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LEGAL ASPECTS OF BUSINESS

SEMESTER II

MMS (B)

GROUP NO 4

BATCH 2014-2016

Evolution and Revolution of

Negotiable Instruments

as

Facilitators for Trade and Commerce

&

10 Years taking forward

GROUP MEMBERS

Chintan Mhatre

82

Aadya Naik 90

Sumedh Munje

86

Vinay Mhatre

84

Prachiti Niwate

92

Tushar Oswal

94

Riddhi Palkar

96

Abhiskek Nagdeve 88

Vivek Pange 98

Amit Paratwar100

PROJECT CONTENTS

Introduction to Negotiable Instruments

Evolution of Negotiable

Instruments

The Negotiable Instrument

Act, 1881

Types of Negotiable

Instruments

Revolution in Negotiable

Instruments and Global

Trade

Primary Research On

Scope Of Negotiable

Instruments

Conclusion Suggestions

Recommendations

CHAPTER IIntroduction to


INTRODUCTION

The term ‘Negotiable Instrument’ is made up of two parts,

‘Negotiable’ and ‘Instrument’

♠The word, ‘negotiable’ means being transferable from one person to another

♠The word ‘instrument’ signifies ‘any written document’ through which a right is created in favor of some person.

INTRO TO NEGOTIABLE INSTRUMENTS



NEED FOR NEGOTIABLE INSTRUMENTS

♠Helpful in Dealing Business on Credit bases

♠Cash Free Asset

♠Instant receipts and payments of the dealings and transactions

FEATURES OF NEGOTIABLE INSTRUMENTS

♠Free Transferability






♠Holder in Due Course












♠Holder in Due Course can Sue in his own name

♠Must be in writing & must bear signature

♠Payee must be a certain person

♠Promise for payment of money only

♠Time of payment must be certain

♠Delivery of the instrument is essential

CHAPTER IIEvolution of Negotiable

Instruments

EVOLUTION OF NEGOTIABLE INSTRUMENTS

Agricultural stage

Grain Barter (9000 - 8000 BC)

Livestock (8000 - 6000 BC)

Pastoral stageBarter Exchange (Earliest forms of civilization)


Guild stage

Precious Metal Coins (700 BC)

Handicraft stageCrude Metal Coins (1000 - 600 BC)


Factory stage

Gold (1816)

Domestic stagePaper Money (806)


Post Great Depression

Coins and Paper Money (1921 onwards)

Industrial RevolutionGold Bullion (1900)

BIRTH OF INDIAN ACT

Drafted in 1866 by the 3rd India Law Commission

Redrafted in 1877

Bill was revised by a Select Committee

Fourth time was introduced in the Council

Finally bill passed Negotiable Instruments Act, 1881

World Economy & World Market with respect toEconomy & Growth of Commerce

♠Evolution of commerce is a never ending process. Almost every day new experiments in its mechanism are made.

♠New forms and methods are being evolved in both socialist and capitalist countries, in both developed and developing nations.

CHAPTER IIIThe Negotiable

Instruments Act 1881

THE NEGOTIABLE INSTRUMENTS ACT, 1881

SECTION 13

‘A negotiable instrument means a promissory note, bill of exchange or cheque, payable either to order or to bearer’.

It may, however, be clarified here that Section 13 does not exclude any other instrument from being treated as a negotiable

instrument, provided, of course, it does have the characteristics of being negotiable’.

RESERVE BANK OF INDIA ACT, 1934

Section 31‘no person (other than the Reserve Bank of India or the Central Government),

can draw, accept, make or issue any bill of exchange or a promissory note payable to bearer on demand’.

Section 32‘a punitive clause which provides that if a person issues any bill of exchange or a promissory note, payable to the bearer on demand, shall be punishable

with fine’.

