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Negotiableinstrumentsact hajeri

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Negotiable Instrumetns Act

Negotiable Instrumetns Act

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    Negotiableinstrumentsact hajeri Negotiableinstrumentsact hajeri Document Transcript

    • NI ACT SYLLABUS-1• Acceptance, Acceptor, Acceptor for Honour• Bill of Exchange, Demand Bill, Usance Bill, Accomodation Bill, Kite plying, Foreign Bill, Inland Bill• Cheque, Bearer Cheque, Order Cheque,• Crossing, General Crossing, Special Crossing, Account Payee Crossing, Not Negotiable Crossing• Due Date, Days of Grace• Demand Draft• Dishonour (Bouncing) of Cheque• Drawee, Drawee in case of need• Drawer.08/04/12 1SHANTILAL V HAJERI 1
    • NI ACT SYLLABUS-2• Endorsement, Endorser, Endorsee, Full Endorsement, Blank endorsement, Per Pro endorsement, Restrictive Endorsement, Sans Recourse endorsement, Allonge• Exceeds arrangement• Funds insufficient.• Holder, Holder for value• Holder in due course• Inchoate instrument• Material Alteration• Negotiation, Negotiation Back• Noting08/04/12 2SHANTILAL V HAJERI 2
    • NI ACT SYLLABUS-3• Payee• Payment in due course• Post dated Cheque• Presentment for payment• Promissory Note• Protesting• Protection to collecting banker• Protection to Paying banker• Provision for criminal action• Rights & Liabilities of a holder in due course• Stale Cheque• Stop payment of a Cheque• Title of the Account• Validity of a Cheque08/04/12 3SHANTILAL V HAJERI 3
    • What is a Negotiable Instrument?• NEGOTIABLE INSTRUMENT IS NOT DEFINED BY NI ACT.• IT IS A WRITTEN DOCUMENT WHICH CREATES SOME RIGHTS IN FAVOUR OF SOME PERSON AND WHICH IS FREELY TRANSFERABLE NOT WITHSTANDING ANY DEFECT IN THE TITLE OF THE TRANSFEROR• IN CASE OF OTHER PROPERTIES, TRANSFEREE GETS SAME TITLE AS THAT OF TRANSFEROR.• IN CASE OF N.I., TRANSFEREE GETS GOOD TITLE EVEN IF TRANSFEROR HAS DEFECTIVE TITLE,08/04/12 4SHANTILAL V HAJERI 4
    • DIFFERENCE BETWEEN N I & OTHER GOODS?• MR. X LOST A RING WORTH Rs.5,000/- AND A BEARER CHEQUE FAVOURING “X” WORTH Rs.5,000/-• MR. Y FOUND THEM. GAVE THE CHEQUE AND RING TO A JEWELLERS SHOP AND PURCHASED A NEW CHAIN.• MR.X LODGED A Police complaint. POLICE CAN RECOVER RING FROM JEWWELER SHOP AND GIVE IT TO MR.X. BUT, THEY CANNOT RECOVER THE CHEQUE OR ITS EQUIVALENT FROM JEWELLER SHOP,08/04/12 5SHANTILAL V HAJERI 5
    • What are Negotiable Instruments?• PROMISSORY NOTE, BILL OF EXCHANGE AND CHEQUE ARE THE THREE BASIC NEGOTIABLE INSTRUMENTS NAMED IN NI ACT.• THE FOLLOWING ARE ALSO CONSIDERED AS NEGOTIABLE INSTRUMENTS.• DEMAND DRAFT, TRAVELLER CHEQUE, GIFT CHEQUE, DIVIDEND WARRANT, INTEREST WARRANT, BANKERS’ CHEQUE, PAY ORDER, COMMERCIAL PAPER.• THE FOLLOWING ARE NOT NEGOTIABLE INSTRUMENTS.• DEPOSIT RECEIPT, NSC, POSTAL ORDER, SHARE CERTIFICATE, BILL OF LADING, LORRY RECEIPT, AIRWAY BILL, RAILWAY RECEIPT, STOCK INVEST, DOCK WARRANT08/04/12 6SHANTILAL V HAJERI 6
    • What is Negotiation?• TRANSFER OF A NEGOTIABLE INSTRUMENT BY PAYEE/HOLDER IN DUE COURSE TO AN OTHER PERSON SO AS TO CONSTITUTE THE TRANSFEREE THE OWNER THERE OF IS CALLED NEGOTIATION.• IN SHORT IT IS TRANSFER OF OWNERSHIP IN A N.I.• IT IS LIKE A SALE OF N.I. How a NI is Negotiated?• A Bearer NI is negotiated by Delivery.• An Order NI is negotiated by Endorsement & Delivery08/04/12 7SHANTILAL V HAJERI 7
    • What is Negotiation?• TRANSFER OF A NEGOTIABLE INSTRUMENT BY PAYEE/HOLDER IN DUE COURSE TO AN OTHER PERSON SO AS TO CONSTITUTE THE TRANSFEREE THE OWNER THERE OF IS CALLED NEGOTIATION.• IN SHORT IT IS TRANSFER OF OWNERSHIP IN A N.I.• IT IS LIKE A SALE OF N.I. How a NI is Negotiated?• A Bearer NI is negotiated by Delivery.• An Order NI is negotiated by Endorsement & Delivery08/04/12 8SHANTILAL V HAJERI 8
    • Promissory note S-4. It is an instrument in writing 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. “I promise to pay Bank of Maharashtra Rs.10,000/-” Sd/ 2 parties. Promisor (Maker) Promisee (Payee)-08/04/12 9SHANTILAL V HAJERI 9
    • Bill of exchange S-5. It is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.• To, Mr.Vishal,• On demand pay to Shantilal Rs.5,000/- for value received.• sd/-• 3 parties. Draqwer, Drawee, & Payee08/04/12 10SHANTILAL V HAJERI 10
