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The Negotiable Instruments Act, 1881 - 3 Video Lecture | Crash Course for CA Foundation
FAQs on The Negotiable Instruments Act, 1881 - 3 Video Lecture - Crash Course for CA Foundation
| 1. What are the types of negotiable instruments under the Negotiable Instruments Act, 1881? |  |
Ans. The Negotiable Instruments Act, 1881 recognizes three main types of negotiable instruments: Promissory Notes, Bills of Exchange, and Cheques. Each of these instruments serves as a document guaranteeing the payment of a specific amount of money, either on demand or at a predetermined date.
| 2. What is the significance of a ‘holder in due course’ in the context of negotiable instruments? | |
Ans. A 'holder in due course' is a person who has obtained a negotiable instrument for value, in good faith, and without notice of any defect. This status provides the holder with certain legal protections, including the right to enforce payment against all prior parties, even if there are issues such as fraud or lack of consideration.
| 3. How does the Negotiable Instruments Act, 1881 define a cheque? | |
Ans. Under the Negotiable Instruments Act, 1881, a cheque is defined as a bill of exchange drawn on a specified banker and payable on demand. It is a specific type of negotiable instrument that can be used for the transfer of money and is commonly used in day-to-day transactions.
| 4. What are the legal consequences of dishonoring a cheque under the Negotiable Instruments Act, 1881? | |
Ans. If a cheque is dishonored due to insufficient funds or if it exceeds the amount arranged to be paid, the drawer may face legal consequences. The holder of the cheque can file a complaint under Section 138 of the Act, which may result in penalties including fines and imprisonment.
| 5. Can a negotiable instrument be transferred? What is the process? | |
Ans. Yes, a negotiable instrument can be transferred through endorsement and delivery. The transferor (endorser) must sign the back of the instrument, and then deliver it to the transferee (endorsee). This process enables the transferee to become the holder of the instrument and to enforce it against the maker or drawer.
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Sep 08, 2025
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