1: INTRODUCTION

In India, there is reason to believe that instrument to exchange were in use from early times and we find that papers representing money were introducing into the country by one of the Mohammedan sovereigns of Delhi in the early part of the fourteenth century. The word 'hundi', a generic term used to denote instruments of exchange in vernacular is derived from the Sanskrit root 'hund' meaning 'to collect' and well expresses the purpose to which instruments were utilized in their origin. With the advent of British rule in India commercial activities increased to a great extent. The growing demands for money could not be met be mere supply of coins; and the instrument of credit took the function of money which they represented.

Before the enactment of the Negotiable Instrument Act, 1881, the law of negotiable instruments as prevalent in England was applied by the Courts in India when any question relating to such instruments arose between Europeans. When then parties were Hindu or Mohammedans, their personal law was held to apply. Though neither the law books of Hindu nor those of Mohammedans contain any reference to negotiable instruments as such, the customs prevailing among the merchants of the respective community were recognized by the courts and applied to the transactions among them. During the course of time there had developed in the country a strong body of usage relating to hundis, which even the Legislature could not without hardship to Indian bankers and merchants ignore. In fact, the Legislature felt the strength of such local usages and though fit to exempt them from the operation of the Act with a proviso that such usage may be excluded altogether by appropriate words. In the absence of any such customary law, the principles derived from English law were applied to the Indians as rules of equity justice and good conscience.

The history of the present Act is a long one. The Act was originally drafted in 1866 by the India Law Commission and introduced in December, 1867 in the Council and it was referred to a Select Committee. Objections were raised by the mercantile community to the numerous deviations from the English Law which it contained. The Bill had to be redrafted in 1877. After the lapse of a sufficient period for criticism by the Local Governments, the High Courts and the chambers of commerce, the Bill was revised by a Select Committee. In spite of this Bill could not reach the final stage. In 1880 by the Order of the Secretary of State, the Bill had to be

referred to a new Law Commission. On the recommendation of the new Law Commission the Bill was re-drafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was passed into law in 1881 being the Negotiable Instruments Act, 1881.

Negotiable Instruments
Exchange of goods and services is the basis of every business activity. Goods are bought and sold for cash as well as on credit. All these transactions require flow of cash either immediately or after a certain time. In modern business, large number of transactions involving huge sums of money takes place every day. It is quite inconvenient as well as risky for either party to make and receive payments in cash. Therefore, it is a common practice for businessmen to make use of certain documents as means of making payment. Some of these documents are called negotiable instruments.

Definition of Negotiable Instrument

The term 'negotiable instrument' has been defined as- A 'negotiable instrument' means a promissory note, bill of exchange or cheque payable either to order or to bearer." The word 'negotiable' means transferable from one person to another and the term 'instrument' means 'any written document by which a right is created in favor of some person.' Thus, the negotiable instrument is a document by which rights vested in a person can be transferred to another person in accordance with the provisions of the Negotiable Instruments Act, 1881.

Meaning of Negotiable Instruments

The concept of negotiability is one of the most important features of commercial paper. A negotiable instrument is a written document, signed by the maker or drawer, and containing an unconditional promise to pay (or order to pay) a certain sum of money on delivery, or at a definite time, to the bearer (or to the order). Example Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three months credit. To be sure that Prashant will pay the money after three months, Pitamber may write an order addressed to Prashant that he is to pay after three months, for value of goods received by him, Rs.10,000/- to Pitamber or anyone holding the order and presenting it before

him (Prashant) for payment. This written document has to be signed by Prashant to show his acceptance of the order. Now, Pitamber can hold the document with him for three months and on the due date can collect the money from Prashant. He can also use it for meeting different business transactions. For instance, after a month, if required, he can borrow money from Sunil for a period of two months and pass on this document to Sunil. He has to write on the back of the document an instruction to Prashant to pay money to Sunil, and sign it. Now Sunil becomes the owner of this document and he can claim money from Prashant on the due date. Sunil, if required, can further pass on the document to Amit after instructing and signing on the back of the document. This passing on process may continue further till the final payment is made. In the above example, Prashant who has bought books worth Rs. 10,000/- can also give an undertaking stating that after three month he will pay the amount to Pitamber. Now Pitamber can retain that document with himself till the end of three months or pass it on to others for meeting certain business obligation (like with Sunil, as discussed above) before the expiry of that three months time period. Thus, we can say negotiable instrument is a transferable document, where negotiable means transferable and instrument means document. To elaborate it further, an instrument, as mentioned here, is a document used as a means for making some payment and it is negotiable i.e., its ownership can be easily transferred.

