LEGAL ASPECTS OF BUSINESS

SEMESTER II
MMS (B)
GROUP NO 4
BATCH 2014-2016

Negotiable Instruments
as
Facilitators for Trade and
Commerce
&
10 Years taking forward

Chintan
Mhatre
82

Vinay
Mhatre
84

Prachiti
Niwate
92

Tushar
Oswal
94

GROUP
MEMBERS

Riddhi
Palkar
96

Sumed
h Munje
86

Abhiskek
Nagdeve 88

Aadya
Naik

Vivek Pange
98

Amit
Paratwar

Conclusion
Suggestions
Recommendati
ons

Primary
Research
On Scope
Of
Negotiable
Instrument
s

Introductio
n to
Negotiable
Instrument
s

Evolution of
Negotiable
Instruments

PROJECT
CONTEN
TS

Revolution
in
Negotiable
Instrumen
ts and
Global
Trade

Types of
Negotiabl
e
Instrumen
ts

The
Negotiable
Instrument
Act, 1881

CHAPTER I
Introduction to
Negotiable
Instruments

INTRODUCTION
The term Negotiable Instrument is made up of two
parts,
Negotiable and Instrument
The word, negotiable means being transferable from

one person to another

The word instrument signifies any written document

through which a right is created in favor of some person.

INTRO TO NEGOTIABLE INSTRUMENTS

INTRO TO NEGOTIABLE INSTRUMENTS

INTRO TO NEGOTIABLE INSTRUMENTS

NEED FOR NEGOTIABLE INSTRUMENTS

Helpful in Dealing

Business on Credit bases

Cash Free Asset
Instant receipts and

payments of the dealings

and transactions

FEATURES OF NEGOTIABLE INSTRUMENTS

Free Transferability

FEATURES OF NEGOTIABLE INSTRUMENTS

Free Transferability

FEATURES OF NEGOTIABLE INSTRUMENTS

Free Transferability

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due Course

FEATURES OF NEGOTIABLE INSTRUMENTS

Holder in Due

Course can Sue in

his own name
Must be in writing &

must bear signature

Payee must be a

certain person

Promise for payment

of money only
Time of payment

must be certain
Delivery of the

instrument is
essential

CHAPTER II
Evolution of
Negotiable
Instruments

EVOLUTION OF NEGOTIABLE
INSTRUMENTS

Barter Exchange
Pastoralforms
stage
(Earliest
of
civilization)

Agricultural stage
Grain Barter
(9000 - 8000 BC)

Livestock (8000
- 6000 BC)

EVOLUTION OF NEGOTIABLE
INSTRUMENTS

Crude
Metal
Coins
Handicraft stage
(1000 - 600 BC)

Guild stage
Precious Metal Coins
(700 BC)

EVOLUTION OF NEGOTIABLE
INSTRUMENTS

Domestic
stage
Paper
Money
(806)
Factory stage
Gold (1816)

EVOLUTION OF NEGOTIABLE
INSTRUMENTS

Industrial
Revolution
Gold Bullion
(1900)

Post Great Depression

Coins and Paper Money
(1921 onwards)

BIRTH OF INDIAN ACT

Drafted in 1866 by the 3rd India Law
Commission
Redrafted in 1877
Bill was revised by a Select Committee
Fourth time was introduced in the Council
Finally bill passed Negotiable Instruments

respect to
Economy & Growth of Commerce
Evolution of commerce is a never ending

process. Almost every day new

experiments in its mechanism are made.
New forms and methods are being evolved

in both socialist and capitalist countries, in

both developed and developing nations.

CHAPTER III
The Negotiable
Instruments Act
1881

THE NEGOTIABLE INSTRUMENTS ACT, 1881

SECTION 13
A negotiable instrument means a promissory note, bill of
exchange or cheque, payable either to order or to bearer.
It may, however, be clarified here that Section 13 does not
exclude any other instrument from being treated as a
negotiable instrument, provided, of course, it does have
the characteristics of being negotiable.

RESERVE BANK OF INDIA ACT, 1934

Section 31
no person (other than the Reserve Bank of India or the Central
Government), can draw, accept, make or issue any bill of
exchange or a promissory note payable to bearer on demand.

Section 32
a punitive clause which provides that if a person issues any
bill of exchange or a promissory note, payable to the bearer on
demand, shall be punishable with fine.

