S- 8 Nego Ins Act( MktgA 201) 13 Jan 10

8/9/2019 S- 8 Nego Ins Act( MktgA 201) 13 Jan 10

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BUSINESS LAWS

SYMBIOSIS INSTITUTE OF

BUSINESS MANAGEMENTPune


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BUSINESS LAWS

Prof. Bala

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Session 8

The Negotiable Instruments Act 1881

Presentation on 13.1.201011.45 to 13.00 Hr.

Marketing B - X-202


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BUSINESS LAWS

Agenda

1 Recap

The Sales of Goods Act 1930

2 The Negotiable Instruments Act 1881


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Days Agenda1 Importance of Negotiable instruments

2 Negotiable instruments

3 Related Acts4 Dishonour cheques criminal offence

5 TDS default

6 Overview of the Negotiable Ins. Act7 Provision relating to Cheques

8 Misc provisions


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Negotiable Instruments

1 It occupies prominent place

2 Not only in trade and commerce by also in publiclife

3 A written document4 Creating a right in favour of someone

5 Freely transferable

6 Prominence in making payments and discharging

business obligations7 Pass freely from hand to hand

8 In short, integral part of modern financialtransactions.


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Negotiable InstrumentsAn instrument, negotiable when it is, by a Legallyrecognized custom of trade or by law, transferableby delivery or by endorsement and delivery,

without notice to the party liable, in such a way (a)the holder of it for the time being may sue upon itin his own name (b) the property in it passes to abona fide transferee for value free from any defect

in the title of the person from whom he obtained It.

- Thomas -


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Negotiable Instruments1 Like many other laws, the definition of

negotiable instrument is not defined by the

Negotiable Instruments Act, 1881.

2 Section 13 of the Act merely states that

Negotiable Instrument means a

-promissory note,-bill of exchange or

- cheque payable either to order or to bearer.


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The Negotiable Instruments Act1 Chapter I - short title, local extent and the

definition of banker

2 Chapter II Section 4 to 25 characteristicsof notes / bills of exchange and cheque

3 Chapter III Provision relating to parties toinstruments minor, agency, legal

representative, drawer , drawee, maker,acceptor, and endorser their liability section 26 to 45A


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The Negotiable Instruments Act

1881

4 Chapter IV kinds of negotiation delivery

. Endorsements Sec. 46 60

5 Chapter V dealing with presentation for

acceptance / payment - Sec. 61 77

6 Chapter VI Provisions of payment and

interest - Sec. 78 817 Chapter VII dealing with discharge of

liability on instruments - Sec. 82 90


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18818 Chapter VIII Dishonour - Sec. 91 98

9 Chapter IX 104A Noting and protest -

Sec. 9910 Chapter X Reasonable time

Sec 105 & 106

11 Chapter XI payment / hour / reference incase of need - Sec 108 116

12 Chapter XII Rules of Compensation - Sec.117


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188113 Chapter XIII Evidence containing

presumption and estoppels Sec. 118 122

14 Chapter XIV - dealing crossed chequesSec. 123 131A

15 Chapter XVbills in sets Sec.132 & 133

16 Chapter XVI foreign instruments Sec.134 137

17 Chapter XVII Penalties Sec. 138 - 142


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Negotiable Instruments

Amended in 2002 an update1 Negotiable Instruments Act 1881

2 Extends whole of India w.e.f 1/3/1882

Act relating to Promissory notes, Bills of Exchange

and cheques

3 17 chapters 147 sections

4 Amended many a times section 138 to 142 was

introduced by the Banking Public FinancialInstitutions and Negotiable Instruments

Laws(Amendment) Act 1988 w.e.f 1.4.1989


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1881Sections 143 to 147 has been inserted in

Year 2002 through the Amendment Act of

2002 providing:-

- Dishonour of cheques

- Court procedure

- In connection with the dishonour of cheques


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Related Acts

1 Bills of Exchange Act 1882 and

Amendment Act 1932

2 The Bankers Books Evidence Act 1891

3 The Notaries Act 1952

4 The Cheques Act 1957


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The Negotiable Instruments

1 Transferability & Negotiability

2 Principle of Domino Martis Causa (most

complete ownership absolute ownership)3 Specific privilege in negotiable instruments

holder in due course difference between

transferable instrument and negotiable

instrument.


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18814. Section 118 of the Act

- Of consideration

- As to date- As to time of acceptance

- As to time of transfer

- As to order of endorsements- As to stamps

- That holder is a holder in due course


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DISHONOUR OF CHEQUESDecision in case ofSMS Pharmaceuticals

Ltd V/s Neeta Bhalla (SCL-V63/2005, page

93/CLT-6-144-SC)1 Dishonour of cheque has been made acriminal offence under the amendedNegotiable Instruments Act 1881.

