Beruflich Dokumente
Kultur Dokumente
STRUCTURE
1.0
Introduction
1.1
1.2
1.3 Conclusion
1.0 INTRODUCTION
The Negotiable Instruments Act was enacted, in India, in 1881. Prior to its enactment,
the provision of the English Negotiable Instrument Act were applicable in India, and
the present Act is also based on the English Act with certain modifications. It extends
to the whole of India except the State of Jammu and Kashmir. The Act operates subject
to the provisions of Sections 31 and 32 of the Reserve Bank of India Act, 1934.
Section 31 of the Reserve Bank of India Act provides that no person in India other than
the Bank or as expressly authorised by this Act, the Central Government shall draw,
accept, make or issue any bill of exchange, hundi, promissory note or engagement for
the payment of money payable to bearer on demand. This Section further provides that
no one except the RBI or the Central Government can make or issue a promissory note
expressed to be payable or demand or after a certain time. Section 32 of the Reserve
Bank of India Act makes issue of such bills or notes punishable with fine which may
extend to the amount of the instrument. The effect or the consequences of these
provisions are:
1.
2.
3.
Essential element
An instrument to be a promissory note must possess the following elements:
1. It must be in writing: A mere verbal promise to pay is not apromissory note. The
method of writing (either in ink or pencil or printing, etc.) is unimportant, but it
must be in any form that cannot be altered easily.
2. The instrument must be signed by the maker: The person who promises to pay
must sign the instrument even though it might have been written by the promisor
himself. There are no restrictions regarding the form or place of signatures in the
instrument. It may be in any part of the instrument. It may be in pencil or ink, a
thumb mark or initials. The pronote can be signed by the authorised agent of the
maker, but the agent must expressly state as to on whose behalf he is signing,
otherwise he himself may be held liable as a maker. The only legal requirement is
that it should indicate with certainty the identity of the person and his intention to
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6. The money must be payable to a definite person: The instrument must point
outwith certainty the person to whom the promise has been made. The payee may
be ascertained by name or by designation. A note payable to the maker himself is
not pronate unless it is indorsed by him. In case, there is a mistake in the name of
the payee or his designation; the note is valid, if the payee can be ascertained by
evidence. Even where the name of a dead person is entered as payee in ignorance
of his death, his legal representative can enforce payment.
7. The promise should be to pay money and money only: Money means legal
tender money and not old and rare coins. A promise to deliver paddy either in the
alternative or in addition to money does not constitute a promissory note.
8. The
sum
of
money
to
be
paid
must
be
certain:
One
of
the
Rs. 5,000/-
On Demand, I promise to pay Prakash or order the sum of rupees five thousand
with interest at 18 per cent per annum, for value received.
To
Mumbai,
1st June, 1999
Empty Stomach,
Rs. 5,000/Mumbai 400 052.
Three months after date, I promise to pay Srichand Rohra or Bearer/Order the
sum of rupees five thousand, for value received.
Stamp
XYZ
Sd/-
To
Srichand Rohra,
Jai Palace,
Mumbai 400 052.
It must be in writing.
(2)
(3)
(4)
(5)
(6)
For example, In the following cases, there is no order to pay, but only a request to pay.
Therefore, none can be considered as a bill of exchange:
(a)
(b) Mr. Ramesh, please let the bearer have one thousand rupees, and place it to
my account and oblige
However, there is an order to pay, though it is politely made, in the following
examples:
(a) Please pay Rs. 500 to the order of A.
(b) Mr. A will oblige Mr. C, by paying to the order of P.
(7)
Rs. 20,000/-
Stamp
Rs.
To 20,000/Prof. P.P. Prakash,
25, Raja Mahan,
Accepted
Stamp
Sd/A.G. Joshi,
245, Mahatma Gandhi Road,
Mumbai 400 001.
To
M.N.Patel
15, Netaji Subhash Lane,
Surat.
Accepted
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1.2.3 Cheques
Section 6 of the Act defines A cheque is a bill of exchange drawn on a specified
banker, and not expressed to be payable otherwise than on demand.
A cheque is bill of exchange with two more qualifications, namely,
(i) it is always drawn on a specified banker, and (ii) it is always payable on demand.
Consequently, all chequeare bill of exchange, but all bills are not cheque. A cheque
must satisfy all the requirements of a bill of exchange; that is, it must be signed by the
drawer, and must contain anunconditional order on a specified banker to pay a certain
sum of money to or to the order of a certain person or to the bearer of the cheque. It
does not require acceptance.
exclude the possibility of adding any other instrument which satisfies the following
two conditions of negotiability:
1.
2.
the person who obtains it in good faith and for value should get it free from all
defects, and be entitled to recover the money of the instrument in his own name.