ESSENTIALS UNDER SECTIONS 118 & 119

Consideration

Title

Money

Notice

Regarding Date
Regarding

Acceptance
Writing and Signature

Evidence
Regarding Dishonor

of an Instrument

NEGOTIABLE INSTRUMENTS
(AMENDMENT AND MISCELLANEOUS PROVISIONS)
ACT, 2002
Section 138
Dishonor of cheque for insufficiency, etc.,
of funds in the account
Doubling the imprisonment term from one year to two years
the period of time to issue demand notice to the drawer

from 15 days to 30 days

NEGOTIABLE INSTRUMENTS
(AMENDMENT AND MISCELLANEOUS PROVISIONS)
ACT, 2002

Section 141
Offences by companies
If company commits an offence, every person

who, at the time the offence was committed, was

in charge of, and was responsible to the company
shall be deemed to be guilty of the offence

NEGOTIABLE INSTRUMENTS
(AMENDMENT AND MISCELLANEOUS PROVISIONS)
ACT, 2002
Section 143
Achieve speedy trial by applying
provisions of CrPC
(Code of Criminal
Procedure)
Section 144
Deals with the service of summons
Section 145
Contemplates evidence on affidavit

NEGOTIABLE INSTRUMENTS
(AMENDMENT AND MISCELLANEOUS PROVISIONS)
ACT, 2002
Section 146
Provides for presumption to bank memorandums

Section 147
Provides for compounding of offences under this
Act

CHAPTER IV
Types of
Negotiable
Instruments

HUNDIS
A Hundi is a financial instrument developed in
Medieval India for use in trade and credit transactions

Remittance instruments
Credit instruments
Trade transactions

TYPES OF HUNDIS
Dhani-jog Hundi
Sahyog Hundi

Jokhim-Hundi

Muddati Hundi

Jawabi Hundi

Darshani Hundi

Khaka Hundi
Khota Hundi

DECODING OF HUNDIS
1) Pre-printed

revenue stamp

2) Amount to be pay

3) Name of the

broker

Remittance instruments

4) Signature of the

Drawer

Credit instruments
Trade transactions
3
7

5) Due date
6) Date of

documentation

PROMISSORY NOTE
SECTION 4
An instrument in writing (not being a bank note or a
currency note) containing an unconditional undertaking,
signed by the maker, to pay a certain sum of money only
to or to the order of a certain person or to the bearer of
the instrument.
Parties involved for Promissory Notes

Drawer

Endorser

Payee

Endorsee

DECODING OF PROMISSORY NOTE

1) Pre-printed

revenue stamp

2) Amount to be pay

3) Name of the

broker
4) Signature of the

Drawer

3
7

5) Due date
6) Date of

documentation

REQUISITES OF A PROMISSORY NOTE

Must be in writing
Stamped as per Indian

Stamp Act
Undertaking or promise

to pay
Acknowledgement of

indebtedness is not
enough

Not an conditional

promise
Promise to pay

money only
Payable on

demand

DISHONOR OF PROMISSORY NOTES

SECTION 93
When a promissory note, bill of exchange or
cheque is dishonored by non-acceptance or nonpayment, the holder thereof, or some party
thereto who remains liable thereon, must give
notice that the instrument has been so
dishonored to all other parties whom the holder
seeks to make severally liable thereon.

CASELETTE
The suit has been filed by Aditya against Dhruv on the basis that there was
loan transaction between Aditya and Dhruv under which Dhruv had borrowed
a sum of Rs.50,00,000/- and executed 5 promissory notes, each one for a sum
of Rs.10,00,000/-, with a promise to repay the said amount with interest at
the rate of 18% p.a. It is the further case of Aditya that in addition to the
promissory notes, Dhruv issued 5 cheques each one for a sum of Rs.10,
00,000/-, with a specific understanding that as and when each cheque will be
honored on presentation, corresponding promissory note will be discharged
on payment of interest on the principal amount of the promissory note
calculated from 06.03.2007 till the date of encashment of the cheque.

CASELETTE
On 24.10.1994, the Satvinder had borrowed a sum of

Rs.50,000/- from the ruby agreeing to repay the same

with interest at Rs.1.50p for Rs.100/- per month and
had executed a promissory note in favour of ruby.
Even after repeated demands by ruby and issuance of
legal notice on 03.04.1997, Satvinder did not pay any
amount, but had sent a reply notice dated 07.04.1997
with false allegations. Hence, ruby filed this suit for
recovery of a sum of Rs.61,200/- (Principal Rs.50,000/+ interest Rs.11,200/-) from the Satvinder.