    • Cheque S-6 A “cheque” is a bill of exchange drawn on a specified banker payable on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form. Bank of Maharashtra, Pune main branch date: 10-2-07 Pay to Shantilal or Bearer Rs. One hundred only Rs.100/ ChNo.12345 Sd/-08/04/12 11SHANTILAL V HAJERI 11
    • Holder in due course S-9 “any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorse thereof, if payable to order without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.08/04/12 12SHANTILAL V HAJERI 12
    • Payment in due course S-10. “means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.08/04/12 13SHANTILAL V HAJERI 13
    • Endorsement. s-15. When the maker or holder of an negotiable instrument signs the same, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, he is said to indorse the same, and is called the endorser.08/04/12 14SHANTILAL V HAJERI 14
    • Types of Endorsement S-16. Endorsement in blank The endorser signs his name only, Endorsement in full The endorser signs his name and adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, The person so specified is called the “endorsee” of the instrument08/04/12 15SHANTILAL V HAJERI 15
    • Token Lost by bearer• Mr. Vishal presented a bearer cheque for Rs.10,000/-. He was issued a token no.7• He had gone out for a while to attend personal work.• When he returned to the Bank to receive payment, he found that the token was lost by him.• When he went to cashier to inform about the loss of token, the cashier told him that the token No.7 has already been presented by Mr.Subhas and he has paid 10,000/- to Subhas• Is Bank liable to Mr.Vishal?08/04/12 16SHANTILAL V HAJERI 16
    • Alteration not visible• Mr.Vithal issued a cheque of Rs.1,000/- to Mr.Shankar. Mr.Shankar altered the amount as Rs.10,000/- in words and figures.• The alteration was not visible to naked eyes. The Bank debited Rs.10,000/- to Vithal’s account.• Mr.Vithal demanded credit of Rs.9,000/- since he had issued a cheque for Rs.1,000/- and not Rs.10,000/-• Is Bank liable to Mr.Vithal?08/04/12 17SHANTILAL V HAJERI 17
    • Stop payment by Payee• Your customer Mr.Shantilal issued a cheque to Mr. Ashok. The cheque has been presented for payment through clearing.• You have received a phone from Mr.Ashok stating that the cheque received from Mr.Shantilal has been lost by him. Mr.Ashok (Payee) requests you to stop payment of the cheque.• Will you return the cheque?08/04/12 18SHANTILAL V HAJERI 18
    • Forgery of Signature• You have received a cheque for Rs.10,000 through clearing issued by your customer.• The signature of the drawer tallies and the cheque is in order. you have passed the cheque.• Your customer has complained that a leaf has been stolen from his cheque book and some body has forged his signature, He has not issued this cheque.• Your customer has demanded credit of Rs10,000/- since he had not issued the cheque.• Is Bank liable?08/04/12 19SHANTILAL V HAJERI 19
    • Liability of Collecting Banker• Mr.Raju sent a DD drawn on SBI, favouring XYZ pvt Ltd for Rs.10,000/-• XYZ pvt Ltd deposited the DD in their current a/c with you. You collected the DD and credited the amount to their current A/c.• XYZ Ltd withdrew the amount but did not send the goods to Mr.Raju. They absconded.• Mr.Raju filed the case against XYZ Pvt Ltd, SBI and your Bank• Is Bank liable to Mr.Raju?08/04/12 20SHANTILAL V HAJERI 20
    • Token first• Mr. Vishal presented a bearer cheque for Rs.10,000/-. He was issued a token no.7 He approached cashier for payment. Cashier asked for token.• Mr.Vishal insisted that payment should be made first. He will handover the token after receiving the payment.• Cashier insisted that the token should be handed over first.• Is cashier justified?08/04/12 21SHANTILAL V HAJERI 21
    • Bouncing of a cheque• What is meant by bouncing of a cheque?• When a drawee bank returns a cheque unpaid without passing it, then it is called bouncing of a cheque.• Whether bouncing of a cheque is a criminal offence in all cases?• No. Bouncing of a cheque becomes a criminal offence only if the provisions as laid down in Section 138 of NI Act are fulfilled.• Cheques returned with the technical reasons do not result in criminal offence.08/04/12 22SHANTILAL V HAJERI 22