ESSENTIALS UNDER SECTIONS 118 & 119

♠Consideration

♠Money

♠Regarding Date

♠Regarding Acceptance

♠Writing and Signature

♠Title

♠Notice

♠Evidence

♠Regarding Dishonor of an Instrument

NEGOTIABLE INSTRUMENTS (AMENDMENT AND MISCELLANEOUS PROVISIONS)

ACT, 2002

Section 138

Dishonor of cheque for insufficiency, etc.,

of funds in the account

Doubling the imprisonment term from one year to two years

the period of time to issue demand notice to the drawer from 15 days to 30 days


ACT, 2002

Section 141

Offences by companies

If company commits an offence, every person who, at the time the offence was committed, was in charge of, and was responsible to the company shall be deemed to be guilty of the offence


ACT, 2002

Section 143 Achieve speedy trial by applying provisions of CrPC

(Code of Criminal Procedure)

Section 144 Deals with the service of summons

Section 145 Contemplates evidence on affidavit


ACT, 2002

Section 146

Provides for presumption to bank memorandums

Section 147

Provides for compounding of offences under this Act

CHAPTER IVTypes of


HUNDIS

A Hundi is a financial instrument developed in Medieval India for use in trade and credit transactions

♠Remittance instruments

♠Credit instruments

♠Trade transactions

TYPES OF HUNDIS

Sahyog Hundi

Muddati Hundi

Darshani Hundi

♠ Dhani-jog Hundi

♠ Jokhim-Hundi

♠ Jawabi Hundi

♠ Khaka Hundi

♠ Khota Hundi

DECODING OF HUNDIS

♠Remittance instruments

♠Credit instruments

♠Trade transactions

1 2

3

4

5

6

7

1) Pre-printed revenue stamp

2) Amount to be pay

3) Name of the broker

4) Signature of the Drawer

5) Due date

6) Date of documentation

7) Stamp of administrative authority

PROMISSORY NOTE

SECTION 4

‘An instrument in writing (not being a bank note 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’.

Drawer

Payee

Endorser

Endorsee

Parties involved for Promissory Notes

DECODING OF PROMISSORY NOTE

1 2

3

4

5

6

7

1) Pre-printed revenue stamp

2) Amount to be pay

3) Name of the broker

4) Signature of the Drawer

5) Due date

6) Date of documentation

7) Stamp of administrative authority

REQUISITES OF A PROMISSORY NOTE

♠Must be in writing

♠Stamped as per Indian Stamp Act

♠Undertaking or promise to pay

♠Acknowledgement of indebtedness is not enough

♠Not an conditional promise

♠Promise to pay money only

♠Payable on demand

DISHONOR OF PROMISSORY NOTES

SECTION 93

‘When a promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment, the holder thereof, or some party thereto who remains liable thereon, must give notice that the instrument

has been so dishonored to all other parties whom the holder seeks to make severally liable thereon’.

CASELETTE

The suit has been filed by Aditya against Dhruv on the basis that there was loan transaction between Aditya and Dhruv under which Dhruv had borrowed a sum of Rs.50,00,000/- and executed 5 promissory notes, each one for a sum of Rs.10,00,000/-, with a promise to repay the said amount with interest at the rate of 18% p.a. It is the further case of Aditya that in addition to the promissory notes, Dhruv issued 5 cheques each one for a sum of Rs.10, 00,000/-, with a specific understanding that as and when each cheque will be honored on presentation, corresponding promissory note will be discharged on payment of interest on the principal amount of the promissory note calculated from 06.03.2007 till the date of encashment of the cheque.

CASELETTE

On 24.10.1994, the Satvinder had borrowed a sum of Rs.50,000/- from the ruby agreeing to repay the same with interest at Rs.1.50p for Rs.100/- per month and had executed a promissory note in favour of ruby. Even after repeated demands by ruby and issuance of legal notice on 03.04.1997, Satvinder did not pay any amount, but had sent a reply notice dated 07.04.1997 with false allegations. Hence, ruby filed this suit for recovery of a sum of Rs.61,200/- (Principal Rs.50,000/- + interest Rs.11,200/-) from the Satvinder.

