Negotiable Instruments

Act 1881
 What is Negotiable
Instruments?
➢The term negotiable instruments means a written document
which entitles a person to a sum of money.

➢A negotiable instruments is transferable by delivery or by

endorsement and delivery.

➢The transfer entitles a person to the sum of money mentioned

therein.

➢“Thus the negotiable instrument is a document which is

legally recognized by custom of trade or law, transferable by
delivery or by endorsement and delivery.”
 Characteristics Of a Negotiable
Instrument
➢Freely transferable: The property in a negotiable
instrument passes from one person to another by a simple
process, i.e., by mere delivery if it is payable to bearer,
and by endorsement and delivery if it is payable to order.

➢Holder’s title free from all defects: The holder in due

course (one who acquires the instrument in good faith and
for consideration) gets it free from all defects.

➢Recovery: One can sue upon the instrument in his own

name.
➢Payable to order or bearer: - It must be payable
either to order or bearer

➢Presumption as to Holder:- Every holder of

negotiable instrument is presumed to be holder in
due course.

➢Presumption as to considerations:- Every

negotiable instrument is presumed to have been
made, drawn, accepted, endorsed , negotiated or
transferred for consideration.
Bills Of
Exchange
•Cheque
Promissory Note
 BILL OF
EXCHANGE
 MEANING
According to the Negotiable Instruments Act 1881, a bill of exchange is
defined as 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 to the bearer of the
instrument.

It means that the Bill of Exchange is drawn by a person directing

another person to pay the specified sum of money to the bearer of the
instrument or to a specified person on his/her order.
 FEATURES
• A Bill of Exchange is a written
order.

• It is drawn and signed by the

maker, i.e., drawer of the bill.

• It is an unconditional order to a
person, i.e., drawee to pay the
specified amount.

• The specified amount is payable

to the person named in the bill or to
his order or to the bearer.
• It specifies the date by which the amount
should be paid.

• It is accepted by the drawee.

 IMPORTANT
TERMS
DRAWER : The person
who makes or writes the
bill of exchange.
Term of a Bill : The period
intervening between the
date on which a bill is
drawn and that on which
it becomes due.

DRAWEE : The person on Due Date : It is the date

whom the bill of exchange on which the payment of
is drawn for acceptance. the bill is due.

Days of Grace: These are Date of Maturity : The

the three extra days date which comes after
added to the period of bill. adding the days of grace
It is a custom to do so. to the due date of a bill.
 Parties
➢ DRAWER: The person who makes the bill of exchange is called
drawer.

➢ DRAWEE: The person who is directed to pay is called drawee.

➢ PAYEE: The person to whom the payment is to be made is called

payee.

➢ ACCEPTOR: When the drawee accepts the bill is called acceptor.

Promissory note

A promissory note 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.
 Che
que
A cheque is a bill of exchange drawn on a specified banker
and expressed to be payable otherwise than on demand.

The maker of a bill of exchange or Cheque is called the

“Drawer"; the person thereby directed to pay is called the
"Drawee".
Case Study
On
Multinational
Banks
A sum of Rs 3.36 lakh was fraudulently withdrawn from the net
banking account of a 59-year-old HR professional on December 21 last
year.

The complainant, Mr. X, a resident of ABC, said he approached the

police after the ICICI Bank failed to act on his complaint. An ICICI bank
official, however, told TOI that the bank has already ordered an
inquiry into the matter.

In his complaint, Mr. X said that he received an email purportedly from

the bank's customer care on December 17 seeking his personal details.
The information sought, as per the mail, was required to upgrade his
account as per the bank's new scheme. The email stated that as per
the ISO guidelines his net banking system needed an upgrade. The mail
requested him to provide details within 72 hours else his account will
be closed. The email contained two forms - personal form and
corporate form, said the police.
Three days later, Mr. X replied to the email giving the required details.
On December 21, he received a telephone call at 11.07am from a man
named Mr. Y, who claimed he was employed with the ICICI Bank. Mr. X
was told that he'll receive a one-time password (OTP) after which he
should call back and read the code numbers contained in the SMS.

Mr. X did as he was told and read out the SMS and the four-code
numbers comprising six digits each. At 11.24am, he received an SMS
stating that Rs 2 lakh were withdrawn from his account via net banking.
At 11.28am, he received another SMS stating that Rs 1.36 lakh more
have been withdrawn.

Mr. X told TOI that the bank has frozen his Bhandarkar Road branch
account and has also blocked his debit card. He said the bank has told
police that the money was transferred to one Mr. Z , a customer of Axis
Bank in Gujarat, via net banking.
Apparently, the first two code numbers that Mr. X gave to Mr. Y
failed to operate. "It was only after I gave the other code numbers that
Rs 3.36 lakh got transferred from my account. I have also sent an
email to Axis Bank to verify credentials of the account holder. The
reply from the bank is awaited," Mr. X said.

Manohar Joshi, senior police inspector of the Deccan Gymkhana police

station, said, "We have asked the ICICI Bank to find out if the fraudster
has withdrawn the money through ATM. If yes, then the bank will
provide us with CCTV footage and other details. We will also seek help
from the cyber crime cell to track the email ID, telephone calls and
address of the person who called Mr.X ."

A complaint in this regard has been registered under sections of the

Indian Penal Code and the Information Technology Act.
Debit Card Cloned

A 27-year-old engineer from Wagaonsheri registered a

complaint with the Yerawada police station on Tuesday
stating that Rs 50,000 were withdrawn from his ICICI Bank
account using a cloned card in an ATM kiosk in Hyderabad
on February 2.

The complainant, Arpan Vani, said that he was in possession

of the debit card when the money was withdrawn from a
Yes Bank ATM kiosk in Nampalli in Hyderabad in February 2.
He has also registered a complaint with the ICICI Bank's
Chinchwad branch where his salary account is located.
Senior police inspector Kishore Jadhav said that
investigations are on.
Credit Card Fraud

• On May 28 he had received

three messages between
9.53 pm and 10.01 pm on his
mobile phone about online
shopping and the fourth
message informed him that
shopping worth around Rs.
• The complainant said that when he
contacted bank officials in this regard he was
not provided any information after which he
blocked his card and informed the police,
which also took no action.

• He said that after all his efforts failed, he

moved an application in the court against
Kochhar and Valse. The CJM directed the
Station House Officer of Hazratganj police
station to lodge an FIR and investigate the
matter.
• At Lucknow local court has directed the police to
lodge an FIR against ICICI Bank CEO Chanda
Kochhar and head of card operations Vinay Valse
in connection with allegations of cheating and
fraud over online shopping through credit card.

• Chief Judicial Magistrate, Lucknow, Sunil Kumar

pronounced the order on Thursday on a
complaint filed by an ICICI Bank credit card
holder Imran Ahmed, seeking direction for
lodging an FIR and proper investigation in the
matter.
BY
VAISHNAVI . P