Negotiable

Negotiable Instrument SECTION 13(1): “A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or bearer” Justice Willis: “A negotiable instrument is one, the property in which is acquired by anyone who takes it bonafide, and for value not withstanding any defect of title in the person from whom he took it”

Promissory Note 



Section (4) defines a promissory note as an “instrument in writing containing unconditional undertaking, signed by the maker to pay a certain sum of money only to or to order of a certain person, or to the order of a certain person or to the bearer of the instrument.” There are basically two partiesMaker & Payee.

Bills of Exchange 

According to section “5”, “ A Bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.” Sec. (1)(4)(a) of IT act is not applicable to Bills of exchange, so Bills of exchange

Parties to a Bill of Exchange       

Drawer Drawee Acceptor Payee Holder Endorser Endorsee

Cheque 

A “ cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. ‘Cheque’ includes electronic image of a truncated cheque and a cheque in a electronic form (sec 6). It is addressed to the Bank and payable on demand. It cannot be pay after the expiry date.

Types of Cheque 

Open cheque.



Crossed cheque.



Bearer cheque.



Order cheque

Features of a Negotiable Instrument 

Freely transferable



Better title



Right to sue



Presumptions



 

 



PRESUMPTIONS {as per sections 118 and 119}

Consideration [Sec 118(a)] Date [Sec 118(b)] Time of acceptance [Sec 118( c )] Time of transfer [Sec 118 (d)] Order of endorsement [ Sec 118 (e)] Stamp [Sec 118 (f)]

Kinds of Negotiable Instruments 



Negotiable by Statute

(statute means law,this was already xplained by… so we will go ahead )



Promissory Note



Bill of Exchange



Cheque

u/s 13

Kinds of Negotiable Instruments  II Demand Draft

Negotiable by Custom

Customs in our country have created 3types such as 

I Govt Promissory Notes

It has been customary for the govt to issue prom. Notes on which a certain amount of intrest will be paid to



Made w en sum1 appr oac he s t he bank

It is a D emand to pay a ce rtain a mou nt to a ce rtain p erson . It is Pa yab le on pr esent atio n t o t he rig htfu l ow ner as state d.



III Hundis

Earliest known N.i,19th century,in india,types such as time bill,demand bill etc. of xchange,payment was conditional on safe

Kinds of Negotiable Instruments



 



A negotiable instrument Bearer Instrument becomes a bearer -> instrument when, “ the payment of which , can be -> Explanation taken by a person ( need not have the who has the possession of the name of the instrument.” receiver of the N.i Explanation (ii) of Transferred By Sec13(1) mere delivery &

Kinds of Negotiable Instruments Acc to {Sec 11} 



Inland and Foreign  Instrument



-> eg, bearer cheque… (this type of N. I instruments are mainly used for receipts & payments in the import and export





 



An instrument which is made or drawn in India upon any person resident in India , even though it is made payable in a foreign country is called a inland N. instrument. Acc to Sec 12} An instrument that is made, drawn or payable outside India or made in India and payable outside India on a person resident outside India Is called a Foreign N. instrument

Kinds of Negotiable Instruments 





Ambiguous Instrument Inchoate Instrument

An instrument that is vague and cannot be understood whether it is a bill of exchange or promissory note is an ambiguous instrument. {Sec 17 & 18}



An incomplete or blank instrument that is properly stamped and signed is termed as an

Dishonour of cheque     

No direct contract b/w banker and payee. On basis of original debt On basis of dishonoured cheque Loses cheque

 





Liability of drawee on dishonour

Liability of drawer on dishonour

Drawer is not responsible for the wrongful dishonour by the bank Drawing a cheque when knowing that sufficient balance is not present in the A/C is Criminal offence The punishment for the above is 2 years and/Or a Fine of double the original amount stated in the cheque

Revolution of negotiable instrument 

Credit card



Debit card



Mobile banking



Online banking

Advantages 

Easy availibility



Low interest cards



Trends in mobile banking

Disadvantages 

Credit card fraud



Charging fees



Interoperability