Features of Negotiable Instruments After discussing negotiable instruments let us sum up their features as under 1. A negotiable instrument is freely transferable. Usually, when we transfer any property to somebody, we are required to make a transfer deed, get it registered, pay stamp duty, etc. But, such formalities are not required while transferring a negotiable instrument. The ownership is changed by mere delivery (when payable to the bearer) or by valid endorsement and delivery

(when payable to order). Further, while transferring it is also not required to give a notice to the previous holder. 2. Negotiability confers absolute and good title on the transferee. It means that a person who receives a negotiable instrument has a clear and undisputable title to the instrument. However, the title of the receiver will be absolute, only if he has got the instrument in good faith and for a consideration. Also the receiver should have no knowledge of the previous holder having any defect in his title. Such a person is known as holder in due course. For example, suppose Rajiv issued a bearer cheque payable to Sanjay. It was stolen from Sanjay by a person, who passed it on to Girish. If Girish received it in good faith and for value and without knowledge of cheque having been stolen, he will be entitled to receive the amount of the cheque. Here Girish will be regarded as holder in due course. 3. A negotiable instrument must be in writing. This includes handwriting, typing, computer printout and engraving, etc. 4. In every negotiable instrument there must be an unconditional order or promise for payment. 5. The instrument must involve payment of a certain sum of money only and nothing else . For example, one cannot make a promissory note on assets, securities, or goods. 6. The time of payment must be certain. It means that the instrument must be payable at a time which is certain to arrive. If the time is mentioned as when convenient it is not a negotiable instrument. However, if the time of payment is linked to the death of a person, it is nevertheless a negotiable instrument as death is certain, though the time thereof is not. 7. The payee must be a certain person. It means that the person in whose favour the instrument is made must be named or described with reasonable certainty. The term person includes individual, body corporate, trade unions, even secretary, director or chairman of an institution. The payee can also be more than one person. 8. A negotiable instrument must bear the signature of its maker. Without the signature of the drawer or the maker, the instrument shall not be a valid one. 9. Delivery of the instrument is essential. Any negotiable instrument like a cheque or a promissory note is not complete till it is delivered to its payee. For example, you may issue a cheque in your brothers name but it is not a negotiable instrument till it is given to your brother.

10. Stamping of Bills of Exchange and Promissory Notes is mandatory. This is required as per the Indian Stamp Act, 1899. The value of stamp depends upon the value of the pronote or bill and the time of their payment.

Need for Negotiable Instruments:

1. Negotiable instruments such as cheques, bills of exchange, promissory notes etc. are playing a vital role in today's boosting trade and commerce. Negotiable such as promissory note and specially the bills of exchange are specially made for this purpose. Bills of exchange help many people who do not have the money to spend money as capital in their business. 2. There were the different stages of evolution of business. However it was seen that the growth was very slow and the system was very complex. There were different instruments used to purchase different commodities in different stages. The system of exchange was such that it led to confusion and various complexities. To avoid such confusion and to operate the business activities smoothly negotiable instruments were introduced. 3. Due to the negotiable instruments it became very easy and secure to make payments through cheques.

Objectives Of Negotiable Instruments

1. To study the evolution and revolution of negotiable instruments act. 2. To study negotiable instruments act. 3. To study types of negotiable instruments. 4. To study the differences between the different negotiable instruments. 5. To study the impact of negotiable instruments act 10 years in future. 6. To get a better understanding of negotiable instruments act through case studies.

TYPES & FEATURES OF NEGOTIABLE INSTRUMENTS Types of Negotiable Instruments:

According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque. However many other documents are also recognized as negotiable instruments on the basis of custom and usage, like hundis, treasury bills, share warrants, etc., provided they possess the features of negotiability. In the following sections, we shall study about Promissory Notes (popularly called pronotes), Bills of Exchange (popularly called bills), Cheques and Hundis (a popular indigenous document prevalent in India), in detail.

