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8/8/2019 negotiableinstruments-100403000448-phpapp02

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Negotiable InstrumentsNegotiable Instruments

BY B.K.VASHISHTHABY B.K.VASHISHTHA


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Governed by NegotiableinstrumentsGoverned by NegotiableinstrumentsAct 1881Act 1881

A negotiableinstrumentmeansaA negotiableinstrumentmeansapromissory note, bill ofexchangeorpromissory note, bill ofexchangeorcheque payableeithertoorderorcheque payableeithertoorderorbearer ( section 13)bearer ( section 13)

NegotiableinstrumentsareeasilyNegotiableinstrumentsareeasilytransferableandtheownership oftransferableandtheownership ofthe property may be passedon bythe property may be passedon by

meredelivery andendorsement.meredelivery andendorsement.


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A negotiableinstrument confersA negotiableinstrument confersabsoluteandgoodtitleontheabsoluteandgoodtitleonthetransferee,whotakesitingoodtransferee,whotakesitingood

faith,forvalueandwithoutnoticeoffaith,forvalueandwithoutnoticeofthefactthatthetransferor hadathefactthatthetransferor hadadefectivetitle.defectivetitle.

Inthe caseofgoodsor commodity,Inthe caseofgoodsor commodity,thetransferor cannottransferathetransferor cannottransferabettertitle tothetransferee,thanbettertitle tothetransferee,thanhe himself possesses.he himself possesses.

Distinctdifference betweenDistinctdifference between


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A holderofanegotiableinstrumentA holderofanegotiableinstrumentpossessestherighttosueuponthepossessestherighttosueupontheinstrumentin hisownnameinstrumentin hisownname

As persection 8 of N I Act,the holderofaAs persection 8 of N I Act,the holderofapromissory note, bill ofexchangeorpromissory note, bill ofexchangeorchequemeansany personentitledin hischequemeansany personentitledin hisownnametothe possessionthereofandownnametothe possessionthereofandtoreceiveorrecovertheamountduetoreceiveorrecovertheamountduethereonfromthe partiesthereto.thereonfromthe partiesthereto.


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As persection 9 of N I Act,As persection 9 of N I Act,holder inholder indue coursedue course meansany personwho,meansany personwho,for consideration, becamethefor consideration, becamethe

possessorofa promissory note, billpossessorofa promissory note, billofexchangeor cheque,if payabletoofexchangeor cheque,if payabletobearer,orthe payeeorendorseebearer,orthe payeeorendorseethereofif payabletoorder, beforethereofif payabletoorder, beforetheamountmentionedinit becametheamountmentionedinit becamepayable,andwithout havingpayable,andwithout havingsufficient causeto believethatdefectsufficient causeto believethatdefect

existedinthetitleofthe personfromexistedinthetitleofthe personfromwhom hederived histitle.whom hederived histitle.


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Holder Vs Holderindue courseHolder Vs Holderindue course Considerationisnotessential in caseofaConsiderationisnotessential in caseofa

holderholder

Possession: holderindue coursemustPossession: holderindue coursemustpossesstheinstrument beforeit becamepossesstheinstrument beforeit becamepayable. Inthe caseofthe holder,neitherpayable. Inthe caseofthe holder,neitheractual possessionnorany time limitwithinactual possessionnorany time limitwithinwhich itmust beacquiredisrequiredwhich itmust beacquiredisrequired

Defectinthetitle: holderindue courseDefectinthetitle: holderindue courseshould haveno causeto believethatanyshould haveno causeto believethatanydefectexistsinthetitleofthetransferordefectexistsinthetitleofthetransferor



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Payment in due coursePayment in due course

Section 10 Paymentindue courseSection 10 Paymentindue coursemeans paymentinaccordancewithmeans paymentinaccordancewith

theapparenttenorofthetheapparenttenoroftheinstrument,ingoodfaith andwithoutinstrument,ingoodfaith andwithoutnegligencetoany personinnegligencetoany personinpossessionthereofunderpossessionthereofunder

circumstanceswhich donotaffordacircumstanceswhich donotaffordareasonablegroundfor believingthatreasonablegroundfor believingthatheisnotentitledtoreceive paymentheisnotentitledtoreceive payment

oftheamountthereinmentioned.oftheamountthereinmentioned.


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Paymentshould bemadeinPaymentshould bemadeinaccordancewith theapparenttenoraccordancewith theapparenttenoroftheinstrument.oftheinstrument.

Paymentshould bemadeingoodPaymentshould bemadeingoodfaith andwithoutnegligence.faith andwithoutnegligence.

Paymentmust bemadetothePaymentmust bemadetothe

personin possessionofthepersonin possessionoftheinstrumentin circumstanceswhichinstrumentin circumstanceswhichdonotarousesuspicionabout hisdonotarousesuspicionabout histitleto possesstheinstrumentandtotitleto possesstheinstrumentandto

receive paymentthereof.receive paymentthereof.

Payment in due coursePayment in due course


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ChequesCheques

DidDid youyou getget mymy chequecheque ??

Yes,Yes, twicetwice onceonce fromfrom youyou andand whenwhen

thethe bankbank sentsent itit backback !!

AA chequecheque isis anan unconditionalunconditional order,order,

drawndrawn onon aa specifiedspecified bankerbanker andand isispayablepayable onon demanddemand


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ChequesCheques

General crossingGeneral crossing -- Sec 123 of N I Act.Sec 123 of N I Act.

WhereWhere aa chequecheque bearsbears acrossacross itsits

faceface anan additionaddition ofof thethe wordswords andandcoco oror anyany abbreviationabbreviation thereof,thereof,betweenbetween twotwo parallelparallel transversetransverse lineslinessimply,simply, eithereither withwith oror withoutwithout thethe

wordswords notnot negotiable,negotiable, thatthat additionadditionshallshall bebe deemeddeemed aa crossingcrossing andand thethechequecheque shallshall bebe deemeddeemed toto bebe

crossedcrossed generallygenerally..