2 The normal rule in cases involving criminalLiability is against Vicarious liability but inSec 141 of Negotiable Instrument Act is anexception to this rule


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DISHONOUR OF CHEQUES

3 An offence under section 138 committed by a

company, extends criminal liability for

dishonour of cheque to officers of company4 To make a person accused liable under

Sec141- it is necessary to check whether such person was in charge of and

responsible for conduct of thebusiness at the time of offence


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DISHONOUR OF CHEQUES

5 The Managing Director, by virtue of theoffice he holds, is in charge of and

responsible for the conduct of businessof the company, hence is covered underSec 141

6 Signatory of cheque which is dishonored

is clearly responsible for the incriminatingact and will be covered under sub sec (2)of Sec 141


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TDS DEFAULT IS NOW

CRIMINAL OFFENCETDS default is now brought under criminal

Offence by the latest decision of Supreme

Court recentlyIt has been held that the defaulting companies

and their CAN BE PROSECUTED for delay in

deposit of the Tax Deducted at Source into theGovernment account. ( Madhumilan Syntex vs

Union of India (2007)160 Taxmann 71(sc),


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Certain case laws1 Instrument / endorsement made for consideration

the burden of proof of failure on consideration

on the maker of the note / endorser ( Kundan Lal

Rallaram Vs Custodian, Evacuee Property,BombayAIR 1961 SC 1316

2 Instrument is drawn for consideration amount

was advanced four years back the debt not

enforceable etc not proper ( A V Murthy VsNagabasavanna AIR 2002 SC 985 = 2002 (2) SCC

642


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Cheques1 Digital Cheque (mirror image of paper

cheque with digital signature)

2 Truncated cheque(scanned n electronic

copies)

3 Bankers cheque (transfer money frm ur

account to bank account)(first introduced in 1976 by SBI)

4 SBI Golden Cheque

(similar to at par across)


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Crossed cheques1 Order and bearer (open cheque)2 Payee - Pay to Lord Shiva or order

Pay to XYZ Ltd or bearer

3 Once a bearer cheque is always a bearercheque ( Payable to bearer has the effect ofmaking the instrument pass from hand tohand Re Marsilles Imerial Land & Co (40LJCH 93)

Sec 219(1) of Companies Act 1956 bear is he who bears or carries


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Crossed cheques (General)

4 Crossed cheque can only be presented

through a banker

5 Why crossing anyone even a bank

employee can encash if no crossing is done.

6 Crossing two parallel lines words in

between & Co, And Company, Not

Negotiable, A/c Payee, Not Negotiablea/c payee, Under Rs


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SPECIAL CROSSINGS7 Section 124 talks about special crossing. State

Bank of India / Indian Bank / Andhra Bank notnegotiable / ICICI Bank Ltd Payees A/c /Modern Bank Ltd Not negotiable A/c Payee

8 The above means, the crossing is done to thatparticular banker and the instrument can only

be paid through that banker only9 Special crossing gives more protection thanthe general crossing


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Who can cross1 The drawer

2 The holder (Section 125)

3 The banker (for collection his agent)4 Opening of crossing ( cancellation of crossing)

can it be done and if so by whom?

5 If bankers acted otherwise on crossedcheques, liability is provided in section

126,127,128 and 129


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MARKING OF CHEQUEWhat is marking of Cheque?

The practice of marking of cheque hasnow been completely stopped in India on

account of inter-bank agreement


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Parties to negotiable

Instruments1 Maker

2 Drawer(draws the cheque)

3 Drawee in case of need (Section 7)4 Acceptor(drawee after assent to drawer)

5 Payee

6 Endorser 7 Endorsee

8 Holder / Holder in due course


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Capacity of Parties

1 Section 26 every person capable of

contracting, as per law.

1 Minors position

2 Corporation

3 Lunatics / Insolvents

4 Married women (husband not liable for debts ofwives incurred before marriage)

5 Agents

6 HUF

7 Legal Representatives


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Miscellaneous Provisions- Dishonour / non-acceptance / non-payment

/ Notice is required to be given

- Mode of notice

- Noting and Protest (notary public)

- Protest is done for better security at thetime of insolvency, it safeguards the due

- Foreign bills of exchange must be protestedfor dishonour (section 104)

- Noting is equivalent to protest ( Sec. 104A)


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Miscellaneous ProvisionsSection 117 talks about compensation

Section 118 talks about evidence

Section 119 talks about protest

Section 134 137 deals on international law

Section 137 presumes, law in other country is

similar unless proved to contrary


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Miscellaneous ProvisionsSection 141 Criminal offence

Section 142 Complaint period has been

extendedSection 142 Proviso sufficient cause further

extension of time is permitted if the complainant

satisfies the court that he had sufficient causefor not making a complaint within the prescribed

period


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Miscellaneous ProvisionsAdditional sections 143 to 147 inserted

Sec. 143 Power of Court to try casessummarily

Sec. 144 Mode of Service of Summons

Sec. 145 Evidence on affidavit

Sec. 146 Banks slip prima facie evidence of

certain factsSec. 147 Offences to be compoundable

(every offence under the act is compoundable)


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WHEN WE MEETNEXT TIME

Next Session on

WEDNESDAY20 JANUARY 2010

TOPICSTransfer of Property Act 1882


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THANK YOU

Documents

S- 8 Nego Ins Act( MktgA 201) 13 Jan 10