COMPILED B:- JYOTI SINGH BBA 3 rd

IMC

 According to section 13(a) of this Act,

Negotiable instrument means, a promissory note, bill of exchange or cheque payable either to order or to bearer. Definition includes only three documents in negotiable instruments. But in practice, many other documents which meet the basic requirements of a negotiable instruments.

 The following instrument are characterized

as negotiable instrument either by law or custom and tradition of a trade:1) treasury bill 2) government promissory note 3) dividend warrant 4) share warrant 5) bearer debentures 6) hundies 7) port trust bonds 8) improvement trust debentures/bonds 9) bearer railway bonds

 Transferability
Good title to transferee

Right of holder
Evidence of debt

Legal presumptions

 According to section 13 if this Act

negotiable instrument includes following three documents:a) Promissory note b) Bill if exchange c) Cheque

 According to section 4 of this Act,

Promissory note is an instrument, in writing(not being bank note or currency note) containing an unconditional undertaking signed by the maker, to pay certain sum of money only to or to the order of certain person or to bearer of the instrument.

 It must be in writing

It must contain unconditional promise to pay

The promise to pay must be unconditional It must be signed by the maker

It maker must be a certain person

The payee must be a certain person The sum payable must be certain

Promise to pay money only

Other formalities

 According to section 5 of this Act, A

bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay certain sum of money, only to or to the order of certain or to the bearer of the instrument.

 It must be in writing

It contains an order to pay

The order to pay must be unconditional It must be signed by the maker The drawee must be certain The payee must be certain

The sum payable must be certain

Other formalities

 According to section 6 of this Act, a cheque

is a bill of exchange drawn on a specified banker and not expresses to be payable, otherwise than on demand and it includes the electronic image of truncated cheque and a cheque in electronic form.

 Cheque is always drawn on a specific banker.

Cheque is always payable on demand.

Cheque is a bill of exchange, nevertheless it

does not require acceptance. Cheque is valid for a period of six months.

 Bearer and order instruments. Demand and time instrument.

Inland and foreign instruments.

 Parties to promissory note:

Maker,Payee,Holder,Indorser and Indorsee. Parties to a bill of exchange: Drawer,Drawee,Payee,Holder,Drawee in case of need and Acceptor for honour. Parties to a cheque: Drawer,Drawee(bank) Payee,Holder,Indorser and Indorsee

 According to section 8 of this Act, the

holder of a negotiable instrument means any person, entitled in his own name to the possession thereof and to receive or recover, the amount due thereon from the party liable thereto..

 The holder has a right to possess the instrument in his

own name. He is entitled to receive or recover the payment of the instrument. He has a right to give valid discharge of the instrument. He can further negotiate instrument in favour to another party. He is entitled to complete inchoate instrument with an amount as intended by the drawer.

 According to section 9 of this Act, holder in due

course means any person who for the possessor of a negotiable instrument if payable to bearer or payee or indorsee thereof if payable to order before the amount mentioned in it became payable and without sufficient cause to believe that any defect existed in the title of a person from whom derived his title.

 He must be a holder

He must be a holder for consideration

He must acquire the instrument before

maturity Instrument should be complete and regular Holder must take the instrument in good faith.

HOLDER
Instrument get possessed

HOLDER IN DUE COURSE

Gets an instrument before

on the name of the holder and recover from the party liable to pay Consideration is not necessary Can acquire an instrument after the date of maturity. Get same title as the transferor. Drawer,drawee and transferor are liable to pay

the period of maturity in good faith and for valuable consideration. Consideration is necessary. Have to acquire before the date of maturity. Gets a title better than that of transferor. All parties prior to him are liable to pay.

 Liability of drawer

Liability of drawee of cheque

Liability of maker of promissory note and

acceptor of bill Liability of indorser Liabilities of prior parties to a holder in due course.

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