1.Promissory Note:
Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as 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. Example: Suppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make a document stating that you will pay the money to Ramesh or the bearer on demand. Or you can mention in the document that you would like to pay the amount after three months. This document, once signed by you, duly stamped and handed over to Ramesh, becomes a negotiable instrument. Now Ramesh can personally present it before you for payment or give this document to some other person to collect money on his behalf. He can endorse it in somebody elses name who in turn can endorse it further till the final payment is made by you to whosoever presents it before you. This type of a document is called a Promissory Note

Features of a promissory note:

The features of a promissory note are: i. A promissory note must be in writing, duly signed by its maker and properly stamped as per Indian Stamp Act. ii. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is not enough. For example, if someone writes I owe Rs. 5000/- to Satya Prakash, it is not a promissory note.

iii. The promise to pay must not be conditional. For example, if it is written I promise to pay Suresh Rs 5,000/- after my sisters marriage, is not a promissory note. iv. It must contain a promise to pay money only. For example, if someone writes I promise to give Suresh a Maruti car it is not a promissory note. v. The parties to a promissory note, i.e. the maker and the payee must be certain. vi. A promissory note may be payable on demand or after a certain date. For example, if it is written three months after date I promise to pay Satinder or order a sum of rupees Five Thousand only it is a promissory note. vii. The sum payable mentioned must be certain or capable of being made certain. It means that the sum payable may be in figures or may be such that it can be calculated.

Parties to a Promissory Note:

There are primarily two parties involved in a promissory note. They are i. The Maker or Drawer the person who makes the note and promises to pay the amount stated therein is a drawer. ii. The Payee the person to whom the amount is payable is a payee. In course of transfer of a promissory note by payee and others, the parties involved may be: a. The Endorser the person who endorses the note in favor of another person. b. The Endorsee the person in whose favor the note is negotiated by endorsement. (Endorsement means transfer of any document or instrument to another person by signing on its back or face or on a slip of paper attached to it)

Specimen of a Promissory Note Rs. 10,000/New Delhi 15th March 2013 On demand, I promise to pay Abhay, s/o Sitaram of Meerut or order a sum of Rs 10,000/- (Rupees Ten Thousand only), for value received. To , Abhay Address.. Sd/ Sanjeev Stamp

2.Bill of Exchange:
Section 5 of the Negotiable Instruments Act, 1881 defines a bill of exchange as 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. Example: Suppose Rajiv has given a loan of Rs.10,000 to Sameer, which Sameer has to return. Now, Rajiv also has to give some money to Tarun. In this case, Rajiv can make a document directing Sameer to make payment up to Rs.10,000 to Tarun on demand or after expiry of a specified period. This document is called a Bill of Exchange, which can be transferred to some other persons name by Tarun.

Features of a bill of exchange:

The various features of a bill of exchange are: i. A bill must be in writing, duly signed by its drawer, accepted by its drawee and properly stamped as per Indian Stamp Act. ii. It must contain an order to pay. Words like please pay Rs 5,000/- on demand and oblige are not used. iii. The order must be unconditional. iv. The order must be to pay money and money alone. v. The sum payable mentioned must be certain or capable of being made certain. vi. The parties to a bill must be certain.

Parties to a Bill of Exchange:

There are three parties involved in a bill of exchange. They are: i. The Drawer The person who makes the order for making payment. I ii. The Drawee The person to whom the order to pay is made. He is generally a debtor of the drawer. iii. The Payee The person to whom the payment is to be made. The drawer can also draw a bill in his own name thereby he himself becomes the payee. Here the words in the bill would be Pay to us or order. In a bill where a time period is mentioned, just like

the above specimen, is called a Time Bill. But a bill may be made payable on demand also. This is called a Demand Bill.

Specimen of a Bill of Exchange Rs. 10,000/New Delhi May 2,2001 Five months after date pay Tarun or (to his) order the sum of Rupees Ten Thousand only for value received. To Sameer Address Accepted Sameer Stamp S/d Rajiv

3.Cheques:
The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Actually, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer. Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favour of others, thereby directing the bank to pay the specified amount to the person named in the cheque. Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is always the drawee in case of a cheque.

