1.

0 Introduction

According to the Bills of Exchange Act 1949, a bill is negotiated when it is transferred
from one person to another in such a manner as to constitute the transferee the holder of the
bill. The bills of exchange represents a paper of value issued in the prescribed form in which
its issuer as unconditional order gives another person which is the drawee at a specific time
and place to pay a certain sum of money which is shown on the bills of exchange, the user the
same payee whose name is indicated on the bills of exchange. Bills of Exchange get its name
because it acts as replacement money in the supply of goods, primarily because of its
characteristic which is more safe and secure handling of money.

1.1 Informal definition

Based on the textbook of Banking Law in practice by Dr. Mahendra Tiwari defines the
bills of exchange are negotiable instruments which enables debtors to discharge their
obligations to the creditors. When the seller of the goods realise his dues from the buyer at a
distant place immediately or after the lapse of the agreed period of time, with the help of
banking institution the bills of exchange facilitates this tasks. Bills of exchange is the document
that can be used for the settlement of debts where the transaction most probably occurred across
the border. This document is drawn by the creditor (the person who is entitled to receive the
money) on a debtor (the person who is liable to pay the money). It is a written order to receive
a certain sum of money from a certain person. Besides, it is also a legal document which
confirms a debt ( Tiwari, 2013).

1.2 Formal definition

A bills of exchange is an unconditional order in writing, addresses by one person to

another, signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to, or to the order of
specified person, or to the bearer. An instrument which does not comply with the conditions,
or which orders any act to be done in addition to the payment of money, is not a bill of
exchange. An order to pay out of a particular fund is not unconditional within the meaning of
this section, but an unqualified order to pay, coupled with an indication of a particular fund out
of which the drawee is to reimburse himself or a particular account to be debited with the
amount, or a statement of the transaction which gives rise to the bill, is unconditional. A bill is
not invalid by reason that it is not dated, it does not specify the value given, or that any value
has been given therefore and that it does not specify the place where it is drawn or the place
where it is payable (Bills of Exchange Act 1949, 2011).

2.0 The Origin of the Bills of Exchange

2.1 History of Bills of Exchange Act in Malaysia

3.0 Bills of exchange law in Malaysia

The statute governing the bills of exchange in Malaysia is the Bills of Exchange Act
1949. There are 5 parts in Bills of Exchange Act 1949. Part I Preliminary, Part II Bill of
exchange form and interpretation, Part III Cheque on a banker, Part IV Promissory Notes and
Part V Supplementary (Bills of Exchange Act 1949, 2011).

Part IV is explained about promissory note. According to Section 88 in Bills of

Exchange Act 1949, Promissory note defined as a promissory note is an unconditional promise
in writing made by one person to another signed by the maker, engaging to pay, on demand or
at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified
person or to bearer in the Section 88 of Bills of Exchange Act 1949. It is an instrument in the
form of a note payable to maker's order is not a note within the meaning of this section unless
and until it is indorsed by the maker. It is a note that is not invalid by reason only that it contains
also a pledge of collateral security with authority to sell or dispose thereof. It is also a note
which is, or on the face of it purports to be, both made and payable within Malaysia is an inland
note where any other note is a foreign note.

