Unit-4 Negotiable Instrument Act PDF

THE NEGOTIABLE INSTRUMENT ACT 1881 (MARKS 10) PREPARED FOR SEM. 1 BY PROF AO & JD  FEATURES OF NEGOTIABLE INSTRUMENTS TIME OF PAYMENT : certain to arrive. RIGHT...

THE NEGOTIABLE INSTRUMENT ACT 1881 (MARKS 10) PREPARED FOR SEM. 1 BY PROF AO & JD  FEATURES OF NEGOTIABLE INSTRUMENTS TIME OF PAYMENT : certain to arrive. RIGHT TO FILE SUIT: the transferee of a EASY TRANSFERABILITY: freely “When convenient” or linked to the death of a negotiable instrument is entitled to file a suit in his transferable. The ownership is changed by mere person is nevertheless negotiable instrument. own name for enforcing any right or claim on the delivery (when payable to the bearer) or valid basis of the instrument. endorsement and delivery (when payable to order). Further, while transferring, it is also not THE PAYEE MUST BE A PERSON : the person must me named or described with reasonable NOTICE OF TRANSFER : not necessary to give required to give a notice to the previous holder. certainty. The payee can also be more than one to the party liable to pay. TITLE: Absolute and good title on the person. transferee. The title of the receiver will be PRESUMPTIONS: Sec 118 and 119 of NI act lay SIGNATURE: must bear the signature of its down certain presumptions which court presumes absolute, only if he got the instrument in good maker. in regards of NI. Like Considaration, date , time of faith and for a consideration. Also the receiver should have no knowledge of the previous holder acceptance etc. DELIVERY: not completed till it is delivered to having any defect in his title(holder in due its payee. PROCEDURE FOR SUITS: special procedure course) for bills of exchange and promissory notes. MUST BE IN WRITING: this includes STAMPING : for Bill of Exchange and Promissory handwriting, typing, computer print out and Notes is Mandatory. This is required as per the NUMBER OF TRANSFER: transferred engraving (design). Indian Stamp Act, 1899. the value of stamp depends indefinitely till they are at maturity. upon the value of the promissory note or bill and the UNCONDITIONAL ORDER or Promise for time of their payment. payment. POPULARITY : very much popular in commercial transactions because of their easy PAYMENT: involve payment of a certain sum of RULE OF EVIDANCE: used as evidence negotiability and quick remedies. money only and nothing else. [cannot make on of the fact of indebtedness because they assets, securities or goods. have special rules of evidence. EXCHANGE: these instrument related to payment of certain money in legal tender. They are considered as substitutes for money and are accepted in exchange off goods.  TYPES OF NEGOTIABLE INSTRUMENTS NEGOTIABLE BY STATUTE ( LAW) NEGOTIABLE BY CUSTOM OR USAGE Promissory Notes Treasury bill INSTRUMENT NOT CONSIDERED AS NEGOTIABLE Bank notes Bills of exchange INSTRUMENTS Draft Cheques Money order Railways receipts for goods Postal order Order of delivery Share certificate Dividend warrant Bill of lending Dock warrant ect TYPE OF CHEQUES  DISHONOUR OF NEGOTIABLE INSTRUMENTS ⦿ Dishonour means failure to honour a negotiable instrument. ⦿ Mode of Dishonor (i) By Non-Acceptance [Section 91] (only in case of a bill of exchange) or (ii) Non-payment [Section 92]  Dishonour by non-acceptance [Section 91]: A bill is said to be dishonoured by non-acceptance in the following ways: (1) When it is presented to the drawee for acceptance and he does not accept it within 48 hours from the time of presentment for acceptance. (2) When the drawee is incompetent to contract (3) When presentment for acceptance is excused and the bill is not accepted (4) When drawee is a fictitious person or after reasonable search cannot be found. (5) When the acceptance is a qualified acceptance (6) When one of several drawer not being partner makes default in acceptance on being duly required to do so.  NOTICE OF DISHONOUR Meaning: Notice of dishonor means formal communication of the fact of dishonor. It is given to the party sought to be made liable and therefore it serves as a warning to the person to whom the notice is given that he could now be made liable. Notice of dishonor has got following points: ⦿ Notice of dishonor means formal communication of the fact of dishonor. ⦿ Such a notice also serve the purpose of enabling the person so notified to protect himself against the prior parties. Notice by Whom: notice of dishonor to all the prior party whom he wants to make liable on the instrument. Mode of notice: The notice of dishonor may be oral or written or partly oral and partly written. It may be sent by post. Duties of the holder upon dishonor 1. Notice of dishonor: notice of dishonor to all the parties to the instrument whom he seeks to make liable thereon. [section 93] 2. Noting and protesting : when a promissory note or bill of exchange has been dishonour by non-acceptance or non-payment , the holder may cause such dishonor to be noted by a notary public upon the instrument or upon a paper attached thereto or partly upon each [section 99]. The holder may also within a reasonable time of the dishonor of the notice or bill, get the instrument protested by notary public [section 100] 3. Suit for money : after the formality of noting and protesting is done, the holder may bring a suit against the parties liable for the recovery of the amount due on the instrument.  Noting [section 99] Noting should be made by the notary within a reasonable time after dishonor. Noting and protesting are not compulsory but foreign bills must be protested for dishonor when such protest is required by the law of the place where they are drawn. Noting should specify in the instrument---- (a) The fact of dishonor (b) The date of dishonor (c) The reason for such dishonor. If any (d) The notary’s charges (e) A reference to the notary’s register and (f) The notary’s initials Protesting [section 100] Protest is a formal certificate of the notary public attesting the dishonor of the bill by non-acceptance or by non-payment. The protest must contain the following particulars: 1. The instrument itself or a literal transcripts of the instrument and of everything written or printed thereupon 2. The name of the person for whom and against whom the instrument has been protested. 3. The fact and reason for dishonor, i.e., a statement that payment or acceptance, or better security, as the case may be , was demanded by the notary public from the person concerned and he refused to give it or did not answer, or that he could not be found. 4. The place and time of dishonor 5. The signature of the Notary Public. 6. In the case of acceptance for honour or payment for honour, the name of the persons by whom and for whom it is accepted or paid.  DISCHARGE OF NEGOTIABLE INSTRUMENTS Definition: A negotiable instrument is said to be discharged when it becomes completely useless, i.e., no action on that lie, and it cannot be negotiated further. After a negotiable instrument is discharged the rights against all the parties thereto comes to an end and no party, even a holder in due course, can claim the amount of the instrument from any party thereto. Discharge of the party primarily and ultimately liable on the instrument results in the discharge of the instrument itself.  MODE OF DISCHARGE ⦿ BY PAYMENT IN DUE COURSE ⦿ BY PARTY PRIMARILY LIABLE BY BECOMING HOLDER [SECTION 90] ⦿ BY EXPRESS WAIVER ⦿ BY CANCELLATION ⦿ BY DISHARGE AS A SIMPLE CONTRACT Thank you