Features of a cheque:
The features of a cheque are: i. A cheque must be in writing and duly signed by the drawer. ii. It contains an unconditional order. iii. It is issued on a specified banker only. iv. The amount specified is always certain and must be clearly mentioned both in figures and words.

v. The payee is always certain. vi. It is always payable on demand. vii. The cheque must bear a date otherwise it is invalid and shall not be honoured by the bank. Specimen of a Cheque: ......20....... Pay.............................................................................................................. ....................................................................................................... or Bearer Rupees STATE BANK OF INDIA Jawaharlal Nehru University, New Delhi 110067 MSBL 653003 110002056 10

Types of Cheque:
Broadly speaking, cheques are of four types. a) Open cheque, and b) Crossed cheque. c) Bearer cheque d) Order cheque 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 someone 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 other 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.

There is another categorization of cheques which is discussed below: Ante-dated cheques:- Cheque in which the drawer mentions the date earlier to the date of presenting if for payment. For example, a cheque issued on 20th May 2003 may bear a date 5th May 2003. Stale Cheque:- A cheque which is issued today must be presented before at bank for payment within a stipulated period. After expiry of that period, no payment will be made and it is then called stale cheque. Find out from your nearest bank about the validity period of a cheque. Mutilated Cheque:- In case a cheque is torn into two or more pieces and presented for payment, such a cheque is called a mutilated cheque. The bank will not make payment against such a cheque without getting confirmation of the drawer. But if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque. Post-dated Cheque:- Cheque on which drawer mentions a date which is subsequent to the date on which it is presented, is called post-dated cheque. For example, if a cheque presented on 8th May 2003 bears a date of 25th May 2003, it is a post-dated cheque. The bank will make payment only on or after 25th May 2003.

4. Hundis
A Hundi is a negotiable instrument by usage. It is often in the form of a bill of exchange drawn in any local language in accordance with the custom of the place. Sometimes it can also be in the form of a promissory note. A hundi is the oldest known instrument used for the purpose of transfer of money without its actual physical movement. The provisions of the Negotiable Instruments Act shall apply to hundis only when there is no customary rule known to the people.

Types of Hundis There are a variety of hundis used in our country. Let us discuss some of the most common ones. 1. Shah-jog Hundi: This is drawn by one merchant on another, asking the latter to pay the amount to a Shah. Shah is a respectable and responsible person, a man of worth and known in the bazaar. A shah-jog hundi passes from one hand to another till it reaches a Shah, who, after reasonable enquiries, presents it to the drawee for acceptance of the payment. 2. Darshani Hundi: This is a hundi payable at sight. It must be presented for payment within a reasonable time after its receipt by the holder. Thus, it is similar to a demand bill. 3. Muddati Hundi: A muddati or miadi hundi is payable after a specified period of time. This is similar to a time bill. There are few other varieties like Nam-jog hundi, Dhani-jog hundi, Jawabee hundi, Jokhami hundi, Firman-jog hundi, etc.

Section 123-131 & 138

Section 123- Cheque crossed generally
Where a cheque bears across its face an addition of the words "and company" or any abbreviation thereof, between two parallel transverse lines, either with or without the words "not negotiable" that cheque shall be deemed to be crossed generally.

Section 124- Cheque crossed specially

Where a cheque bears across its face an addition of the name of a banker, either with or without the words "not negotiable", that addition shall be deemed to be crossed specially.

Section 125- Crossing after issue

Where a cheque is uncrossed, the holder may cross it generally or specially. Where a cheque is crossed generally, the holder may cross it specially. Where a cheque is crossed generally or specially, the holder may add the words "not negotiable".

Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker, his agent, for collection. Whoever, being a public servant, legally bound as such public servant to apprehend or to keep in confinement any person charged with or liable to apprehended for an offence, intentionally omits to apprehend such person, or intentionally suffers such person to escape, or intentionally aids such person in escaping or attempting to escape from such confinement, shall be punished as follows, that is to say:With imprisonment of either description for a term which may extend to seven years, with or without fine, if the person in confinement, or who ought to have been apprehended, was charged with, or liable to be apprehended for, an offence punishable with death; or With imprisonment of either description for a term which may extend to three years, with or without fine, if the person in confinement or who ought to have been apprehended, was charged with, or liable to be apprehended for, an offence punishable with *[imprisonment for life] or imprisonment for a term which may extend to ten years; or With imprisonment of either description for a term which may extend to two years, with or without fine, if the person in confinement, or who ought to have been apprehended, was charged with, or liable to be apprehended for, an offence punishable with imprisonment for a term less than ten years. * Subs. by Act 26 of 1955, sec.117 and sch., for "transportation for life" (w.e.f.1-1-1956 ).