As such, documents like share warrants payable to bearer, debentures payable to bearer
and dividend warrants are negotiable instruments. But the money orders and postal
orders, deposit receipts, share certificates, bill of lading, dock warrant, etc. are not
negotiable instruments. Although they are transferable by delivery and endorsements,
yet they are not able to give better title to the bonafide transferee for value than what
the transferor has.
office during the usual office hours, provided the cheque is validly drawn and
the drawer has sufficient funds to his credit.
4. Bill and notes may be written entirely by hand. There is no legal bar to cheques
being hand- written. Usually however, banks provide their customers with
printed cheque forms which filled up and signed by the drawer.
5. The signature must tally with the specification signature of the drawer kept in
the bank.
6. A cheque must be dated. A banker is entitled to to refuse to pay a cheque which
is not dated. A cheque which is not dated. A cheque becomes due for payment
on the date specified on it.
7. A cheque drawn with future date is valid but it is payable on and after the date
specified. Cheques are called postdated cheques.
8. A cheque may be presented for payment after the due date but if there is too
much delay the bank is entitled to consider the circumstance suspicious and
refuse to honour the cheque. The period after which a cheque is considered too
old or stale varies according to custom from place to place. It is usually six
months in indian cities.
9. In some certain circumstances the bank is not bound to pay the cheques.
2.
3.
4.
A grace of three days is allowed in the case of time bills while no grace
is given in the case of a cheque.
5.
6.
8.
9.
Types of Cheques:
1) Those which are uncrossed are popularly known as bearer or open cheques;
and
2) Crossed Cheques.
1) Bearer Cheques or Open Cheques:
Bearer or open cheques are payable at the counter of drawee banker on presentment.
As the bearer cheques carry risk of being lost or stolen and the finder may be able to
get it encashed, crossing of cheques avoids such a contingency and secures payment.
2) Crossed Cheques: Crossing of cheques is of different types:
124). It is to be payable to that person only on which the bill is drawn which means it
is not a risky document as Bearer Cheque is. 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
(Sec. 126). It will paid only when presented by the banker.
Payment of cheque crossed especially more than once (Sec. 127):A cheque cannot be
crossed more than once specially, except the banker on whom it is crossed specially
can cross it again to his agent for purpose of collection only. If the cheque is crossed
especially more than once, the banker has a right to refuse payment thereof.
Cheques crossed A/c. Payee: Often cheques are crossed with two parallel transverse
lines and in between the two parallel lines the words a/c payee or a/c payee only
are written. This means that the proceeds of the cheque are to be credited to the
account of the payee only. This type of crossing is also called Restrictive crossing.
Insertion of words A/c. Payee does not restrict its negotiability. It serves a good
protection to drawer from loss or theft.
Cheque bearing Not Negotiable (Sec. 130): A cheque crossed generally or specially
may bear additional words 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 transferee than that which the
person from whom he took it had.It will be observed that writing the words not
negotiable is a type of special crossing or general crossing. Cheques crossed generally
or specially, can be added with the words not negotiable. The words not negotiable
are not the same thing as special crossing, because in a special crossing, the banker on
whom it is drawn shall not pay it otherwise than to the banker on whom it is crossed or
his agent for collection. When the cheque is marked with the words not negotiable in
addition to the special crossing, it deprives the cheque of its main feature of
negotiability.
Crossing after issue (Sec. 125): Crossing of cheque other than that authorized by the
act is unlawful. The following crossings are permissible:
a. Where a cheque is uncrossed, the holder may cross it generally or specially.
b. Where a cheque is crossed generally, the holder may cross it specially.
c. Where a cheque is crossed generally or specially, the holder may add the words
not negotiable.
d. Where a cheque is crossed specially, the banker to whom it is crossed may again
cross it specially to another banker or his agent, for collection.
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1.3 Conclusion
The law relating to negotiable instruments is not the law of one country or of one
nation, it is the law of the commercial world in general, for, it consists of certain
principles of equity and usages of trade which general convenience and
commonsense of justice had established to regulate the dealing of merchants and
mariners in all the commercial countries of the civilised world. Even now the laws
of several countries in Europe are, at least so far as general principles are concerned,
similar in many respects. Of course, on questions of detail, different countries have
solved the various problems in different ways, but the essentials are the same, and
this similarity of law is a pre-requisite for the vast international transactions that are
carried on among the different countries.
The main object of the Negotiable Instruments Act is to legalize the system by which
instruments contemplated by it could pass from hand to hand by negotiation like any
other goods. The purpose of the act was to present an orderly and authoritative
statement of leading rules of law relating to the negotiable instruments. To achieve
the objective of the Act, the legislature thought it proper to make provision in the Act
for conferring certain privileges to the mercantile instruments contemplated under it
and provide special procedure in case the obligation under the instrument was not
discharged. A Negotiable Instrument is a document guaranteeing the payment of a
specific amount of money, either on demand, or at a set time.
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