According to Section-13 of the Negotiable Instruments Act-1881, negotiable instruments include only three instruments namely, (a) Promissory Note, (b) Bill of Exchange and (c) Cheque. Since Bank Draft is not included in this list, controversy arose as to whether Drafts are negotiable instruments or not despite the fact that Drafts are equivalent to Bill of Exchange.
Various court decisions or judgements made it clear that the Drafts are Bill of Exchange. For example, mention may be made about the Allahabad High Court case (S.N. Shukla Vs The Punjab National Bank Limited) and Calcutta High Court case (State Bank of India and another Vs Jyoti Ranjan Mazumder). Both these courts held that the Drafts are Bill of Exchange. If Drafts are Bill of Exchange, as per court judgement, it needs no mention that they are also negotiable instruments.
Not only the court judgements, Negotiable Instruments Act-1881 itself clarified the position by two subsequent amendments - one in 1930 and another in 1947. The amendment made in 1930 by Section 85A states that where any drat, that is an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand, purports to be endorsed by or on behalf of the payee, the bank is discharges by payment in due course.
On the other hand, amendment made in 1947 by Section - 131 A states that the special provisions relating to cheque that is provisions relating to crossing of cheques shall also apply to any drafts, as defined in section-85 A, as if the draft were a cheques. Based on these two amendments, it is argued by all authors including M.L. Tannan that Drafts are negotiable instruments since protection to the paying and collecting banker in case of crossed cheques is also applicable to the Drafts.
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