiable Instrument
|By Law||1) Promissory Note (प्रतिज्ञा पत्र )|
2) Bills of Exchange (अधिकार/विनिमेय पत्र/आदेश पत्र )
|By Custom/Uses||1) Good For Payment|
2) Bank Circulars (परिपत्र )
3) Dividend Warrants (लाभांश )
4) Share Warrants
1) Promissory Note
A promissory note is a written agreement (document) to pay a specific amount to a specific party at a future date or on demand. It is written document except for government banknote having promise to pay. It has two parties – Maker and Payee.
It is a promise paper which creates absolute liabilities to the maker. There is no requirement for acceptance and no requirement to notice of dishonor.
2) Bills of Exchange
Bills of Exchange is a kind of written document containing an unconditional order to pay an amount of negotiable instrument. It is an instrument of order to pay unconditionally in a certain date, period at the time of demand. It has three parties drawer, drawee and payee. It creates conditional liabilities to the maker. It is necessary to accept by the drawee and need to notice of dishonor.
(उदाहरणको लागि यदि चेक Reject भएको छ भने चेक धनिलाई कारण सहित खबर गर्नु पर्छ )
Examples of Bills of Exchange
- Cheque – Bills of exchange drawn on a certain bank payable on demand.
- Draft – Bills of exchange drawn on a certain bank/other bank/branches by other banks payable on demand. Bills of exchange drawn by a bank payable on demand from its one office to another office or to the order of a certain person.
Major Provisions of the Negotiable Instrument Act 2034
1. Clarification of negotiable instrument and its parties.
2. It has the provision related to use of the negotiable instrument, its parties and rights and liabilities of parties.
3. It has the provision relating to the endorsement of negotiable instruments.
Endorsement – Act of signing in a negotiable instrument for the purpose of negotiation. An endorsement is a process to create a contract among the parties. It is a way to transfer title. It can be complete only after transferring or submitting to others by endorsement.
चेकमा सहि गरिसकेपछि Drawer, Drawee र Payee को बिचमा एक किसिमको Contract भएको मानिन्छ।
Types of endorsement
- The endorsement in the blank – Sign in blank check without writing amount.
- The endorsement in full – Sing in check with amount and payee name.
- Joint endorsement – some account need one or more than one’s signature.
- Qualified endorsement – some cheque need a sign of a specific person to be qualified.
- Conditional endorsement – some time conditions are mentioned in the negotiable instrument.
हाम्रो प्रचलित कानुनले अहिलेसम्म endorsement in the blank र endorsement in full मात्र उल्लेख गरेको छ। Joint endorsement, Qualified endorsement र Conditional endorsement लाई endorsement in full ले नै समेट्छ।
4. It has provision relating to the presentation of the negotiable instrument.
5. It has provision relating to the payment of interest and discharges from liabilities to parties.
6. A provision relating to dishonor of negotiable instrument.
-If drawee refuses to pay the amount of negotiable instrument it becomes dishonor.
-Dishonor may create as per
– by non-acceptance
– by non-payment
– by creating an obstacle to present and payment of the negotiable instrument.
-Notice of dishonor should be provided to the drawer by any means.
-Some conditions are outlined where no requirement to make notice of dishonor.
Provision of punishment
– Compensate claim amount (cheque amount) and other expenses or interest which are made a claim.
-If cheque becomes dishonor due to insufficient balance, compensate cheque amount and other claim expenses, interest and fine up to 3000 or three months imprisonment or both.
7. It has provision relating notary public to approve/certified dishonor of negotiable instrument.
8. Provision of cross cheque and its payment.
9. Provision of use of a foreign negotiable instrument.
The weakness of the Negotiable Instrument Act 2034
- Need to amend as per the time.
- Need to increase the scope.
- Punishment should be increased.