NEGOTIABLE INSTRUMENTS ACT 1881

Presented By:Satish Verma

Objective

To make provisions for early disposal of cases relating to dishonour of cheque and to enhance punishments. To make provisions relating to summary trial of cases in order to speed up the disposal of cases. To introduce electronic image of a truncated cheque.

Meaning and Definations

NEGOTIABLE
INSTRUMENT
Transferable by delivery

A written document right is created in favour of some Person.

DEFINATION by Justice Willis As one, the property in which is acquired by any one who takes it bonafide and for value notwithstanding any defect of title.

CONDITIONS FOR NEGOTIABLE NSTRUMENTS

The instrument should be free transferable

either by delivery or by endorsement and delivery.

The person who obtains gets it free from all

defects and is entitled to recover the money in his own name.

CHARACTERISTICS
Must be in writing. Free transferability or easy negotiablity:-

Means complete ownership and not only the right of possessing the instrument. Title of holder is free from all defects:Principle of nemo quod dot habet( no one can give what he does not possess) Recovery:Holder in due course has the right to sue on the negotibale instrument in his own name for recovering the amount.

 Presumptions :-

Sec 118 and 119 of the Act. Following presumptions shall be made a. of consideration b. 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.

 Sec 119 As to proof of protest. Payments

May be payble to two or more payees jointly.

Payable to order or to bearer

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.

BILL OF EXCHANGE SEC-5

Is an instrument in writings containing an

unconditional order signed by the maker. Three parties to a bill of exchange drawer, drawee and 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.

5.Bill of exchange must be signed by the drawer and accepted by the drawee. 6. The sum payable must be certain. 7. Bill of exchange must contain an order to pay money only. 8. Bill of exchange must be stamped properly. 9. Bill of exchange originally drawn cannot be made payable to bearer

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.

To Mr. X Address.. .. Mumbai

Accepted Signature of Mr. X

Stamp Signature of Mr.y

PROMISSORY NOTE SEC-4

Is an instrument in writing ( not being a bank-

note or a currency note) containing an unconditional undertaking.

Signed by the maker, to pay certain sum of

money only to or to the order of a certain person or the bearer of the instrument.

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, place

etc are generally found in the promissory note.

SPECIMEN OF A PROMISSORY NOTE

Rs 6,000/Pune, 2nd October, 2006 Three months after the datem I promise to pay Mr.X of mumbai or order a Sum of Rupees FIFTY THOUSNAD FOR VALUE RECEIVED.

TO, To Mr. X Address.. .. Mumbai

Stamp Signature of Mr.y

Promissory note
There are two parties-

Bill of exchange
There are three parties

maker and payee

It contains an

unconditional promise pay It is payable by a person who makes it.Therefore, no acceptance is necessary.

drawer, drawee and payee It contains an unconditional order to pay It is payable by the other person directed. Therefore,it should be presented to the drawee for acceptance.

 The maker of the

Maker of bill exchange

promisssory note is primarily liable to payee.

is secondarily and conditionally liable to payee. He becomes liable only when the drawee refuses to honour the bill. Drawer stands in immediate relation to the drawee or acceptor and not the payee

 No notice of dishonour

Notice should be given

is necessary to the maker Cannot be made payable to bearer.

to all the parties. Can be made payable to bearer, though it cannot be made payable to bearer on demand.

Cheque
A cheque is a document/instrument (usually a piece of paper)that orders a payment of money from a bank account. The person writing the cheque, the drawer, usually has a current account where their money was previously deposited.

The drawer writes the various details including the money amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated. Cheques are a type of bill of exchange.

Types of cheques a) Open cheque: A cheque is called Open when it is possible to get cash over the counter 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 account iii. 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 to issue such cheques. This risk can be avoided by issuing another types of cheque called Crossed 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 by drawing two transverse parallel lines across the cheque, with or without the writing Account payee or Not Negotiable.

c) Bearer cheque: A cheque which is payable to any person who presents it for payment 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. In such 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 or her name on the back of it.

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

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 country to 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.