prithvi

1. Negotiable instruments act
Tot al sect i ons 147

2. Introduction
• To the whole of India except Jammu and
Kashmir
• The act deals with only three instruments :
– Promissory note
– Bill of exchange
– And cheque
The act does not apply to currency and any local
usage documents : such as Hundies
If there is no local custom, it applies even to
Hundies

3. What is negotiable instrument
• A piece of paper which entitles a person a
sum of money.. Which can be transferred to
person by mere
– Delivery or
– Endorsement
– And delivery
– The person to whom it is transferred will get a
better title to it ..

4. Features of negotiable instrument
A. Consideration
A. It is presumed that every instrument is
drawn for consideration
B. It need not be mentioned in the instrument
For example when the cheque is issued only the
amount is mentioned and name is mentioned
– It need not mention for what purpose it is
issued

5. Features of negotiable instrument
B. transferability:
a negotiable instrument can be transferred by.
a. Endorsement and delivery
b. If It is an instrument payable to order and
c. Mere delivery, if it is a bearer instrument
Negotiable instrument can be transferred
unlimited number of times ….

6. Features of negotiable instrument
C. title:
a. The transferee who takes the instrument
bonafide, for value and consideration gets
good title
b. This title is not affected any defect of title of
transferor.
c. This is an exception to : “nemo dat quod non
habet”

7. Presumptions- sec: 118
a. As to consideration
b. As to date
c. As to time of acceptance –before maturity
d. As to time of transfer – before maturity
e. As to the order of endorsements
f. As to the stamp
g. That the holder is the holder in due course
h. As to dishonour

8. Promissory note: sec 4
a. An instrument in writing
b. Contains an unconditional undertaking
c. Signed by maker
d. To pay certain sum of money
e. Only to the person mentioned
f. Or order
g. Or to the bearer of the instrument
h. However as per RBI the word bearer can not
be used

9. Characteristics of PN
a. In writing
b. Promoise to pay
c. Unconditional
d. Certain sum of money
e. Signed by maker
f. Certainty of maker
g. Not payable to maker himself

10. Other important features
a. Can be made jointly
b. The consideration, place and date of making
need not be mentioned
c. It may be payable on date or after a period
d. If undated, the date is the date of delivery
e. It must be duly stamped
f. The ante-dated or post dated is invalid
g. It payable in instalments…

11. Promissory note -format
Rs……. Place……….
date………..
……….month/days after date, I promise to
pay….or bearer/order the sum of Rs….. For
value received with interest @...... P.A
with…..rests.
……………..
(maker)

12. Bill of exchange sec; 5
It is an instrument …
a. in writing
b. containing an unconditional order
c. signed by the maker
d. directing certain person to pay money
e. or order of a certain person or
f. to the bearer of the instrument.

13. Bill of exchange sec; 5
Amount Rs….. Place:……..
date: ………
…….month/days after date, pay to
…….or bearer/order the sum of Rupees
……..only for value received.
To
………………. ……………..
(drawer) (drawee)

14. Features of Bill of exchange
a. In writing
b. Order
c. Unconditional order
d. Money only – certain sum
e. Acceptance
f. Three parties
g. stamping

15. Cheque: sec:6
a cheque is a bill of exchange drawn
on
1. a specified banker
2. not expressed to be payable
otherwise than on demand
3. and it includes the electronic
image of truncated cheque and also
4. cheque in the electronic form

16. Cheque: sec:6
date………..
Pay…………………………………………
………………………….or bearer….
Rupees………………..
Amount in figures
…………………..........
Yeshas bank
XXXXXXX signature

17. Truncated cheque
This means a cheque which is
truncated during the course of a
clearing cycle..
a. Either by the clearing house or
b. Bank whether paying or collecting
bank
c. This is to substitute further physical
movement of cheque in writing

18. Cheque in electronic form
This means a cheque which contains
the exact mirror image of a paper
cheque, and is generated, written and
signed in secure system ensuring the
minimum safety…
This contains digital signature
With or without biometric system

19. Forms of cheque
Order cheque
Bearer cheque Crossed cheq

20. Forms of cheque
Bearer cheque:
1. It is expressed to be payable or the last
endorsement is blank…
Order cheque:
a. which is expressed to be payable to a
particular person
b. This does not contain any prohibitory
orders for transfer

21. Forms of cheque
Crossed cheque:
A cheque which is collected only
through banker

22. Marked cheque
a. A cheque need not be presented for
acceptance…
b. Always the drawee is liable to the
person in whose the cheque is drawn
c. When the banker certify the cheque
that it is good for payment. That is
marking
d. However this is not acceptance

23. Crossed cheque
a. When cheque bears across its face
two transverse parallel lines on top
left corner of the cheque. It is a
crossed cheque
b. Then the cheque is not payable to
payee or holder at a bank
c. Payment is to be obtained through
bank
d. It can not be negotiated as open

24. Crossed cheque

25. Types of crossing
General crossing
A cheque contains in addition of lines the wo
• “and company” between lines
• Or two transverse lines simply
• Wither with or without words “not negotia
• This should be paid to a banker

26. Special crossing : sec: 124
The two lines contains name of the banker
Either with or without the words “not negotiab
SBI …………………………..
Pay…………………………………………………………………
…………………………………………………………………
………………………………………………………………………
………………………………………….or bearer
Rupees………………………………………………………..
…………………………………………………………………..
Yeshas bank
XXXXXXXXXX

27. Note:
In general crossing name of the
bank is not mentioned whereas in
special crossing the name of the
bank is mentioned and that bank
is the collecting banks to whom
the payment has to be made…

28. Not negotiable crossing: sec: 130
a.This is to protect the rights of holder of
cheque
b.A person taking this kind of cheque can
not transfer a better title to the other
person
c.Even holder in due course can not get
better title if the cheque is crossed not
negotiable
d.However this cheque can be transferred,
the only restriction is on title

29. Account payee crossing or
restrictive crossing
a.This contains the words “account
payee”
b.The amount will be credited to the
account of the payee
c.However cheque remains
negotiable, but generally it hinders
the negotiability of the cheque in
practice

30. Who can cross the
cheque:
a.By the drawer
b.After issue:
a.The holder
b.General one as special one
c.Adding the words not
negotiable
d.The banker may again cross
to his agent or collecting
banker

31. Payment of a crossed cheque:
sec: 126 to 129
a.Banker is not liable if he pays it in due
course a cheque:
a.Crossed generally, then to any bank
b.Crossed specially
Or when the payment made in due
course

32. Payment of a crossed cheque:
sec: 126 to 129
b. If the payment is made out of due
course, the banks shall be liable to the
true owner of cheque for any loss….
When the cheque is crossed specially
the banker can refuse the payment

33. Payment in due
course:
a. According to apparent tenor of the
instrument
b. In good faith
c. To any person in possession without
any suspicion..

34. Bank draft: sec; 85A
a. It is an order drawn by an office of a
bank upon another office of the
same bank.
b. It is an order drawn by one person
upon himself
c. Sec 131 provisions will apply