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The Negotiable Instrument Act was primarily initiated to simplify the transaction of financial institutions. This Act, as the title itself suggests, is a promise in writing that can be used as a medium of the transaction between two parties.
The Finance Ministry looks after the Negotiable Instruments and regulates its implementation. The main aim of this Act was to legalise the Negotiable Instruments in daily transactions. These instruments include everything that can act as a medium of transaction.
There are many interesting facts about this Act that we will try to discuss in detail as follows.
What are The Negotiable Instruments Acts?
The 3rd Indian law commission is credited with initiating the first Indian Negotiable Instruments Act. They formulated this Act in 1866 but had to undergo a lengthy process until it got to the stage when it was finally passed by the council as the Negotiable Instruments Act 1881.
The Act was last amended in 2018, which amended section 138 and inserted section 148. Before this Act was passed, big transactions were very difficult to manage because people were made to carry large amounts of money. Today, any amount of money is carried on a piece of paper called a cheque.
Main Purpose of The NIA 1881
The main purpose of promulgating the Negotiable Instruments Act is to simplify the financial sectors. The need for it was felt due to the rapid development of banks and other financial institutions.
Although most of the negotiable instruments were already in use, what this Negotiable Instruments Act did was make those instruments legally binding.
Provision Under the Negotiable Instruments
Notable provisions under NIA 1881 can be discussed as follows.
It has to be in the form of a written statement. The negotiable instruments can be handwritten or computer-typed documents.
It must provide definite time limits for the instruments to be effective.
It should specifically mention the names of the interested parties.
For the Negotiable Instruments to be legally binding, it has to be signed and stamped by the competent authority.
There should be no other conditions other than those specified in the given document.
Types of Negotiable Instruments under NIA Act 1881
Some of the main types of instruments in NIA are,
Promissory note. It is just a written promise made by an individual or group to uphold an agreed term.
Bill of exchange. As the name suggests, it is legally binding instructions to a party to pay a predetermined sum of money.
Cheques. This is also a written instruction to a bank to pay without any conditions to the bearer of the cheque from the deposit of the payer.
Conclusion
The Negotiable Instruments Act of 1881 is a landmark legislation in the financial sector. It has made trade and business transactions easy for all and accessible to all.
The negotiable instruments are written legal documents that are acceptable to all. This Act spells out all the duties and responsibilities for all the interested parties so that the instruments are accepted as it is.
In conclusion, we can say that due to the legalisation of the Negotiable Instruments, the use of cheques, traveller cheques, promissory notes, bills of exchange, etc. become popular.