BILLS OF EXCHANGE

SECTION 5

‘An unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the

person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to

or to the order of a specified person, or to bearer’

PARTIES INVOLVED IN BILLS OF EXCHANGE

DrawerDrawee

Acceptor

PayeeEndorserEndorsee

BUSINESS ACTIVITY UNDER THE INFLUENCE OF BILL OF EXCHANGE

Mr. A agrees to supply Mr. B with goods if he accepts a 90 days bill for the full price of $10,000.

Mr. A - Manufacturer Mr. B - Retailer

The Bank pays to Mr. A the present value of the bill less Commission or Interest

Mr. B accepts the Bill, Signs it and returns to Mr. A

The general public can now meet their demands through Mr. B

Mr. A Draws the Bill

Bill Accepted

Bill

Dis

coun

ted

Bank

s Pa

ys 1

0,00

0

Bank receives cash from Mr. B G

oods

DECODING BILL OF EXCHANGE

1)Date & Place

2)Amount

3)Period of time before the date of Maturity

4)Drawee

5)Drawer

6)Intermediary Bank

1

2

4

3

5

6

REQUISITES OF BILLS OF EXCHANGE.

3 parties to a bill

Unconditional order to pay

Duely signed by the drawer

Accepted by the drawee.

Order payment of a sum certain in money

Not in goods or services

Payable on demand

Payable to or to the order of a specified person.

SPECIMEN BILL OF EXCHANGE

Rs. 10,000/- New Delhi

November 14, 2002

I, Ramesh , s/o Sadanand of Surat, Gujarat promise to pay Sashikant, s/o Sunil

Kumar of Ahmedabad, Gujarat or order, on demand, the sum of Rs 10,000/- (Rupees

Ten Thousand only) with interest at the rate of 10 percent per annum, for value

received.

Sd/- Ramesh

Stamp

To

Sashikant

Ahmedabad, Gujarat

TYPES OF BILLS OF EXCHANGE:

Types of bill of exchange on the Basis of Period

Demand Bills of Exchange

Term Bills of Exchange

Types of Bills of Exchange on the Basis of Object

Trade Bills

Accommodation Bills

DISCOUNTING AND ENDORSEMENT OF BILL OF EXCHANGE

Discounting of bill of exchange

Endorsement of bill of exchange

Bill sent to Bank for collection

CHEQUE

SECTION 6

‘A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand but it is invariably drawn as a demand bill of exchange only, herein the drawee is always a specific branch of a specified bank and the drawer is the account holder of the same branch of the bank’

REQUISITES OF A CHEQUE.

Instrument in WritingUnconditional OrderPayable on DemandCertain Sum of MoneyPayee must be certainAvoidance of cancellations

DIFFERENT KINDS / TYPES OF CHEQUES

Bearer ChequeOrder ChequeUncrossed /

Open ChequeCrossed Cheque

Anti-Dated ChequePost-Dated ChequeStale ChequeMultilated chequeE-Cheque

TYPES OF CHEQUE CROSSING

TYPES OF CHEQUE CROSSING

DECODING THE CHEQUE1)Date line

2)Or Bearer / or Order

3)Payee line

4)Rupee box

5)Amount in words

6)Account Number

7)Signature line

8)Drawee contact information and logo

9)IFSC

10)CTS

DECODING THE CHEQUE

Cheque Number:

MICR Code

Bank account Number

Transaction ID

DISHONOR OF CHEQUES SECTION 138

Dishonor of cheque for insufficiency

ConditionsPresented to bank within 3 months30 days of the receipt of information15 days of the receipt

GROUNDS FOR DISHONOR OF CHEQUE

Insufficient Funds Account Closed Stop Payment’ instructions Not a clearing member Post Dated Cheque Blank Cheque Admission of signature on the cheque is not equivalent

with admission of execution

TYPES OF FORGERY SEEN

Signature of a real (existing) personSignature even of a fictitious (non-

existing) personEven if a person has signed his own

name on the instrument

CASELETTE

Police on Monday arrested a man for forging a Noida resident's signature on a cheque and withdrawing Rs