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ChequesCheques

Special crossingSpecial crossing Section 124 of N ISection 124 of N IActAct

WhereWhere aa chequecheque bearsbears acrossacross itsitsfaceface anan additionaddition ofof thethe namename ofof aabanker,banker, eithereither withwith oror withoutwithout thethewordswords notnot negotiablenegotiable ,, thatthat additionaddition

shallshall bebe deemeddeemed aa crossingcrossing andand thethechequecheque shallshall bebe deemeddeemed toto bebecrossedcrossed speciallyspecially andand toto bebe crossedcrossed

toto thatthat bankerbanker..


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ChequesCheques

Notnegotiable crossingNotnegotiable crossing Section 130Section 130of N I Actof N I Act

AA personperson takingtaking aa chequecheque crossedcrossedgenerallygenerally oror specially,specially, bearingbearing inineithereither casecase thethe wordswords notnotnegotiablenegotiable shallshall notnot havehave andand shallshall

notnot bebe capablecapable ofof givinggiving aa betterbetter titletitletoto thethe chequecheque thanthan thatthat whichwhich thethepersonperson fromfrom whomwhom hehe tooktook itit hadhad..


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NegotiationNegotiation

Section 14Section 14 Whena promissoryWhena promissorynote, bill ofexchangeor chequeisnote, bill ofexchangeor chequeistransferredtoany person,soastotransferredtoany person,soastoconstitutethat person the holderconstitutethat person the holderthereof,theinstrumentissaidto bethereof,theinstrumentissaidto benegotiated.negotiated.

By deliveryBy delivery

By endorsementanddeliveryBy endorsementanddelivery


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EndorsementEndorsement

Section 15 of N I ActSection 15 of N I Act

Whenthemakeror holderofanegotiableWhenthemakeror holderofanegotiableinstrumentsignsthesame,otherwisethaninstrumentsignsthesame,otherwisethan

assuch maker,forthe purposeofassuch maker,forthe purposeofnegotiation,onthe backorfacethereofornegotiation,onthe backorfacethereoforonaslip of paperannexedthereto,orsoonaslip of paperannexedthereto,orsosignsforthesame purposeastampedsignsforthesame purposeastamped

paperintendedto be completedasapaperintendedto be completedasanegotiableinstrument, heissaidto havenegotiableinstrument, heissaidto haveendorsedthesameandis calledtheendorsedthesameandis calledtheendorser.endorser.


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Endorsementin blankEndorsementin blank

EndorsementinfullEndorsementinfull

Conditional endorsementConditional endorsement EndorsementsansrecourseEndorsementsansrecourse

A forgedendorsementdoesnot passA forgedendorsementdoesnot pass

ontitletoa holderondue courseontitletoa holderondue course


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Payee Irregular RegularPayee Irregular Regular

Mrs Dilip NairMrs Dilip Nair-- Mrs Dilip NairMrs Dilip Nair-- Dilip NairDilip Nair

Dr ThomasDr Thomas-- Dr ThomasDr Thomas--Thomas,M.DThomas,M.D

GenGuptaGenGupta--GenGuptaGenGupta-- Gupta(Genl)Gupta(Genl)

Sai TrustSai Trust-- Sai TrustSai Trust-- For Sai TrustFor Sai Trust

TrusteeTrustee


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Material AlterationsMaterial Alterations

Thefollowingarenotmaterial alterationsThefollowingarenotmaterial alterations

Conversionofendorsementin blankintoConversionofendorsementin blankintoendorsementfullendorsementfull

Crossingofopen cheque by holderCrossingofopen cheque by holder

Conversionofgeneral crossingintospecialConversionofgeneral crossingintospecialcrossingcrossing

Conversionof bearer into orderConversionof bearer into order


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Payment of chequesPayment of cheques

Section 126 of N I ActSection 126 of N I Act

Wherea chequeis crossedWherea chequeis crossed

generally,the bankeronwhomitisgenerally,the bankeronwhomitisdrawnshall not pay itotherwisethandrawnshall not pay itotherwisethantoa bankerandwherea chequeistoa bankerandwherea chequeiscrossedspecially,the bankeroncrossedspecially,the bankeron

whomitisdrawnshall not pay itwhomitisdrawnshall not pay itotherwisethantothe bankertootherwisethantothe bankertowhomitis crossedor hisagentforwhomitis crossedor hisagentfor

collectioncollection


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Payment of chequesPayment of cheques

AntedatedAntedated PostdatedPostdated Stale chequesStale cheques

Amountinwordsandfiguresdiffers ( secAmountinwordsandfiguresdiffers ( sec18 of N I Act) )18 of N I Act) ) AuthenticationofalterationsAuthenticationofalterations Forgery ofdrawerssignatureForgery ofdrawerssignature

Paymentduring banking hoursPaymentduring banking hours Protectionto paying bankerProtectionto paying banker-- 85(1) order85(1) order

cheques, 85(2) bearer chequescheques, 85(2) bearer cheques


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Refusal of payment of chequesRefusal of payment of cheques

Payment countermanded by thedrawerPayment countermanded by thedrawer

Death ofthedrawerDeath ofthedrawer

Insolvency ofthedrawerInsolvency ofthedrawer

Insanity ofthedrawerInsanity ofthedrawer

GarnisheeorderGarnisheeorder

Breach oftrustBreach oftrust trustaccountstrustaccounts

Defectivetitleofthe propertyDefectivetitleofthe property

Mutilated chequesMutilated cheques

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