BILLS OF EXCHANGE
SECTION 5
An unconditional order in writing, addressed 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 a
specified person, or to bearer

PARTIES INVOLVED IN BILLS OF EXCHANGE

Drawer

Payee

Drawee

Endorser

Acceptor

Endorsee

BUSINESS ACTIVITY UNDER THE INFLUENCE

OF
BILL OF EXCHANGE
Mr. B - Retailer

Bill Accepted

The Bank pays to

Mr. A the present
value of the bill less
Commission or
Interest

k
n
Ba

as
c
s
e
v
ei r. B
c
M
re

m
o
r
f

Mr. B accepts the

Bill, Signs it and
returns to Mr. A

Goods

Mr. A Draws the

Bill

Banks Pays
10,000

Bill
Discounted

Mr. A Manufacturer
Mr. A agrees to
supply Mr. B with
goods if he accepts
a 90 days bill for the
full price of $10,000.

The general public

can now meet their
demands through
Mr. B

DECODING BILL OF EXCHANGE

1
2
3

1)Date & Place

2)Amount
3)Period of time

before the date

of Maturity
4)Drawee

5)Drawer
6)Intermediary

Bank

REQUISITES OF BILLS OF EXCHANGE.

3 parties to a bill
Unconditional order to

pay

Duely signed by the

drawer

Accepted by the drawee.

Order payment of a sum

certain in money

Not in goods or services

Payable on demand
Payable to or to the

order of a specified
person.

SPECIMEN BILL OF EXCHANGE

Rs. 10,000/-

New Delhi
November 14, 2002

I, Ramesh , s/o Sadanand of Surat, Gujarat promise to pay Sashikant, s/o Sunil
Kumar of Ahmedabad, Gujarat or order, on demand, the sum of Rs 10,000/- (Rupees
Ten Thousand only) with interest at the rate of 10 percent per annum, for value
received.
Sd/- Ramesh
Stamp
To
Sashikant
Ahmedabad, Gujarat

TYPES OF BILLS OF EXCHANGE:

Types of bill of exchange on the Basis of Period
Demand Bills of Exchange
Term Bills of Exchange

Types of Bills of Exchange on the Basis of Object

Trade Bills
Accommodation Bills

DISCOUNTING AND ENDORSEMENT OF

BILL OF EXCHANGE
Discounting of bill of exchange
Endorsement of bill of exchange
Bill sent to Bank for collection

CHEQUE
SECTION 6
A Cheque is a bill of exchange drawn on
aspecifiedbanker and not expressed to be payable
otherwise than on demand but it is invariably drawn as a
demand bill of exchange only, herein the drawee is
always a specific branch of a specified bank and the
drawer is the account holder of the same branch of the
bank

REQUISITES OF A CHEQUE.
Instrument in Writing
Unconditional Order
Payable on Demand
Certain Sum of Money
Payee must be certain
Avoidance of cancellations

DIFFERENT KINDS / TYPES OF CHEQUES

Bearer Cheque
Order Cheque
Uncrossed /

Open Cheque
Crossed
Cheque

Anti-Dated

Cheque
Post-Dated
Cheque
Stale Cheque
Multilated cheque
E-Cheque

TYPES OF CHEQUE CROSSING

TYPES OF CHEQUE CROSSING

DECODING THE CHEQUE

1)Date line
2)Or Bearer / or

Order
3)Payee line
4)Rupee box
5)Amount in words
6)Account Number
7)Signature line
8)Drawee contact

information and
logo

DECODING THE CHEQUE

Cheque Number:
MICR Code
Bank account Number
Transaction ID

DISHONOR OF CHEQUES SECTION 138

Dishonor of cheque for insufficiency
Conditions
Presented to bank within 3 months
30 days of the receipt of information
15 days of the receipt

GROUNDS FOR DISHONOR OF CHEQUE

Insufficient Funds
Account Closed
Stop Payment instructions
Not a clearing member
Post Dated Cheque
Blank Cheque
Admission of signature on the cheque is not

equivalent with admission of execution

TYPES OF FORGERY SEEN

Signature of a real (existing)

person
Signature even of a fictitious
(non-existing) person
Even if a person has signed his
own name on the instrument

