Concept and Importance of Negotiable Instruments

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Meaning of Negotiable Instrument
The word 'negotiable' means 'exchangeable' or 'transferable' by delivery and 'instrument' means a written document. 'Negotiable Instruments means a document which can be legally transferred to another party for money.' Negotiable instruments can be identified as “paper money,” which is commonly known as commercial paper. Thus, negotiable instrument is a document which is given to another person in exchange for money in the business field. It includes a Bill of Exchange, Cheque, Promissory Note or any other document which is transferable in exchange for money like, Government Promissory Note, Hundi, Share warrants, Dividend warrants, Banker's Draft, Bearer Debentures etc. The word Negotiable means 'transferable by delivery', and word Instrument means 'a written document by which a right is created in favour of some person'.




Definition of Negotiable Instrument
According to Justice K.C. Wills "One, the property which is acquired by any one who takes it bonafide and for value notwithstanding any defect of title in the person from whom he took it".
Nepal Contract Act, 2056 has been silent in this respect but Nepalese Negotiable Instrument Act, 2034 Section 2 has defined as 'Promissory Note and Bill of Exchange are said to be Negotiable Instruments.' Similarly, Indian Negotiable Instrument Act, 1881 Section 13 has defined Negotiable Instrument as 'A Negotiable Instrument means a promissory Note, a bill of Exchange or a Cheque payable either to an orderer or to a bearer'. Thus, a negotiable instrument is a certain type of document which can be taken as money in business transaction and money transaction is a document by delivery. In another words we can say; Negotiable instrument is a certain type of document which can be discharged the value of business transaction.


Characteristics of Negotiable Instrument
The followings are the characteristics of the Negotiable Instrument:
• Written document: A Negotiable Instrument is a promise or order that must be made in a formal written document.
• Right of ownership: The property in a Negotiable Instrument means a complete right of ownership and not merely a right of possession of the form.
• Better title to a bonafide transferee: The legitimate transferee of a Negotiable Instrument is known as 'the holder in due course'. A bonafide transferee for the value is not affected by any defect of the title on the part of the transferer or any of the previous holders of that instrument.
• It creates the right: In case of a dishonor of the Negotiable Instrument, the transferee or a holder in due course is entitled to sue in his own name against the transferer.
• Easy negotiability: The instrument is transferable from one person to another without any formality in faster way.
• Legal presumption: There are some legal presumptions in the Negotiable Instrument. E.g Consideration

Importance of Negotiable Instrument
Negotiable Instrument is a certain type of document, which transfers the money. It makes easy to carry money one place to another place. So, it is very important for transfer of money in business sector. The following points can grasp as the importance of Negotiable Instrument.
• Negotiable Instrument is easier means of transfer of money.
• It is easy to delivery one place to another place.
• It helps to flourish the business sector.
• It creates the right of property.
• It has the easy negotiability and some where it provides the security.
• It makes the fast transaction of money.
• It makes the security of money as well as personal security in course of transaction of money.
Negotiable Instrument is the easier way of transfer of money one place to another place. It provides the safe way to deliver of money. It has important role to develop the way of money transaction as well as the business realm.

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