Negotiable Instruments Act 1881
Prepared By:Sonali Daine - 68Pratima Pawar - 91Chetana Sawant -103Sneha Thakur - 115Avantika Udas - 116
What is money?
• Money is anything that is generally accepted as payment for goods and services and repayment of debts.
• Money is a "medium of exchange"
What is Negotiation?
• Business negotiation is the process by which typically two or more parties come together to try to create a mutually agreeable contractual decision. Each party will have competing interests and, thus, negotiations can be quite intricate and lengthy. Negotiations end when all parties have come to a final decision and have agreed to contractual guidelines.
Negotiable instruments
• What is negotiable?– Negotiable means transferable.– The negotiation that goes on refers to the
transfer of the instrument between two people, or from one bank to another, or even from one country to another.
• What is an instrument?– In the broadest sense, almost any agreed-upon
medium of exchange could be considered a negotiable instrument.
– In day-to-day banking, a negotiable instrument usually refers to checks, drafts, bills of exchange, and some types of promissory notes.
Types of negotiable instruments
Promissory NoteBill of exchange ChequeHundis
Bill of Exchange According to section 5 of Negotiable
Instrument Act, “A Bill Of Exchange is an instrument
in writing containing an unconditional order, signed by the maker , directing a certain person to pay a sum of money only to or to the order of a certain person or to the bearer of the instrument”
Types Of Negotiable Instruments • Bill of Exchange:
Writing, signed, accepted, stamped
Unconditional order to pay
Money only
Certain party
Certain sum
Parties – Drawer, Drawee & Payee
• A bill of exchange is a negotiable and unconditional written order, such as a check, draft, or trade agreement, addressed by one party to another.
• The receiver of the bill must pay the specified sum or deliver specified goods on demand or at a specified time.
• Bills of exchange are a common form of
internationally negotiable instruments.
Specimen Of A Bill Of Exchange
JAMMUJAMMU
2727thth Nov. 2006 Nov. 2006
StampStamp
Three months after due date, pay XYZ or order, theThree months after due date, pay XYZ or order, theSum of Rs 1000(one thousand only) for value received.Sum of Rs 1000(one thousand only) for value received.
To,To,M/S ABCM/S ABCGandhi NagarGandhi NagarJammuJammu
Parts Of A Bill Of Exchange
•Date•Term•Amount•Stamp•Parties
Parties to a Bill Of Exchange
Drawer Drawee Payee
Special features1. A Bill Of Exchange is an instrument
in writing2. It must be signed by the maker3. It contains an unconditional order4. The order must be to pay money
and money only5. The sum payable must be specific6. The amount must be paid within a
stipulated time7. The name of the drawee must be
clearly mentioned8. It must be dated and stamped
Advantages of Bill of Exchange
1. Purchase and Sale of Goods on Credit
2. Discounting Facility3. Easy to Recover the Amount4. Endorsement5. Certainly as to Payment6. No Reminder to Debtor7. Convenient Mean of Trade
Remittance8. Valid Evidence of Debt
Kinds of Bills Of Exchange
• Inland Bill• Foreign Bill• Demand Bill• Time Bill• Trade Bills• Accommodation Bills
Promissory Note
• A “Promissory Note” is an instrument (not being a banknote or a currency-note)
• containing an unconditional undertaking,
• signed by the maker,• to pay a certain sum of money only
to, or to the order of a certain person,
• or to the bearer of the instrument.
•Promissory NoteIn writing, signed, stampedUnconditional promise to payMoney onlyCertain partyCertain sumParties – Maker, Payee
Elements Of Promissory Note
1. Writing : No oral engagement Use of ink or pencil or can be
printed No particular form of words Intention must be clear
2. Undertaking to pay :
Clear intention No need of the word ‘Promise’
3. Unconditional :
Definite & an unconditional undertaking to pay
Certainty of payment
4. Promise to pay must be money only :
Agreement with consideration Promise to pay money as well as
something else is not a Promissory note
5. Specific sum:
Certain sum of money to be paid Payment with interest, installments
& indicated rate of exchange
6. Certain persons:
2 distinct persons Description of payee – by name or
designation No use of “You” for payee
7. Signed:
Maker’s sign Not only physical act but mental act
8. Stamping:
Chargeable with stamp duty Cancellation of stamps with maker’s
signature
Hundis
A hundi is the negotiable instrument used for the purpose of transfer of money without its actual physical movement
It is in the form of bill of exchange or promissory note
It is governed by local usage & customs
• HUNDIS
Drawn in any local language in accordance with the custom of the place.
Oldest form of negotiable instrument
Types of Hundis
Darshani Hundi :- Payable at sight
Muddati or Miadi Hundi :- Payable after specific period of time
Subtypes Shah Jog Hundi
Nam Jog Hundi
Dhani Jog Hundi
Jawabee Hundi
Jokhami Hundi
Cheque (Sec. 6)
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
Specimen of Cheque
FEATURES Duly signed by the drawer & must be
in writing
It contains an unconditional order
Issued on a specified banker only
Amount specified & payee is always certain
Cheque without date is invalid
Types of Cheque
Open Cheque
Crossed Cheque
Bearer Cheque
Order Cheque
Contd..Ante- Dated
Stale dated
Mutilated
Post- dated
Electronic
Truncated
Crossing Of Cheque
Crossing: Crossing of cheque gives safety. crossing of cheque is way of making it even more certain that money is to be paid to correct person. A crossed cheque will be paid to the banker through which is presented.
Cheques can be crossed by two types:- General crossing
- Special Crossing
General crossing Sec 123 & 126 It has two transverse parallel lines
marked across ots face It bears an abbreviation “&co.”between
the transverse parallel lines It bears the words non- negotiable
between two parallel lines.
& Co. NOT NEGOTIABLE
Special Crossing of Cheques
Sec 124 Defines Special Crossing:“where a cheque bears across its face, an
addition of the name of a banker, with or without the words ‘Not Negotiable’, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker
In this bankers name is written between two lines
The cheque requires words ‘ not negotiable’ Two transverse parallel lines are not necessary
Forms Of Special Crossing
Cheques crossed with bank name
Cheques crossed with A/c payee
Cheques crossed with Not negotiable.Bank O
f India
Cheque Crossed after issue: Sec 125
Following cases are allowed :
where a cheque is uncrossed, the holder may cross it generally or specially
a generally crossed cheque can be crossed specially.
The holder may add words not negotiable A banker may cross specially crossed cheque
to another banker or his agent for collection
Presentment and payment of cheque
According to sec 84 cheque must be presented to bank upon which it is drawn
Cheque must be presented within its validity period.
The drawee (bank) must have sufficient funds of drawer to make the payment
An obligation of the banker to honour the payment of cheque.
Dishonour of Cheque
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge in whole or in part, of any debt, or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that exceeds the amount arranged to be paid by an agreement made with that bank, such person shall be deemed to have committed an offence.
(sec 138)
Notice in writing Constitutes an offence
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