Section 126- Payment of cheque crossed generally

Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker. Payment of cheque crossed specially.- Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection.

Section 127- Payment of cheque crossed specially more than once

Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.

Section 128- Payment in due course of crossed cheque

Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof.

Section 129- Payment of cheque crossed specially more than once

Any banker paying a cheque crossed generally otherwise than to a banker or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.

Section 130-Cheque bearing not negotiable

A person taking a cheque crossed generally or specially, bearing in either case the words "not negotiable", shall not have and shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had.

Section 138- Dishonour of cheque for insufficiency, etc., of funds in the accounts
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for 2["a term which may extend to two year"], or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) The payee or the holder induce 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, 3["within thirty days"] of the receipt of information by him from the bank regarding the return of the cheques 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 fifteen days of the receipt of the said notice.

Evolution of Payment Systems in India

1. The earliest payment instruments used in India were coins, which were either punch marked or cast in silver and copper.

2. In ancient India, loan deed forms were also used. They were called rnapatra or rnalekhya . They contained details such as the name of the debtor and the creditor, the amount of loan, the rate of interest, the condition of repayment and the time of repayment. The deed was witnessed by a person of respectable means and endorsed by the loan-deed writer.

3. In the Buddhist period loan deeds called inapanna were used. In this era merchants in large towns gave letters of credit to one another. Promissory notes were also used widely.

4. In the Mauryan period, the bill of exchange was used. It was called adesha. It was an order that a banker had to pay to a third person.

5. In the Mughal period, the deeds were called dastawez and were of two types: dastawez-eindultalab which was payable on demand and dastawez-e-miadi which was payable after a stipulated time. In the this period, foreign travellers used the bills of exchange in the then great shopping centres. The Indian bankers also issued bills of exchange on foreign countries, mainly for financing sea-borne trade. Another instrument used was the Pay order. It was called Barattes and was similar to the present day drafts or cheques.

6. In the twelth Century, the Hundis was introduced..

7. . Hundis were used to transfer funds from one place to another to borrow money as bills of exchange

8. Hundis were of various kinds as follows: Darshani Hundi : This was a demand bill of exchange, payable on presentation according to the usage and custom of the place. This was mainly of four types. Sah-jog This was a hundi transferable by endorsement and delivery but payable only to a Sah or to his order. A Sah was a respectable and responsible person, a man of worth and substance who was known in the market. Dhanni-jog This was a demand bill of exchange, payable only to the dhanni, i.e. the payee. This hundi was not negotiable. Firman-jog - Hundis came into existence during the Mughal period. Firman is a Persian word meaning order and therefore, firman-jog hundis were payable to the order of the person named. These hundis could be negotiated with a simple or conditional endorsement. Dekhavanhar - Hundi was a bearer demand bill of exchange, payable to the person presenting it to the drawee. Thus it corresponded to a bearer cheque. Muddati Hundi : This is a bill that is payable after stipulated time or on a given date or on a determinable future date or on the happening of a certain stipulated event. The most important type of muddati hundi was the jokhami hundi, which was a documentary bill of exchange corresponding to the present day bill of lading i.e. The bill of lading is a legal document serves as a receipt of shipment when the good is safely delivered to the predetermined destination

9. The princely states of India had their own distinct coins. An example of this was the Arcot Rupee coin struck by the Nawab of Arcot in the Madras Presidency.

10. By 1740, the Europeans coined this rupee, and the coins came to be known as English, French and Dutch arcots.

11. In 1770, the first public bank-The bank of Hindustan introduced the cheque. 12. In the 18th century paper money, originated with the note issues of private banks as well as semi-government banks. Amongst the earliest issues were those by the Bank of Hindustan,

the General Bank in Bengal and Behar, and the Bengal Bank. Later, three Presidency Banks were established and the job of issuing notes was taken over by them.