90,000 from his bank account. The accused was caught when he went to withdraw another Rs 3 lakh from

the victim's bank account. Police said the victim, identified as Radhey Shyam Gupta, owns a building

material supply shop in Sector 9. The victim alleged that the conman had illegally withdrawn Rs 90,000

from his account on Sunday. "On Saturday, a person approached me and said that he wanted to buy cement

from him. He took the quotation on which I signed. He said to give my account number to transfer the

money, so I it to him," said Gupta. On Sunday, the victim got an SMS that Rs 90,000 was withdrawn from his

account. He immediately informed the bank and police. During investigation, police found that a person had

approached the bank and given a letter to issue a cheque book in Gupta's name. On Monday, when the

accused came to the bank to withdraw Rs 3 lakh, he was caught.

Revolution in Negotiable Instruments and Global Trade

CHAPTER V

Revolution in Negotiable Instruments

Digital CashSmart CardElectronic Fund TransferDigital ChequeBiometricsBehavioral BiometricsPhysical Biometric

Changing face of Trade and Commerce

Advance PaymentDirect PaymentDocumentary CollectionDocumentary Credit

Statistical Data on Disposal and Pendency ofNegotiable Instruments

2011 2012 20130

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

7761 7700 8096

7750 7072 8202

16943

1897219831

Institution Disposal Pendency

Institution, Disposal and Pendency of Negotiable Instrument Act Cases in Four High Courts

Institution19%

Disposal21%

Pending60%

MUMBAI

Insti-tution18%

Disposal22%

Pendency60%

DELHI

Institution22%

Disposal19%

Pendency58%

MADRAS

Institution16%

Disposal15%

Pendency69%

CALCUTTA

CONCLUSION 10 YEARS GOING FORWARD

Globally, there are many options to dematerialize these financial instruments, but a very few can provide guaranteed security to the user’s information and money.

In order to maintain the security level & to save the time

Government needs to use more resources, do research about the latest facilities, test them, regularize it & spread awareness about these facilities.

SUGGESTIONS

Social networking and Negotiable InstrumentsTwitterEmailFacebookMobile walletsBiometrics

RECOMMENDATIONS

Governments and some companies are moving away from strictly financial assessments of wealth and incorporating more quality of life measures, and social strengths are big components.

Far future companies will become much more integrated into the fabric of communities.

CASE STUDY Vijay Mallya vs. Delhi International Airport

Delhi High Court did not hear liquor baron Vijay Mallya's plea challenging summons issued to

him by a trial court in several cheque-bouncing cases in which he had to appear on February 20,

2012. Justice Sunil Gaur fixed May 8 for hearing of the matter after the counsel for the parties

requested adjournment. The trial court had summoned Mallya as an accused after GMR-led Delhi

International Airport (DIAL), which operates the capital's Indira Gandhi International Airport,

had moved the trial court after a cheque amounting to Rs one crore issued by Kingfisher Airlines

Ltd on February 22, 2012 was returned to them a month later containing the remarks "fund

insufficient".

CASE STUDY P.N. Khanna vs. Bank of India

Brief facts of the case are that complainant/ appellant had one account with opposite

party/ respondent and one account with Allahabad Bank. He filled cheque No. 839595 of

Allahabad Bank in his name for Rs. 8,16,000/- and handed over the cheque to Officer of

the opposite party for clearance, who in turn called his peon Rajiv Kumar and got the

cheque dropped in the drop box and counter slip was given to the complainant. Amount

of this cheque was not credited in his account and on enquiry from Allahabad Bank, he

came to know that the cheque has been cleared for Rs. 28,16,000/- and has been

credited in the name of one Satnam Singh in State Bank of India.

CASE STUDY Mohd Azharuddin vs. Sanjay Solanki

The Delhi court issued a fresh non-bailable warrant (NBW) against

cricketer-turned Congress MP Mohd Azharuddin after he failed to appear

before it in connection with a cheque bounce case. Metropolitan

magistrate Vikrant Vaid issued the warrant against the former captain of

the Indian cricket team for March 7 after he failed to appear before it in

pursuance of the earlier NBW issued against him on February 18.

Thank you

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