    • Preface to amendments Negotiable Instruments Amendment Act 1988. Came into force w.e.f 19-12-1988 Section 138 to section 142 have been incorporated which contain the provisions regarding bouncing of a cheque. There are some safeguards to protect the genuine cases of cheque bouncing. The objective was to improve the credibility of a cheque and in turn to enhance the acceptability of a cheque for making payments, To punish those who abuse the cheque facility08/04/12 23SHANTILAL V HAJERI 23
    • Section 138 of NI Act If a person gives a cheque towards full partial discharge of a debt or any other liability, and if that cheque is returned unpaid on the ground of lack of adequate balance in an account or for not making any arrangemnt for the payment of the cheque, this shall be treated as an offence under this act and shall be punishable with imprisonment of 2 years and or a fine for double the amount of the cheque, Provided the cheque is presented within 6 months or validity period, the payee has given a notice within 30 days and the drawer has failed to make payment within 15 days.08/04/12 24SHANTILAL V HAJERI 24
    • S-138 SIMPLIFIED.• Bouncing of a cheque will be a criminal offence if the following conditions are fulfilled.1) Cheque should have been issued towards a debt or any other liability.2) Cheques should have been returned with the reason “Funds insuficient” or “ Not arranged for” “Account closed” and “Payment stopped by the drawer” will have the same effect as funds insufficient.3) Cheque should have been presented within its validity period or 6 months.08/04/12 25SHANTILAL V HAJERI 25
    • S-138 SIMPLIFIED.(cntd)• Bouncing of a cheque will be a criminal offence if the following conditions are fulfilled.4) Payee or Holder in Due course should have issued a notice to the drawer within 30 days.5) The drawer has failed to make the payment within 15 days6) The payee or holder in due course files a case within 30 days. Even if any one condition is not fulfilled, then it will not be a criminal offence. However Civil case can be filed.08/04/12 26SHANTILAL V HAJERI 26
    • S-138 DATES1) DATE OF CHEQUE 10-1-062) CHEQUE DEPOSITED AT COLLECTING BANK ON 12-1-063) CHEQUE PRESENTED TO PAYING BANKER ON 13-1-064) DRAWEE BANK RETURNED THE CHEQUE ON 14-1-065) COLLECTING BANK INFORMED PAYEE ON 15-1-066) PAYEE RECEIVED THE NOTICE ON 16-1-06 HE HAS 2 OPTIONS.A) REPRESENT THE CHEQUEB) TAKE ACTION U/S 138. HE HAS TO GIVE NOTICE BEFORE 31-1-0608/04/12 27SHANTILAL V HAJERI 27
    • S-138 SIMPLIFIED.(cntd)• Bouncing of a cheque will be a criminal offence if the following conditions are fulfilled.4) Payee or Holder in Due course should have issued a notice to the drawer within 30 days.5) The drawer has failed to make the payment within 15 days6) The payee or holder in due course files a case within 30 days. Even if any one condition is not fulfilled, then it will not be a criminal offence. However Civil case can be filed.08/04/12 28SHANTILAL V HAJERI 28
    • S-138. QuestionsQ.1 How many times a cheque can be presented?A: There is no restriction on the number of times a cheque can be presented within its validity period. It can be presented as many times as possible as long as it has not become a stale cheque. When a cheque is bounced, it is not binding on payee to either represent the cheque or file a case under S-138. It is the option of the payee. He may opt for filing a case or he may opt for representing the cheque. He can file case after the last case of bouncing.08/04/12 29SHANTILAL V HAJERI 29
    • Format of Notice From:- Date: To, Reg; Bouncing of Ch. No.___ Ch.No.__ dated___ drawn on __Branch of __ Bank for Rs.____ (Rs._______)issued by you has been returned unpaid on _____ with the reason_____. Please make the payment of Rs.____ by cash/DD on or before _____. If we do not receive the payment within the above date, we shall be constrained to file a criminal case against under s-138 to s.142 of NI ACT. Yours faithfully08/04/12 30SHANTILAL V HAJERI 30
    • S-138. Questions CHECK YOUR BALANCE BEFORE YOU SIGN YOUR CHEQUE. IF THE CHECQUE BOUNCES YOU WILL HAVE TO CHECK IN INTO A JAIL. CHECKOUT AFTER TWO YEARS. PAY THE LODGING CHARGES UPTO DOUBLE THE AMOUNT OF CHEQUE. FOR FURTHER DETAILS CHECK SECTION 138 OF NI ACT.08/04/12 31SHANTILAL V HAJERI 31