Negotiable Instrument Act 1881 Satish

8/4/2019 Negotiable Instrument Act 1881 Satish

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NEGOTIABLE

INSTRUMENTS ACT 1881

Presented By:-

Satish Verma


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Objective

To make provisions for early disposal of casesrelating to dishonour of cheque and toenhance punishments.

To make provisions relating to summary trialof cases in order to speed up the disposal ofcases.

To introduce electronic image of a truncated

cheque.


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Meaning and Definations

NEGOTIABLE

INSTRUMENT

DEFINATION by Justice Willis

As one, the property in which is acquired by anyone who takes it bonafide and for valuenotwithstanding any defect of title.

Transferable by delivery

A written document right iscreated in favour of some

Person.


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CONDITIONS FOR

NEGOTIABLE NSTRUMENTS

The instrument should be free transferableeither by delivery or by endorsement anddelivery.

The person who obtains gets it free from alldefects and is entitled to recover the moneyin his own name.


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CHARACTERISTICS

Must be in writing.

Free transferability or easy negotiablity:-

Means complete ownership and not only the right ofpossessing the instrument.

Title of holder is free from all defects:-

Principle of nemo quod dot habet( no one can givewhat he does not possess)

Recovery:-

Holder in due course has the right to sue on thenegotibale instrument in his own name for recoveringthe amount.


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Presumptions :-

Sec 118 and 119 of the Act.

Following presumptions shall be made

a. of considerationb. as to date

c. As to time of acceptance

d. As to time of transfer

e. As to order of endorsements.

f. As to stamps

g. As to a holder in due course.


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Sec 119 As to proof of protest.

Payments

May be payble to two or more payees jointly.

Payable to order or to bearer


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TYPES OF NEGOTIABLE

INSTRUMENTS

Recognized by statute

Recognized by usage or custom

Some of the negotiable instruments.

a. Bill of exchange

b. Promissory note

c. Cheque.


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BILL OF EXCHANGE SEC-5

Is an instrument in writings containing anunconditional order signed by the maker.

Three parties to a bill of exchange drawer, draweeand payee.

CHARACTERISTCS

1. It must be in writing

2.It must contain an order to pay and not request.

3. The order must be unconditional.4. The parties to the bill of exchange I.e drawer,drawee and payee must be certain.


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5.Bill of exchange must be signed by thedrawer and accepted by the drawee.

6. The sum payable must be certain.

7. Bill of exchange must contain an order topay money only.

8. Bill of exchange must be stamped properly.

9. Bill of exchange originally drawn cannot bemade payable to bearer

SPECIMEN OF BILL OF


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SPECIMEN OF BILL OF

EXCHANGE

Rs. 1,000/- Pune,2nd October,2006

Three months after the date pay to Mr.s of Nagar or order the sum of Rs.ONE THOUSAND, for value received.

ToMr. X Accepted StampAddress.. Signature of Signature of

.. Mr. X Mr.yMumbai


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PROMISSORY NOTE SEC-4

Is an instrument in writing ( not being a bank-note or a currency note) containing anunconditional undertaking.

Signed by the maker, to pay certain sum ofmoney only to or to the order of a certainperson or the bearer of the instrument.


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CHARACTERISTICS OF

PROMISSORY NOTE It must be in writing.

Promise to pay money only.

Promise to pay must be definite.

Must be unconditional. Signed by the maker.

Maker and the payee must be certain

Amount be certain.

Must be properly stamped.

Other details like number, date, consideration, placeetc are generally found in the promissory note.


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SPECIMEN OF A PROMISSORY

NOTERs 6,000/- Pune,

2nd October, 2006

Three months after the datem I promise to pay Mr.X of mumbai or order aSum of Rupees FIFTY THOUSNAD FOR VALUE RECEIVED.

TO,

ToMr. X StampAddress.. Signature of

.. Mr.yMumbai


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Promissory note Bill of exchange

There are two parties-maker and payee

It contains anunconditional promisepay

It is payable by aperson who makesit.Therefore, noacceptance isnecessary.

There are three parties

drawer, drawee andpayee

It contains anunconditional order topay

It is payable by theother person directed.Therefore,it should bepresented to thedrawee for acceptance.


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The maker of thepromisssory note isprimarily liable topayee.

Maker of bill exchangeis secondarily andconditionally liable topayee. He becomes

liable only when thedrawee refuses tohonour the bill.

Drawer stands in

immediate relation tothe drawee or acceptorand not the payee


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No notice of dishonouris necessary to themaker

Cannot be madepayable to bearer.

Notice should be givento all the parties.

Can be made payableto bearer, though itcannot be madepayable to bearer ondemand.


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Cheque

A cheque is a document/instrument (usually a piece of paper)that orders apayment of money from a bank account.

The person writing the cheque, the drawer, usually has a current account wheretheir money was previously deposited.

The drawer writes the various details including the money amount, date, and apayee on the cheque, and signs it, ordering their bank, known as the drawee, topay that person or company the amount of money stated.

Cheques are a type of bill of exchange.
http://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Negotiable_instrumenthttp://en.wikipedia.org/wiki/Negotiable_instrumenthttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Transactional_account


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Types of cheques

a) Open cheque:A cheque is called Open when it is possible to get cash over thecounter at the bank. The holder of an open cheque can do the following:i. Receive its payment over the counter at the bank,ii. Deposit the cheque in his own accountiii. Pass it to some one else by signing on the back of a cheque.

b) Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous toissue such cheques. This risk can be avoided by issuing another types of cheque calledCrossed cheque. The payment of such cheque is not made over the counter at the

bank. It is only credited to the bank account of the payee. A cheque can be crossed bydrawing two transverse parallel lines across the cheque, with or without the writing

Account payee or Not Negotiable.


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c) Bearer cheque: A cheque which is payable to any person who presents it forpayment at the bank counter is called Bearer cheque. A bearer cheque can be

transferred by mere delivery and requires no endorsement.

d) Order cheque: An order cheque is one which is payable to a particular person. Insuch a cheque the word bearer may be cut out or cancelled and the word order may

be written. The payee can transfer an order cheque to someone else by signing his orher name on the back of it.


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Objectives of crossing

(i) It prevents the payment of the cheque to a wrongful holder.

(ii) It ensures safe payment to the concerned receiver.

(iii) It facilitates in tracing the recipient of the payment if the cheque is wrongfullycrossed.

(iv) Further it is a guard against any cheating or theft.


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Importance of cheques

(i) A cheque is a convenient and safe method of making payments.

(ii) Cheques facilitate transfer of funds from one place to another and from one countryto another country.

(iii) The use of cheques provides safety to money deposited into bank.

(iv) Payment by cheque can serve the purpose of receipt also.

(v) Cheques facilitate credit which in turn helps in the growth of business in the country.

Negotiable Instrument Act 1881 Satish

Documents

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