CASELETTE
Police on Monday arrested a man for forging a Noida resident's signature on a cheque
and withdrawing Rs 90,000 from his bank account. The accused was caught when he
went to withdraw another Rs 3 lakh from the victim's bank account. Police said the
victim, identified as Radhey Shyam Gupta, owns a building material supply shop in
Sector 9. The victim alleged that the conman had illegally withdrawn Rs 90,000 from
his account on Sunday. "On Saturday, a person approached me and said that he
wanted to buy cement from him. He took the quotation on which I signed. He said to
give my account number to transfer the money, so I it to him," said Gupta. On Sunday,
the victim got an SMS that Rs 90,000 was withdrawn from his account. He immediately
informed the bank and police. During investigation, police found that a person had

Revolution in
Negotiable Instruments
and Global Trade
CHAPTER V

Revolution in Negotiable Instruments

Digital Cash
Smart Card
Electronic Fund Transfer
Digital Cheque
Biometrics
Behavioral Biometrics
Physical Biometric

Changing face of Trade and Commerce

Advance Payment
Direct Payment
Documentary Collection
Documentary Credit

Statistical Data on Disposal and Pendency of

Negotiable Instruments
19831

18972

20000

16943

18000
16000
14000
12000
10000

7761

7750

8000

7700

8096

8202

7072

6000
4000
2000
0

2011

2012

Institution

Disposal

2013

Pendency

Institution, Disposal and Pendency of

Negotiable Instrument Act Cases in Four
High Courts
MADRAS

MUMBAI

Institution; 22%

Institution; 19%

CALCUTTA
Pending; 60%

Disposal; 21%

DELHI

Pendency; 58%

Disposal; 19%

Institution; 16%
Institution; 18%
Disposal; 15%
Pendency; 60% Disposal; 22%

Pendency; 69%

CONCLUSION 10 YEARS GOING FORWARD

Globally, there are many options to dematerialize these

financial instruments, but a very few can provide

guaranteed security to the users information and
money.

In order to maintain the security level & to save the time

Government needs to use more resources, do research

about the latest facilities, test them, regularize it &

spread awareness about these facilities.

SUGGESTIONS
Social networking and Negotiable
Instruments
Twitter
Email
Facebook
Mobile wallets
Biometrics

RECOMMENDATIONS
Governments and some companies are

moving away from strictly financial

assessments of wealth and incorporating
more quality of life measures, and social
strengths are big components.

Far future companies will become much more

integrated into the fabric of communities.

CASE STUDY
Vijay Mallya vs. Delhi International Airport
Delhi High Court did not hear liquor baron Vijay Mallya's plea challenging
summons issued to him by a trial court in several cheque-bouncing cases in
which he had to appear on February 20, 2012. Justice Sunil Gaur fixed May 8 for
hearing of the matter after the counsel for the parties requested adjournment.
The trial court had summoned Mallya as an accused after GMR-led Delhi
International Airport (DIAL), which operates the capital's Indira Gandhi
International Airport, had moved the trial court after a cheque amounting to Rs
one crore issued by Kingfisher Airlines Ltd on February 22, 2012 was returned
to them a month later containing the remarks "fund insufficient".

CASE STUDY
P.N. Khanna vs. Bank of India
Brief facts of the case are that complainant/ appellant had one account
with opposite party/ respondent and one account with Allahabad Bank.
He filled cheque No. 839595 of Allahabad Bank in his name for Rs.
8,16,000/- and handed over the cheque to Officer of the opposite party
for clearance, who in turn called his peon Rajiv Kumar and got the
cheque dropped in the drop box and counter slip was given to the
complainant. Amount of this cheque was not credited in his account
and on enquiry from Allahabad Bank, he came to know that the cheque

CASE STUDY
Mohd Azharuddin vs. Sanjay Solanki
The Delhi court issued a fresh non-bailable warrant (NBW)
against cricketer-turned Congress MP Mohd Azharuddin
after he failed to appear before it in connection with a
cheque bounce case. Metropolitan magistrate Vikrant Vaid
issued the warrant against the former captain of the Indian
cricket team for March 7 after he failed to appear before it
in pursuance of the earlier NBW issued against him on

Thank you