Based on the Section 92, it explained about the presentment of note for payment. It is
where a promissory note is in the body of it made payable at a particular place, it must be
presented for payment at that place in order to render the maker liable. In any other case,
presentment for payment is not necessary in order to render the maker liable. Besides, it is
necessary in order to render the indorser of a note liable. Where a note is in the body of it made
payable at a particular place, presentment at that place is necessary in order to render an
indorser liable; but when a place of payment is indicated by way of memorandum only,
presentment at that place is sufficient to render the indorser liable, but a presentment to the
maker elsewhere, if sufficient in other respects shall also suffice.
 In the case of Majuikan Sdn Bhd Vs Barclays Bank PLC, the first issue is whether the
claimant genuine holder in due course value of promissory notes or not? The second issue
raised is whether claimant could demand payment or not? In this case, Majuikan Sdn Bhd is
second defendant while Barclays Bank PLC is plaintiff. The first defendant is Malaysian Sea
Best who issues the promissory notes but they are not a party in this appeal. Majuikan has been
sued by Barclays due to the 'Per Aval Endorsement' that contains in the promissory notes.
Majuikan must make a total sum of Euro 10,000,000 to Barclays as a guarantee for financing
facility granted to Malaysian Sea Best by HSBC Bank, USA ('HSBC USA'), who was the
original payee. Barclays sued as holder in due course for value of the promissory note. On the
date of 3 March 2008, Barclays was presented the promissory note for payment but it was
considered as dishonoured for non- payment because the signatures of its alleged signatories
on the endorsement were claimed to be forgeries. Majuikan claimed that Barclays was not the
holder because Barclays was been involved in the loan agreement initially. If there was an
evidence proven that there is any signatures forgeries on the documents, Barclays should not
be sheltered on the behind of the legal concept of holder in due course for value. Majuikan
tendered a chemist report through a government chemist ('DW14') (CLJ Legal Network Sdn
Bhd, 2019).

The court held that Barclays may claimed under the Per Aval Endorsement. Barclays
claimed that it had done all that was necessary in terms of due diligence to ensure the legal
integrity of the financing, and was led to believe that everything was in order by the conduct
of the representatives of Majuikan, to the extent that this was a situation where the exception
to Section 24 of the Bills of Exchange Act 1949 applied. According to the Section 24 of the
Bills of Exchange Act 1949, this section is subject to the provisions of this Act, where a
signature on a bill is forged or placed thereon without the authority of the person whose
signature it purports to be, the forged or unauthorized signature is wholly inoperative, and no
right to retain the bill or to give a discharge therefor or to enforce payment thereof against any
party thereto can be acquired through or under that signature, unless the party against whom it
is sought to retain or enforce payment of the bill is precluded from setting up the forgery or
want of authority. In this case, Majuikan never took any active steps to alert or inform Barclays
of the forgery.

In our opinion, we agree with the judge that Barclays may claims upon the payment
from Majuikan because there is no legal evidence proved that Barclays forged the documents.
Barclays as claimant is genuine holder in due course value of promissory notes as they done
the documentations procedure systematically.

Besides, Part V explained about the supplementary. According to Section 95, Good
faith is defined as a thing is deemed to be done in good faith, within the meaning of this Act,
where it is in fact done honestly whether it is done negligently or not (Bills of Exchange Act
1949, 2011).

In the case of CIMB Bank Bhd V Panaron Control Sdn Bhd, the first issue is whether
bank is liable for conversion of customer’s monies or not? The second issue raised whether
customer negligently contributed to forgery or not? In this case, CIMB Bank Bhd (defendant)
has been sued by Panaron Control Sdn Bhd (plaintiff) due to the bank which had unlawfully
and or without mandate or authority honoured forged cheques drawn on the plaintiff’s bank
account thereby causing loss to and or conversion of the plaintiff’s monies. The manager had
forged the plaintiff's directors' signatures on some 196 cheques drawn on the plaintiff's account
with the bank over a period of four years. The plaintiff detected some discrepancies within the
monthly bank statements in or about November 2005 (CLJ Legal Network Sdn Bhd, 2019).

However, the court held that the appeal of defendant was been rejected due to the bank
had failed to maintain a proper system or protocol of examining and or verifying the
authenticity to weed out cheques that bear non-mandated company chops. The judge further
held that the bank could not avail of the defence available under Section 73A of the Bills of
Exchange Act 1949. Section 73A of the Bills of Exchange Act 1949 stated that notwithstanding
section 24, where a signature on a cheque is forged or placed thereon without the authority of
the person whose signature it purports to be, and that person whose signature it purports to be
knowingly or negligently contributes to the forgery or the making of the unauthorized
signature, the signature shall operate and shall be deemed to be the signature of the person it
purports to be in favour of any person who in good faith pays the cheque or takes the cheque
for value. The bank had contended by way of defence that the plaintiff had, by their acts or
omission, knowingly or negligently contributed to the complained forgery or the making of the
unauthorised signatures. In our opinion, the CIMB Bank Bhd must liable for conversion of
Panaron Control Sdn Bhd’s monies. Panaron Sdn Bhd negligently contributed to forgery
because the managers should check the bank statements carefully if there is any mistakes they
must reported to the CIMB Bank Bhd immediately.
4.0 Bill of exchange cases in Malaysia

