I MPORTANT PROVI SI ONS OF

N.I .ACT
DR.S.C.BIHARI
Presented by
I B S, HYDERABAD I B S, HYDERABAD
NEGOTI ABLE I NSTRUMENTS AS NEGOTI ABLE I NSTRUMENTS AS
PER N.I .ACT PER N.I .ACT
The Act does not define a negotiable The Act does not define a negotiable
instrument. instrument.
Section 13states, Section 13states, " a negotiable " a negotiable
instrument means a promissory note, instrument means a promissory note,
bill of exchange or Cheque payable to bill of exchange or Cheque payable to
order or bearer." order or bearer."
This section does not rule out any
other instrument that satisfies the
essential features of negotiability.
I MPORTANT PROVI SI ONS OF I MPORTANT PROVI SI ONS OF
N.I .ACT,1881 N.I .ACT,1881
Promissory Note Promissory Note - - A A promissory note promissory note is is
an instrument in writing (not being a bank an instrument in writing (not being a bank- -
note or note or a currency a currency- -note) note)
containing an unconditional under containing an unconditional under taking, taking,
signed by the maker, signed by the maker,
to pay a certain sum of money to pay a certain sum of money
onl y to, or to the order of, a certain person,
or to the bearer of the instrument. [Section or to the bearer of the instrument. [Section
4]. 4].
I MPORTANT PROVI SI ONS OF
N.I .ACT,1881
Bill of Exchange Bill of Exchange It is an instrument It is an instrument
in writing containing an unconditional in writing containing an unconditional
order, signed by the maker, directing order, signed by the maker, directing
a certain person to pay a certain sum a certain person to pay a certain sum
of money onl y to, or to the order of, a of money onl y to, or to the order of, a
certain person or to the bearer of the certain person or to the bearer of the
instrument. [section 5]. instrument. [section 5].
A Cheque is a special type of Bill of A Cheque is a special type of Bill of
Exchange. It is drawn on banker and Exchange. It is drawn on banker and
is required to be made payable on is required to be made payable on
demand. demand.
I MPORTANT PROVI SI ONS OF
N.I .ACT,1881
Provisions in respect of Cheques Provisions in respect of Cheques - -
Cheque Cheque includes electronic image of includes electronic image of
a truncated Cheque and a Cheque in a truncated Cheque and a Cheque in
electronic form. [section 6]. electronic form. [section 6].
This definition is amended by This definition is amended by
Negotiable Instruments Amendment Negotiable Instruments Amendment
Act, 2002, making provision for Act, 2002, making provision for
electronic submission and clearance electronic submission and clearance
of Cheque. of Cheque.
I MPORTANT PROVI SI ONS OF
N.I .ACT,1881
Section.09.Holder in due course : Section.09.Holder in due course :
A person who for consideration, A person who for consideration,
Became the possessor of a promissory Became the possessor of a promissory
note, bill of exchange or Cheque if payable note, bill of exchange or Cheque if payable
to bearer or the payee or the endorse if to bearer or the payee or the endorse if
payable to order payable to order
Before the amount mentioned became Before the amount mentioned became
payable and payable and
Without having sufficient cause to believe Without having sufficient cause to believe
that any defect existed in the title of the that any defect existed in the title of the
person from whom he derived his title. person from whom he derived his title.
I MPORTANT PROVI SI ONS OF
N.I .ACT,1881
Section.10.Payment in due course: Section.10.Payment in due course:
payment In accordance with the
apparent tenor of the instrument.
In good faith and without negligence. In good faith and without negligence.
To any person in possession of the To any person in possession of the
instrument. instrument.
Under circumstances which do not afford
a reasonable ground to believe that the
person receiving the payment is not
entitled for the same.
DUTI ES OF PAYI NG BANKER
As per Sec. 31 of N.I Act, As per Sec. 31 of N.I Act,
The drawee of a Cheque: The drawee of a Cheque:
(i) having sufficient funds of the drawer (i) having sufficient funds of the drawer
in his hands in his hands
(ii) properl y applicable to the payment (ii) properl y applicable to the payment
of such Cheque of such Cheque
(iii) must pay the Cheque when duly (iii) must pay the Cheque when duly
required to do so and required to do so and
(iv) in default of such payment must (iv) in default of such payment must
compensate the drawer for any loss compensate the drawer for any loss
or damage by such default. or damage by such default.
PROTECTI ON TO COLLECTI NG BANKER
As per Sec.131 of the Act As per Sec.131 of the Act
A banker who has A banker who has
(i) in good faith and without negligence
(ii) received payment for a customer (ii) received payment for a customer
(iii) of a Cheque crossed generally or
specifically to himself shall not, in
case the title of the Cheque proves
defecti ve, incur any liability to the
true owner of the Cheque, by reason
only of having received the
payment .
BOUNCI NG OF CHEQUES CRI MI NAL
LI ABI LI TY (Sec t i on 138 142)
Section138 Section138- -Punishment Punishment imprisonment up to 2 imprisonment up to 2
years or penalty up to double the amount of the years or penalty up to double the amount of the
cheque or both. cheque or both.
Section 139 Section 139 The cheque in question is deemed The cheque in question is deemed
to have been received for consideration. to have been received for consideration.
Section 140 Section 140 The defence of the drawer in the The defence of the drawer in the
Court of Law regarding intention would not be Court of Law regarding intention would not be
considered by the Court considered by the Court
Section 141 Section 141 When a cheques issued by a When a cheques issued by a
Company is bounced, all the persons responsible Company is bounced, all the persons responsible
for conducting the business of the Company are for conducting the business of the Company are
liable on the bounced cheques liable on the bounced cheques
Section 142 Cognizance of offences Normall y
Courts take cognizance of a criminal offence only
when it is routed through police.
Thank s f or your
at t ent i on
Dr. S. C. Bihari
Tell:08417-236660 to 65(Extn: 6214)
Mail:scbihari@gmail.com