13. In 1827 the British introduced the Post. These were Inland Promissory notes issued by the bank on a distant place. They were mainly used by European businessmen for purpose of sending money to someone at a distance.

14. In 1835, the East India Company introduced the Company's Rupee to bring about uniformity of coinage over British India.

15. In 1833, the Bank of Bengal started granting loans against the security of Company's paper, plate, jewels or goods of non-perishable goods.

16. From 1839 the Bank of Bengal began the buying and selling bills of exchange.

17. In 1861, The Paper Currency Act gave the Government of India the monopoly to Issue Notes, thus bringing an end to note issues of private and Presidency Banks.

18. In 1881, the Negotiable Instruments Act (NI Act) was passed, formalizing the usage and characteristics of instruments like the cheque, the bill of exchange and promissory note. The NI Act provided a legal framework for non-cash paper payment instruments in India. Why was it necessary to introduce Negotiable Instruments? Historically business developed by stages. (1) Pastoral stage (2) Agricultural stage (3) Handicrafts stage (4) Guild stage (5) Domestic stage and (6) Factory stage. Pastoral stage: In primitive society man used things just as they were found in nature. With time, he learned to domesticate animals and breed them for food and clothing. Since he had to find pastures for his animals, he tended to lead a wandering life. But in this stage his work served mainly to support only him with his own needs and left very little surplus available for exchange on a business basis.

Agricultural stage: In course of time, the nomadic tribes settled permanently at fixed places, built up the huts and shelters for their residences and began cultivating the land in common. Growing corns, grasses etc. became the main occupation. Agriculture emerged as the basic feature of economic living of man. He gradually produced more and then started to exchange it with other commodities. This was known as barter system. Handicraft stage: In this stage manufacturing was limited to the human efforts to transform raw materials into finished goods. It included candle and soap making, spinning, weaving, making of clothes and shoes, blacksmithing, leather dressing, carpentry etc. Guild stage: A guild is an association of persons following a similar occupation and it is formed to protect and promote the interest of its members through cooperative endeavors. Domestic stage: A new class entrepreneur emerged as a link between producer and consumer. Now entrepreneur purchased the raw materials for the purpose of manufacture and sale nut did not do the processing himself. He took the risk of productions and sale. Out of the proceeds of his undertaking, he paid for the materials and labour. The amount left was his profit Factory stage: In this stage an organized system of production under a single roof came to be identified as a factory. Large scale operations with the use of mechanized production processes resulted in producing good quality products at cheaper rates. However it was greatly influenced not only by its own processes but also by government under which it operates. These were the different stages of evolution of business. However it was noted that the growth was very slow and the system was very complex. There were different instruments used to purchase different commodities in different stages. The system of exchange was such that it led to confusion and various complexities. To avoid such confusion and to operate the business activities smoothly negotiable instruments were introduced.

REVOLUTION OF PAYMENT SYSTEMS IN INDIA

Digital cash A digital coin or digital cash consists of a message issued by a bank or other entity and encrypted by its Private Key. The message contains the serial number of the cash, the identity of the issuer and its Internet address, the amount of the cash and an expiry date. This serial number is unique to bank and can be decrypted by bank only this serial cannot be altered unless message is tweaked i.e it is permanent in nature and once set cannot be changed. Main feature of digital cash is that 1)It is not traceable i.e one cannot track the initial user or whom the money is been transferred. 2) It is transnational it can be sent anywhere in world. Example- when ganesh has bought a book from online retailer and wants to make payment in digital cash then for given price digital-cash code that is associated with the requested digitalcash value i.e book price generated from ganesh bank who provides him digital cash service this code Is then communicated to online retailer ,the retailer will confirm the code from bank weather it is correct value and there is no multiple transaction and then enter the encrypted code with retailers bank account code to transfer money into retailers account. Smart Card A smart card is like an "electronic wallet". It is a standard credit card-sized plastic intelligent token within which a microchip has been embedded within its body and which makes it smart. Amongst other things, the card can be used to store money, or a value of money, including digital coins Example: Rajesh had gone out of station at his cousin marriage for 5 days to Delhi. He had gone out for shopping in a mall. He purchase clothes, shoes and perfume for his cousin marriage. He saw that cash he was carrying in his wallet was not enough to pay the bill. So he thought rather

