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Meaning
Characteristics of a Negotiable
Instrument
1.
2.
3.
4.
Characteristics of a Negotiable
Instrument
5.
a.
b.
c.
d.
Characteristics of a Negotiable
Instrument
Order of indorsement The indorsement appearing upon a
negotiable instrument are presumed to have been made in the order
in which they appear thereon.
f.
Stamp When an instrument has been lost, it is presumed that it
was duly stamped.
g.
Holder presumed to be a holder in due course Every holder of a
negotiable instrument is presumed to be a holder in due course.
h.
Proof of protest In a suit upon an instrument which has been
dishonoured, the Court, on proof of the protest, presumes the fact of
dishonour, until such fact is disproved.
The presumptions are rebuttable by evidence. If anyone challenges any
of these presumptions, he has to prove his allegations. The
presumptions would not be applicable to a case where an instrument has
been obtained by an offense, fraud or unlawful consideration.
e.
Mr. Arjun
Essential features
An instrument is a promissory note if there are present the following
elements:1. Writing : The first essential is that all negotiable instruments must be in
writing. An oral engagement to pay a sum of money is not an instrument,
much less negotiable.
2. Promise to pay : Secondly, it must contain a promise to pay. A mere
acknowledgement of debt is not a promissory note. I.O.U., E.A. Gay, the
sum of seventeen dollars for value received. Has been held not to be a
promissory note. A mere receipt for money does not amount to a
promissory note, even though it might contain the terms of repayment. In
Mange Lal Vs. Lal Chand, AIR 1995, Rajasthan High Court has held
that a document which was in the form of a letter acknowledging receipt of
certain sums and affixed with 20 paise revenue stamp was held to be a
receipt and not a promissory note. In the case of Muthu Sastrigal Vs.
Visvanatha AIR 1914 Madras High Court , it has been held that a
document containing the following words Amount of cash borrowed of you
by me is Rs.350. I shall in two weeks time returning this sum with interest,
get back this letter. Has been held to be a promissory note because there
is an unconditional undertaking to repay the borrowed money.
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Essential features
Essential features
12
Essential features
5. Certainties of parties:
Fifthly, the parties to the instrument must be designated with
reasonable certainity. There are two parties to a promissory note, viz ,
the person who make the note and is known as the maker and the
payee to whom the promise is made. Both the maker and the payee
must be indicated with certainity on the face of the instrument. In Brij
Raj Sharan Vs. Saha Raghunandan Sharan AIR 1955, Rajasthan HC,
a letter was addressed to A continuing the following statement.
In your account Rs. 4668 15 0 are due from my son Mahesh
Chandra, I shall pay the amount by December 1948. You rest
assured.
It was contended that it should not be treated as a promissory note
because the person to whom the amount was to be paid was not
indicated therein. However, C J Wanchoo, holding it be a good note,
said By looking to illustration b of Section 4 it I cleared that if the
person to whom the payment is to be made is certain from the words
used in the document, the fact that the name is not mentioned after
the words I shall pay would not mean that the payee is uncertain.
Since the letter was addressed to A it was clear that A was intended to
be the payee
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Essential features
(iii)
(iv)
(v)
14
15
Rs. 500/2012
Three months after date pay to Krishna or order the sum of rupees five
hundred, for value received
To
Ram
Pune
Accepted
Krishna
Stamp
Sd/-
Shyam
17
18
But if the language of the draft does not show any order to pay, the
draft will not be a bill of exchange. In Little Vs Slackford, the
defendant issued a paper addressed to the plaintiff in the following
words:
Mr Little, please to let the bearer have 7 , and to place them to my
account, and you will oblige. Yours humble servant, R. Slackford.
It was held that the paper does not purport to be a demand made by
a party having a right to call on the other party to pay. The fair
meaning is you will oblige by doing it.
The order must be such as to require the other to pay the money at
all events. Merely to give him the authority to pay is not sufficient.
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Bill of Exchange
In a promissory note there are two In a bill of exchange there are three parties
parties i.e. the maker and payee
the drawer, drawee and payee
A promissory
note
contains
unconditional promise to pay
The maker of a promissory note is the The drawer of a bill of exchange is the
debtor himself and he undertakes to pay. creditor who directs the drawee i.e. his
debtor to pay.
A promissory note cannot be made In a bill the drawer and the payee may be
payable to the maker himself.
one and the same person
The liability of the maker of a promissory The liability of the drawer of a bill is
note is primary and absolute
secondary and conditional as the bill needs
acceptance.
A note needs no acceptance as it is A bill payable after a certain period must be
signed by the person who is liable to pay accepted by the drawee before it is
presented for payment.
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Section 6 : Cheque
21
Section 6 : Cheque
Explanation I For the purpose of this section, the
expression
(a) a cheque in the electronic form means a cheque
which contains the exact mirror image of a paper
cheque, and is generated, written and signed in a secure
system ensuring the minimum safety standards with the
use of digital signature (with or without biometrics
signature) and asymmetric crypto system ;
(b) a truncated cheque means a cheque is truncated
during the course of a clearing cycle (truncation means
make short), either by the clearing house or by the bank
whether paying or receiving payment, immediately on
generation of an electronic image for transmission,
substituting the further physical movement of the cheque
in writing.
