Negotiable Insturments Act 1881

8/8/2019 Negotiable Insturments Act 1881

http://slidepdf.com/reader/full/negotiable-insturments-act-1881 1/26

GROUP: 2



µNegotiable' means transferable from oneperson to another,

µInstrument' means 'any written documentby which a right is created in favor of some person.'The negotiable instrument is a documentby which rights vested in a person can betransferred to another person.

MEANING



According to section 13 of the Ne go tiabl eInstrum ents Ac t, 1881, a nego tiabl e instrum entmeans ³p romi ssory no te, bill of exchang e, or cheq ue payabl e e ithe r to ord er or to bear er´.section 13(1)- A nego tiabl e instrum ent may bemad e payabl e to two or mor e payees j oin tly,

section 13(2)]- or it may be mad e p ayabl e in thealterna tive to one of two, or one or some of several payees .



TYPES OF NEGO TIABLE INSTRU MENTSTYPES OF NEGO TIABLE INSTRU MENTS

Negotiable by Law-B ill of Exchange-C heque-P romissory Note

Negotiable by Usage-B ank Drafts-Dividend Warrant-Interest Warrant-C ertificate of Deposit

-C ommercial paper -Treasury bills



FEATUR ESFEATUR ES

F r ee ly Tran sf erabl eConf er s absolu te t itleIn writingUncondi tionalPaym ent of a cer tain sum of mon eyCe r tain time

Payee mu st be a cer tain Per sonBear signa tur e of mak er Delivery esse ntialStam ping is manda tory



PR ESUMPT IONS AS TO

NEGOT

IABLE INSTRU

MENT

S



PR OMISSO RY NOTEPR OMISSO RY NOTE

S ection 4 of the Negotiable Instruments Act, 1881

µAn instrument in writing (not being a banknote or a currency note) containing anunconditional undertaking, signed by themaker, to pay a certain sum of money onlyto or to the order of a certain person or tothe bearer of the instrument¶.



FEATUR ES

In writing, signed, stamped as per IndianS tamp ActUnconditional promise to payMoney onlyP arties must be certainOn demand or after certain dateC ertain sum



PART IES TO A PR OMISSO RY NOTE

Pr ima r ily two pa r tiesI. The Maker or Drawer

II. The P ayee

In cou r se of t r ansfe r

I. The Endorser II. The Endorsee



SP ECIMEN OF A PR OMISSO RY NOTE

R s.50000/ - P uneNovember 25, 2008

Three months after I promise to pay Mr. X of Mumbai or order asum of R s10,000/ - (R upees Fifty Thousand only), for valuereceived.

To, Mr. X S d/Mr. Y

Address««. S tamp



BILLS OF EXCHANGEBILLS OF EXCHANGES ection 5 of the Negotiable Instruments

Act, 1881 defines;µAn instrument in writing containing anunconditional order, signed by themaker, directing a certain person to paya certain sum of money only to or to the

order of a certain person, or to thebearer of the instrument¶.



FEATUR ES

A bill must be in writing, duly signed by its drawer, Accepted by drawee, stamped as per IndianS tamp Act

C ontain an unconditional order P ay money onlyP arties must be certainS um payable must be certain



PART IES TO A BILL OF EXCHANGE

According to S ection 7The Drawer

The DraweeThe P ayee



Specimen of a Bill of Exchange

R s. 10,000/ - New DelhiMay 2, 2001

Five months after date pay Tarun or (to his) order the sum of R upees Ten Thousand only for value received.

To AcceptedS

tampS ameer S ameer S /d

Address R ajiv



TYPES BILLS OF EXCHANGES

The drawer can also draw a bill in his ownname thereby he himself becomes thepayee. Here the words in the bill would be

Pay to us or order.Tim e B ill (Usance B ill s)De mand B ill I n l and B ill

F ore ig n B ill sT rade and Acco mm odat i on B ill sC l ean and Docu mentary B ill



AT SIGHT, ON PR ESEN TMENT, AFTER SIGHTS ection 21

In a promissory note or bill of exchange theexpressions ³at sight´ and ³on presentment´ meanµon demand¶The expression ³after sight´ means, in apromissory note, after presentment for sight, and,in a bill of exchange, after acceptance, or noting

for non-acceptance, or protest for non

-acceptanceIn case of document µafter sight¶, the countdown

starts only after document is µsighted¶ by theconcerned party.



CHEQUESCHEQUESS ection 6 defines a chequeµAs a bill of exchange drawn on a specifiedbanker and not expressed to be payable

otherwise than on demand¶ .

µC heque¶ includes electronic image of a truncatedcheque and a cheque in electronic form.

The definition is amended by Amendment Act,2002, making provision for electronic submissionand clearance of cheque.



FEATUR ES

In writing, duly signed by the drawer C ontain an unconditional order C ertain sum of moneyP ayee must be a definite person

Amount written in figures and wordsMust be datedDrawn on a specified banker

Always payable on demand



Electronic Cheque

S ection 6 ( I a)

µA cheque in the electronic form¶ means acheque which contains the exact mirror imageof a paper cheque, and is generated, writtenand signed by a secure system ensuring theminimum safety standards with the use of digital signature (with or without biometricssignature) and asymmetric crypto system.



Tru ncated Cheq u eS ection 6 ( I b)

A truncated cheque¶ means a cheque which istruncated during the clearing cycle,either by the clearing house during the courseof a clearing cycle,either by the clearing house or by the bankwhether paying or receiving paymentimmediately on generation of an electronic

image for transmission, substituting the further physical movement of the cheque in writing.



Info rmation Technology Act

S ection (1)(4)(a) provides that:The Act will not apply to B ill of Exchange andP romissory NotesHowever, cheque is covered under InformationTechnology Act and hence can be made and /or sent by electronic means.



Types of Cheq u e

a) Open chequeb) B earer cheque

c) Order chequed) C rossed cheque

1. C heque crossed generally2. C heque crossed specially



CHEQUE CROSSED GENE RALL Y

S ection 123Where a cheque bears across its face anaddition of the words ³and company´ or anyabbreviation thereof, between two paralleltransverse lines,or of two parallel transverse lines simply, either with or without the words ³not negotiable´,

that addition shall be deemed a crossing,and the cheque shall be deemed to becrossed generally



CHEQUE CROSSED S P ECIALL Y

S ection 124Where a cheque bears across its face anaddition of the name of a banker,

either with or without the words ³notnegotiable´,that addition shall be deemed a crossing,

and the cheque shall be deemed to becrossed specially,and to be crossed to that banker



Specimen of a Cheq u e



Dishono ur of Cheq u es

Negotiable Insturments Act 1881

Documents

Transcript of Negotiable Insturments Act 1881