A Group Presentation of Business Law on

THE NEGOTIABLE INSTRUMENTS ACT 1881

 In India, there is reason to believe that instrument to exchange were in use from early times. 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.

Introduction

Introduction
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.

Meaning and Definition

What is a Negotiable Instrument?

More specifically, it is a document contemplated by a contract, which Warrants the payment of money, the promise of or order for conveyance of which is unconditional; Specifies or describes the payee, who is designated on and memorialized by the instrument; and Is capable of change through transfer by valid negotiation of the instrument.

Negotiable instruments distinguished from other types of contracts

Features of negotiable instruments

A negotiable instrument is freely transferable. Negotiability confers absolute and good title on the transferee. A negotiable instrument must be in writing.

Features of negotiable instruments

Negotiable instrument there must be an unconditional order The time of payment must be certain. The payee must be a certain person. Delivery of the instrument is essential.

Promissory notes:
PROMISSORY NOTE Rs. 10,000/New Delhi September 25, 2002 On demand, I promise to pay Ramesh, s/o RamLal of Meerut or order a sum of Rs 10,000/- (Rupees Ten Thousand only), for value received. To , Ramesh S/d Sanjeev Address.. Stamp

Process

Features of a promissory note

A promissory note must be in writing, It must contain an undertaking or promise to pay. The promise to pay must not be conditional. It must contain a promise to pay money only. The parties to a promissory note, A promissory note may be payable on demand or after a certain date

Parties to a Promissory Note

There are primarily two parties involved in a promissory note. The Maker or Drawer the person who makes the note and promises to pay the amount. The Payee the person to whom the amount is payable.

Bills Of Exchange
Features of a bill of exchange Is an instrument in writing
Section 5 of the Negotiable Instruments Act, 1881

Parties to a bill of exchange

The Drawer
The Drawee The Payee

Bills Of Exchange

Cheque
As per Section 6, 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.

PROCESS

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

Features of a cheque
The payee is always certain. It is always payable on demand. The cheque must bear a date otherwise it is invalid and shall not be honored by the bank.

Types of Cheque
Open cheque: A cheque is called Open when it is possible to get cash over the counter at the bank. Example: Depositing the cheque in his own account and Passing it to some one else by signing on the back of a cheque.

Types of Cheque
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 Example: . A cheque can be crossed by drawing two transverse parallel lines across the cheque, with or without the writing Account payee or Not Negotiable t avid the risk

Types of Cheque
Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called Bearer cheque Example: if someone presents this cheque than payment is done to him

Types of Cheque
Order cheque: An order cheque is one which is payable to a particular person Example: The payee can transfer an order cheque to someone else by signing his or her name on the back of it.

IMAGES OF TYPES OF CHEQUES:

IMAGES OF TYPES OF CHEQUES

SOME IMPORTANT CONCEPTS

The maker of a bill of exchange or Cheque is called the "drawer"; the person thereby directed to pay is called the "Drawee". The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the "payee". Holder person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Cheque drawn or made in [India] and made payable in, or drawn upon any person resident in, [Indian] shall be deemed to be an inland instrument.

SOME IMPORTANT CONCEPTS

Electronic Cheque - Amendment Act, 2002 under section 6 says, 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 by a secure system ensuring the minimum safety standards with the use of digital signature. Return of cheque should be for insufficiency of funds-The offence takes place only when cheque is dishonoured for insufficiency of funds or where the amount exceeds the arrangement.

Characteristics of Cheque, Bill of Exchange and Promissory Note

Instrument in writing: Pencil writing is not forbidden by the law Unconditional order/promise Difference between cheque and bill of exchange: The main difference between a cheque and a bill of exchange is that the former is always drawn on and is payable by a banker specified therein.

 Certainty of the sum Payable to order or bearer: The instrument must be payable either to order or to bearer as per the provision of Section 13 of the Act. Term of payment Signature of the drawer/promisor Stamping of promissory notes

PARTIES TO A NEGOTIABLE INSTRUMENTS

Holder Rights of a Holder
Holder in due course Payment in due course

MATURITY OF AN INSTRUMENT

NEGOTIATION & ENDORSEMTS

Negotiation I. By delivery II. By endorsement

Endorsement
Provisions Regarding Endorsement
Effect of endorsement Endorsee an agent Right to endorse

Kinds of Endorsements
Endorsement in blank
Endorsement in full Conditional Endorsement

LIABILITY OF VARIOUS PARTIES

Liability of Liability of signing Liability of Liability of agent signing legal representative drawer drawee of cheque

LIABILITY OF VARIOUS PARTIES

Liability of maker of note and acceptor of bill Liability of endorser Liability of prior parties to holder in due course Discharge of endorser's liability

Liability of various parties

Liability of Liability of signing Liability of Liability of Liability of acceptor of Liability of course Agent signing legal representative
drawer drawee of cheque maker of note and bill parties to holder in due

Discharge from liability

Discharge of instrument and discharge of parties from liability is not the same. Parties may be discharged from liability on negotiable instrument in any of the following ways: By payment By cancellation By release By default of the holder Allowing drawee more than 48 hours Parties not consenting to qualified or limited acceptance

Rules of evidence
Placed before a trier of fact The rules of evidence were developed over several centuries Rules of evidence is that, in general, hearsay testimony is inadmissible This evidence would be rejected by the presiding authority or judge

Thank You..!!