Presented by Advocate N.P.Noronha
22
Section 6 : Cheque
24
25
Cheque
does
not
require
Crossing of cheques
There are two types of cheques
Open cheque
Crossed cheques
Open cheque A cheque which is payable in cash across the counter
of a bank is called an open cheque. When an open cheque is in
circulation it has a great risk, as if the holder loses it, its finder can go to
the bank and encash it.
Crossed cheque a crossed cheque is one on which two parallel lines
are drawn. The payment of such a cheque can be obtained only
through a banker. Thus crossing is a direction to the drawee bank to
pay the amount of money on a crossed cheque generally to a banker or
a particular banker so that the party who obtains the payment of the
cheque can be easily traced.
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Types of Crossing
(4)Not negotiable
(1)
1.
28
Types of Crossing
2.
29
Types of Crossing
30
Not negotiable
31
33
34
Who is a Payee
35
What is Indorsement
36
37
Rs. 500/-
Three months after date pay to Krishna or order the sum of rupees five
hundred, for value received
To
Ram
Pune
Accepted
Krishna
Stamp
Sd/Shyam
In case of need
Punjab National Bank
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Holder
1.
To possession and
To receive or recover the amount due thereon
from the parties.
2. In order to be entitled to receive or recover the
amount due, the holder must be
named as payee or
named as the indorsee in case the instrument is payable
to order.
The bearer in case the instrument is payable to bearer.
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2.
3.
40
Negotiation
The transfer of an instrument by one party to
another so as to constitute the transferee a holder is
called negotiation.
One of essential characteristics of a negotiable
instrument is that it is freely transferable from one
person to another.
Transfer may take place by
1. Negotiation or
2. Assignment
41
Transfer by Negotiation
1.
2.
Negotiation by delivery
Assignment
44
Section 15 Indorsement
45
2.
3.
47
Types of Indorsements
1.
2.
3.
4.
5.
48
49
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Restrictive Indorsement
An indorsement is said to be restrictive
when it prohibits or restricts the further
negotiability of a negotiable instrument.
The indorser may, by express words, restrict
or exclude the right of future negotiation or
merely constitute the indorsee an agent to
indorse the instrument, or receive its
contents for the indorser or some other
specified person.
Presented by Advocate N.P.Noronha
51
Restrictive Indorsement
a)
b)
c)
d)
e)
f)
Illustrations
B signs the following endorsements on different negotiable
instruments payable to bearer:
Pay the contents to C only
Pay C for my use.
I pay C or order for the account of B
The within must be credited to C
These endorsements exclude the rights of further
negotiation by C
Pay C.
Pay C value in account with the Oriental Bank.
These endorsements do not exclude the rights of further
negotiation by C.
Presented by Advocate N.P.Noronha
52
Conditional Indorsement
u54
Partial Indorsement
55
56
57
Protest
58
Protest
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Contents of Protest
Section 101 requires a protest to contain certain particulars
for its validity. The particulars are as follows:
1. It should contain the instrument itself or a literal transcript
of it and of everything written or printed on the instrument.
2. The name of the person for whom and against whom the
instrument has been protested, that is, the name of the
party making the protest and against whom the protest is
made.
3. It should contain a statement that acceptance, or payment
or better security has been demanded from such person by
the notary public, the terms of his answer, or a statement
that he gave no answer or that he could not be found.
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Contents of Protest
4.
5.
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Dishonour Of Cheques
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Dishonour Of Cheques
Provided that nothing contained in the section shall apply
unless
(a)
The cheque has been presented in the bank within a
period of 6 months from the date on which it was drawn
or within the period of its validity, which ever is earlier.
(b)
The payee or the holder in due course of the cheque,
as the case may be, makes a demand for the payment
of the said amount of money by giving a notice, in writing,
to the drawer of the cheque within 30 days of the receipt
of information by him from the bank regarding the return
of the cheque as unpaid; and
(c)
The drawer of such cheque fails to make the payment
of the said amount of money to the payee or , as the
case may be , to the holder in due course of the cheque ,
within 15 days of the receipt of the said notice.
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Dishonour Of Cheques
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Dishonour Of Cheques
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Dishonour Of Cheques
Ingredients of Liability under Section 138
The ingredients of liability under the Section have been stated in terms of
the following points.
The cheque is drawn on the bank for the discharge of a legally
enforceable debt or other liability.
The cheque is returned by the bank unpaid.
The cheque is returned unpaid because the amount available in the
drawers account is insufficient for paying the cheque.
The payee has given a notice to the drawer claiming the amount within
30 days of the receipt of the information form the bank.
The drawer has failed to pay within 15 days from the date of the receipt
of the notice.
If the aforementioned ingredients are satisfied then the person who has
drawn the cheque shall be deemed to have committed an offence.
Punishment
Maximum 2 years imprisonment on the defaulting party with fine which
may extend to twice the amount of cheque or with both.
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