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Negotiab
le
Instrume
Introduction
The
The
on 1st
March 1882
Definition:
The word Negotiable "meansTransferable from one person to another
in return for consideration
Instrument meansA written document by which a right is
created in favour of some person
A negotiable instrument is a piece of
paper which entitles a person to a certain
sum of money and which is transferable
from one to another person by a delivery
or by endorsement and delivery.
Sec.
CHARACTERIST
ICS OF
NEGOTIABLE
INSTRUMENTS
4. Presumptions:
Certain presumptions apply to all negotiable
instruments.
Section 118 and 119 lay down the following
presumptions:
(a)Consideration : that every negotiable
instrument, was made, drawn, accepted,
endorsed or transferred for consideration.
(b)Date : that every negotiable instrument bearing
a date was made or drawn on such date.
(c) Time of acceptance : that every bill of
exchange was accepted within a reasonable
time after its date and before its maturity.
(d) Time of transfer: that every transfer of a
negotiable instrument was made before its
maturity
Types of Negotiable
Instruments
Negotiable instruments are of two types
which are as follows:
1. Negotiable Instruments
recognized by Statute: The
2. Negotiable instruments
recognized by usage or customs of
trade:
e.g. Bank notes, exchequer bills,
share warrants, bearer debentures,
dividend warrants, share certificate.
Etc
The court of India follow the practice of
English courts Promissory Note,
Bankers drafts and pay orders,
Hundies, Delivery orders and Railway
receipts for goods .
Hundies:
system of India. They have been carrying on their ageold banking operations in different parts of the country
under different names.
PROMISSORY NOTE
Definition:
According to (Sec 4), A promissory
BILL OF EXCHANGE
Definition:
It must be in writing
It must contain an order to pay.
The order to pay must be unconditional
It must be signed by the drawer
It requires three parties, i.e. The
drawer, drawee, and the payee.
The drawer, drawee and payee must be
certain.
The sum payable must be certain
The bill must contain an order to pay
money only
It must comply with the formalities as
regards date, consideration, stamps,
etc
CHEQUE
A cheque is a bill of exchange drawn
upon a specified banker and payable
on demand and it includes the
electronic image of a truncated
cheque and a cheque in the
electronic form.
A cheque is a series of a bill of
exchange 1- it is always drawn on a specified
banker and
2-it is always payable on demand.
CHEQUE TRUNCATION
SYSTEM(CTS)
TYPES OF CROSSING
Holder
A Holder of a Negotiable
instrument will not be a Holder in
due course if
1-By Negotiation
2-By Assignment
NEGOTIATION
The
Modes of negotiation
1.
Negotiation By delivery
ASSIGNMENT
When a person transfers his right to
receive the payment of a debt,
Assignment of the debt takes
place .Thus where a holder of a bill
note or cheque transfer the same to
another, he in fact gives his right to
receive the payment of the
instrument to the transferee.
Difference between
Assignment & Negotiation
TYPES/KINDS OF
INDORSEMENT
1.Blank or general Indorsement
2. Full or special Indorsement
3. Restrictive Indorsement
4.Partial Indorsement
5.Conditional Indorsement
3. Restrictive endorsement:
Stating the effect of endorsement, Section 50 provides that the
endorsement of negotiable instrument followed by delivery transfers to the
endorsee the property herein with the right of further negotiation.
However, Section 50 permits restrictive endorsement.
An endorsement which, by express words, prohibits the endorsee from
further negotiating the instrument or restricts the endorsee to deal with his
instrument as directed by the endorser is called restrictive endorsement.
Illustrations:
(a) B, the holder of the bill, makes an endorsement on the bill saying Pay C
only. It is a restrictive endorsement as C cannot negotiate the bill further.
4. Partial Endorsement:
Section 56 provides that a negotiable instrument cannot
be endorsed for a part of the amount appearing to be due
on the instrument. In other words, a partial endorsement
which transfers the rights to receive only a part payment
of the amount due on the instrument is invalid.
Such an endorsement has been declared invalid because
it would subject the prior parties to plurality of actions
(one action by holder for part value and another action by
endorsee for part value) and will thus cause
inconvenience to them.
Thus, where A holds a bill for Rs 2,000 and endorses it in
favour of B for Rs 1,000 and in favour of C for the
remaining Rs 1,000, the endorsement is partial and
invalid.
5. Conditional endorsement:
If the endorser of a negotiable instrument, by express
words in the endorsement, makes his liability,
dependent on the happening of a specified event,
although such event may never happen, such
endorsement is called a conditional endorsement
(Sec. 52).
The law permits a conditional endorsement and
therefore it does not in any way affect the negotiability
of the instrument. Thus, endorsements can validly be
made in the following terms:
(i) Pay B or order on his marriage;
(ii) Pay B on the arrival of Pearless ship at Bombay.
DISCHARGE
Discharge means release from
obligation.
By Payment
By cancellation
By material alteration or lapse of
time.
DISHONOR
It may be by non acceptance or non payment
A. DISHONOUR BY NON-ACCEPTANCE (Sec-91)
A bill of exchange can be dishonored by non
acceptance in the following ways 1-Does not accept 48 hours from the time of
presentment.
Means showing an instrument to the drawee,
acceptor, or maker for acceptance, sight or
payment.
2-Drawee
is fictitious person
3-Drawee has become insolvent or
dead
4-Drawee is incompetent
B. DISHONOUR BY NON-PAYMENT
A promissory note, Bill of exchange
and cheque is said to be dishonoured
by non-payment when the make of
the note, acceptor of the bill or
drawee of the cheque makes default
in payment upon being duly requires
to pay the same
NOTING
PROTESTING
LIABILITY OF PARTIES ON
NEGOTIABLE INSTRUMENT
Liability of DrawerThe drawer of a bill of exchange or
cheque is bound, in case of
dishonour by the drawee or
acceptor thereof, to compensate the
holder, provided due notice of
dishonour has been given to, or
received by drawer.
1.
3. Liability of maker of note and acceptor of billIn the absence of a contract to the contrary, the maker of
a promissory note, by making it, the acceptor before
maturity of a bill of exchange by accepting it, engages
that he will pay it according to the tenor of the note or
his acceptance respectively, andin default of such
payment, suchmaker or acceptor is bound to
compensateany party to the note or bill for anyloss
or damagesustained by him and caused by such
default. . The acceptor of a bill of exchange at or
aftermaturity, by accepting it,engages to paythe
amount thereof to theholder on demand.
5.