Based on Bills of Exchange Act 1949, Section 73A refers to knowingly or negligently
facilitating forgery. Section 73A stated that there is notwithstanding of Section 24, where a
signature on a cheque is forged or placed thereon without the authority of the person whose
signature it purports to be, and that person whose signature it purports to be knowingly or
negligently contributes to the forgery or the making of the unauthorized signature, the signature
shall operate and shall be deemed to be the signature of the person it purports to be in favour
of any person who in good faith pays the cheque or takes the cheque for value.

In the case of Prima Nova Sdn Bhd V. Affin Bank Bhd which referred to the
Section73A. The first issue is whether customer must inform bank about stolen cheques in a
timely manner or not? The second issue raised whether customer knowingly or negligently
contributed to forgery or not? The plaintiff operated a current account with the defendant. A
letter dated 18 November 2003 was issued by the plaintiff to the defendant to cancel several
cheques of the account which is actually 'the Stolen Cheques'. On or about 13 November 2003
the plaintiff's premises was broken into and burgled where the Stolen Cheques had been stolen.
The plaintiff claimed that the signatures appearing on the Stolen Cheques were forgeries. The
plaintiff commenced this action seeking to recover from the defendant the amounts paid out on
the Stolen Cheques. The defendant claimed that by clause 4.2 of the Rules and Regulations
Governing Operation of Current Account ("the Rules and Regulations"), the defendant was not
responsible for any loss or damage occasioned by reason of any delay or omission in executing
stop payment instruction by the plaintiff. The defendant also relied on section 73A of the Bills
of Exchange Act 1949 (CLJ Legal Network Sdn Bhd, 2019).

However, the judgement from the court stated that the evidence recited in paras 24
herein affords ample evidence of negligence on the part of the appellant under the wider duty
of care introduced by section 73A. In the judgment, the contents of this paragraph also supports
the conclusion that the appellant was in breach of the 'Greenwood duty' in failing to report the
stolen cheques until all of the cheques had been honoured by the respondent.

In our opinion, a customer must inform the bank about stolen cheques in a timely
manner so that bank able to make a correction from their mistakes on the bank statement of
customer immediately without delay in order to reduce forgeries. We think that customer also
negligently contributed to the forgery because they did not alert about the amount of account
balances.
5.0 Conclusion

Exporting often involves a unique set of risks that may be unfamiliar to business owners
who are used to trading domestically. Separate laws and customs between states, combined
with longer and more complex transport routes and methods, can make exporting a lot more
difficult than trading within a country.

A bill of exchange helps to counter some of the risks involved with exporting. Long-
term trading arrangements between firms in different countries can be badly effected by
exchange rate fluctuations, so the fixed payment terms laid out in a bill of exchange provides
exporters with the assurance of a fixed price.

Bill of exchange also provides an exporter with protection. By drawing up a bill of

exchange with their bank and submitting it to their importer’s bank, an exporter gains a
contingent agreement that it will not have to chase its importer for payment if that company
fails to honour the agreement and pay its bill.
References:-
Textbook: Banking law in practice Mahendra Tiwari

Website :

https://www-cljlaw-
com.eserv.uum.edu.my/Members/DisplayCase.aspx?CaseId=2987786499&SearchId=5psb

https://www-cljlaw-
com.eserv.uum.edu.my/Members/DisplayCase.aspx?CaseId=2989621507&SearchId=psb-98

https://www-cljlaw-
com.eserv.uum.edu.my/Members/DisplayCase.aspx?CaseId=2977759490&SearchId=8psb

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20204%20-
%20Bills%20of%20Exchange%20Act%201949.pdf