MEANING AND FEATURES OF NEGOTIABLE INSTRUMENTS

Ø  NEGOTIABLE INSTRUMENTS ACT 1881
DEFINITION AND FEATURE OF NEGOTIABLE INSTRUMENTS
 SHASHI AGGARWAL ECONOMICS AND LAW CLASSES IS THE SECOND CHANNEL TOTALLY DEVOTED TO ECONOMICS AND LAW CLASSES. STARTED UPLOADING VIDEOS ON BUSINESS ECONOMICS,PRINCIPLES OF ECONOMICS AND BUSINESS LAW II.

Ø  BUSINESS LAW -II

Ø  INTRODUCTION TO NEGOTIABLE INSTRUMENTS ACT 1881

1. APPLICABLE WITH EFFECT FROM MARCH 1,1881
2. EXTENDS TO THE WHOLE IF INDIA
3. CONTAINS 147 SECTIONS

1. IT DEALS WITH PROMISSORY NOTES, BILL OF EXCHANGE AND CHE QUES,THE THREE KINDS OF NEGOTIABLE INSTRUMENTS BUT IT ALSO INCLUDES ALL OTHER INSTRUMENT WHICH HAVE THE FEATURES OF NEGOTIABILITY.

Ø  DEFINITION AND MEANING

1. NEGOTIABLE MEANS TRANSFERABLE BY DELIVERY
2. INSTRUMENT MEANS A WRITTEN DOCUMENT BY WHICH A RIGHT IS CREATED IN FAVOR OF SOME PERSON.
3. TO BE NEGOTIABLE INSTRUMENT, A DOCUMENT SHOULD CONTAIN AN ORDER OR A PROMISE TO PAY A DEFINITE SUM OF MONEY AND NO MORE.
4. AN INSTRUMENT IS A NEGOTIABLE INSTRUMENT IF IT SATISFIES TWO CONDITIONS:-
5. THAT IT IS IN THE FORM WHICH IS CAPABLE OF BEING USED BY THE HOLDER FOR THE TIME BEING IN HIS OWN NAME
6. THAT IS TRANSFERABLE LIKE CASH BY DELIVERY

Ø  DEFINITION

Ø  SEC 13(1) OF THE NEGOTIABLE INSTRUMENTS ACT,” A NEGOTIABLE INSTRUMENT MEANS A PROMISSORY NOTE, BILL OF EXCHANGE OR CHEQUE PAYABLE EITHER TO ORDER OR TO BEARER.

·         A NEGOTIABLE INSTRUMENT IS ONE WHICH WHEN TRANSFERRED BY

1.  DELIVERY OR BY ENDORSEMENT AND
2.  DELIVERY PASSES TO THE TRANSFEREE A GOOD TITLE TO PAYMENT
3. IRRESPECTIVE OF THE TITLE OF THE TRANSFEROR PROVIDED THE TRANSFEREE IS A BONAFIDE HOLDER FOR VALUE WITHOUT NOTICE OF ANY DEFECT IN THE TITLE OF THE TRANSFEROR.

   FEATURES

1. WRITING: MUST BE IN WRITING
2. UNCONDITIONAL PROMISE OR ORDER:-
3. PROPERTY:-MEANS COMPLETE  RIGHT OF OWNERSHIP AND NOT MERELY RIGHT OF POSSESSION
4. FREELY TRANSFERABLE:THE PROPERTY IN A NEGOTIABLE INSTRUMENT IS FREELY TRANSFERABLE BY MERE DELIVERY IN CASE OF ORDER INSTRUMENT TRANSFERABLE BY ENDORSEMENT
5. GOOD TITLE: A HOLDER IN DUE COURSE GETS A GOOD TITLE EVEN IF THE TRANSFEROR HAD THE DEFECTIVE
6. RIGHT TO SUE IN HIS OWN NAME:-IN CASE OF DISHONOR THE TRANSFERREE HAS THE RIGHT TO SUE IN HIS OWN NAME
7. PROMPT PAYMENT
8. PRESUMPTIONS:-CERTAIN PRESUMPTIONS LIKE CONSIDERATION HAS BEEN PAID,ORDER OF ENDORSEMENT
9. MUST BE AUTHENTICATED BY SIGNATURE

Ø  EXAMPLE OF NEGOTIABLE INSTRUMENTS

1. BY STATUTE:-
1. PROMISSORY NOTES
2. BILL OF EXCHANGE
3. CHE QUES

2.       BY USAGE OR CUSTOMS:-

1. SHARE WARRANT
2. PORT TRUST DEBENTURES
3. INDIRA VIKAS PATRAS
4. GOVERNMENT PROMISSORY NOTES
5. TREASURY BILLS
6. HUNDIIS
7. BANKER’S DRAFT

   EXAMPLE OF NEGOTIABLE INSTRUMENTS

   NON NEGOTIABLE INSTRUMENTS:-

1.       MONEY ORDERS

2.       SHARE CERTIFICATES

3.       LETTER OF CREDIT

4.       POSTAL ORDERS

5.       SHARE CERTIFICATES

6.       FIXED DEPOSIT RECEIPTS

7.       NATIONAL SAVING CERTIFICATES

   QUASI NEGOTIABLE INSTRUMENTS

• CAPABLE OF BEING TRANSFERRED BY DELIVERY OR ENDORSMENT BUT THE TRANSFEREE DOES NOT GET BETTER TITLE. SO THE PROVISIONS OF NEGOTIABLE INSTRUMENTS DO NOT APPLY

1.       BILL OF LADING

2.       RAILWAY RECEIPT

3.       DOCK WARRANTS

4.       WHARFINGER CERTIFICATE

   PRESUMPTIONS (118 AND 119)

NEED NOT TO BE PROVED AS THEY ARE ASSUMED TO BE INHERENT PART OF THE NEGOTIABLE INSTRUMENT

1. CONSIDERATIONS : ASSUMED THAT CONSIDERATION IS PAID
2. DATE:-DATE WHICH ON IT IS SIGNED PRESUMED THAT IT HAS BEEN DRAWN ON THAT DATE
3. TIME OF ACCEPTANCE:-
4. TIME OF TRANSFER: ASSUMED TO BE BEFORE MATURITY
5. ORDER OF ENDORSEMENT:-IN THE ORDER ON WHICH IT APPEARS
6. STAMP:-A LOST PROMISSORY NOTE/BILL OF EXCHANGE/CHEQUE DULY STAMPED
7. HOLDER IN DUE COURSE: PRESUMED THAT THE HOLDER OF A NEGOTIABLE INSTRUMENT IS THE HOLDER IN DUE COURSE
8. PROOF OF PROTEST:-THE COURT SHALL ON THE PROOF OF THE PROTEST PRESUME THE FACTS OF DISHONOR