of withdrawing cash from A.T.M he would pay directly by using his credit card. This will save his time and easy to do the transaction. Electronic fund transfer Electronic Funds Transfer (EFT) is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. The primary modes of funds transfer at present are demand draft, mail transfer and telegraphic transfer. The time taken by these modes of transfer for transferring the money from sender to beneficiary is around 8 to 10 days. In the case of Electronic fund transfer, fund reaches the beneficiary either on the same day or the next day. For e.g: Suppose there are two parties party A and party B entered into to a contract. If party A wants to make payment to party B through Electronic Funds Transfer then party A will approach his bank to make the payment to party B. Party A will give all the details of party A and party B required for making a Electronic Fund Transfer to his bank and then the bank of party A will make the payment to the bank of party B. The bank of party B then will make the payment to party B. Digital Cheque Digital cheque is a form of payment used in Ecommerce. A digital cheque functions in the same way as a paper cheque. It acts as a message to a bank to transfer funds to a third party; however, it has a number of security advantages over conventional cheques since the account number can be encrypted, a digital signature can be employed, and digital certificates can be used to validate the payer, the payer's bank, and the account. There are two types of digital cheques 1. Electronic cheque: Electronic cheque is issued electronically and no paper is involved. The electronic cheques are issued in electronic form with digital signatures / biometric signatures / encrypted data. 2. Truncated cheque:

In cheque truncation, at some point in the flow of the cheque, the physical cheque is replaced with an electronic image of the cheque and that image moves further. The processing is done on the basis of this truncated cheque and physical cheque is stored. For example, a company that is depending on the received cheque clearing in time to use the funds to manage an employee payroll will appreciate the speed that the electronic cheque deposit method provides in comparison to waiting several days for paper cheque to clear. Biometrics It consists of methods for uniquely recognizing humans based upon one or more intrinsic physical or behavioral traits. The traits that are considered include fingerprints, retina and iris patterns, facial characteristics and many more. Biometrics is used as a form of identity access management and access control The meaning of Biometrics is life measurement" which measure a particular set of a person's vital statistics in order to determine identity. E.g. Identify individuals in groups are means of identity access management & A PIN on an ATM system at a bank is means of access control.

Biometric characteristics can be divided in two main classes 1. Behavioral biometrics: it is basically measures the characteristics which are acquired naturally over a time. It is generally used for verification. e.g. Speaker Recognition - analyzing vocal behavior Signature - analyzing signature dynamics Keystroke - measuring the time spacing of typed words

2. Physical biometric definition: it is measures the inherent physical characteristics on an individual. It can be used for either identification or verification. e.g. Fingerprint - analyzing fingertip patterns Facial Recognition - measuring facial characteristics Hand Geometry - measuring the shape of the hand Iris Scan - analyzing features of colored ring of the eye

Retinal Scan - analyzing blood vessels in the eye DNA - analyzing genetic makeup

Advantages of Biometrics in negotiable instruments: Increase security - Provide a convenient and low-cost additional tier of security. Reduce fraud by employing hard-to-forge technologies and materials. For e.g. Minimize the opportunity for ID fraud, buddy punching.

Eliminate problems caused by lost IDs or forgotten passwords by using physiological attributes. cards. For e.g. Prevent unauthorized use of lost, stolen or "borrowed" ID

Reduce password administration costs. Replace hard-to-remember passwords which may be shared or observed. Integrate a wide range of biometric solutions and technologies, customer applications and databases into a robust and access scalable control solution for facility and network

Make it possible, automatically, to know WHO did WHAT, WHERE and WHEN! Offer significant cost savings or increasing ROI in areas such as Loss Prevention or Time & Attendance

Conclusion
A global world means different people, different culture, different opinions, different understanding and different laws in every country. When trade of goods and services started, problems also started taking up their roles. The cases of payment problems were observed among the exporting parties. Since the laws of different countries differ from each other, these matters could not be solved legally and the distance between each country made it even more uncomfortable. The ups and downs in the foreign exchange of every country were making them go through stagnancy. A certain kind of negotiation was required at an international level to make the road of trade go smooth. There was indeed a need for a negotiable instrument which is accepted by every law internationally.