Evolution & Revolution of Negotiable instruments as facilitators for Trade & Commerce.

Group members
Nikhil Khandelwal Pooja Kishnani Shweta Kothare Abin Mathew 722 724 726 728

Khubir Lamani
Ganesh Mimadi Kiran Naik Abhishek Panjiyar Pravinkumar Patra Nikhilesh Patti

730
732 734 736 738 740

Meaning of NEGOTIABLE INSTRUMENTS

The term Negotiable Instrument consists of two parts Negotiable and Instrument. The Word negotiable means transferable by delivery and The word instrument mean written documents by which a right is created in favour of some person. Negotiable Instrument Payable to Order Negotiable instrument Payable to Bearer.

Need of Negotiable Instruments

Non existence of commerce. Trade in the form of barter.

Money as a medium of trade.

Economy and growth of commerce. World economy and the world market.

Evolution of payment systems in India

Paper money--- by Bank of Hindoostan in 18th century Cheques --- by Bank of Hindoostan in 1770

Post Bills---by British in 1827

Cash Credit--- by Bank of Bengal In 1833 Bills of exchange-Bank of Bengal from 1839

Evolution of payment systems in India

Ancient time -coins(silver and copper) Before Mugal periodHundis
After Mughal period--Arcot Rupee coin

Mauryan period-

Mugal period-

adesha

dastawez-eindultalab & dastawez-emiadi and

Pay orders

Negotiable Instruments Act 1881

Came into force on 1st March, 1882

the said act was enacted to define and to provide the law relating to promissory notes, bills of exchange and cheques

Negotiable Instruments
A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer. A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one or two, or one or some of several payees.

Presemtions of Negotiable Instrument (NI)

Every NI was made, accepted & endorsed for consideration. Consideration is not required to be mentioned on the instrument. Every NI bearing a date was made or drawn on such date Every accepted bill was accepted within a reasonable time after its date & before maturity Every transfer of a negotiable instrument was made before its maturity A lost promissory note or bill was duly stamped & signed

The holder of a NI is a holder in due course

Endorsement appearing upon negotiable instrument was made in the order in which they appear thereon

Promissory Note
Rs.

Section 4 of the Act defines:

10,000/ An instrument in writing New Delhi containing an unconditional undertaking September 25, signed by the maker to pay a 2002 certain sum of money only On demand, I promise to pay Ramesh, s/o RamLal of Meerut or order to, a sum of Rs 10,000/- (Rupees Ten Thousand only), for value received. or to the order of a certain person, or to the bearer of To , Ramesh Sd/ the instrument. Sanjeev

Address..

Stamp

Bill of Exchange

Section 5 of the Act defines:

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 or to the bearer or to the bearer of the instrument

Cheque

Section 6 of the Act defines: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Or we can say a cheque is a bill of exchange which is payable on demand and which is drawn on a specified banker.

From April 1989 (1988 Amendment)

If a person issues a cheque and it got dishonoured the person is said to have done an offence. Whatever be the reason for the dishonour weather for insufficiency of funds or whatever, the same does not matter.

st 1

Certain new sections included in the Negotiable

Instruments Act through the

XVII and are numbered as:

Chapter

Section 138, 139, 140 and 141

New sections in the Chapter XVII

Section 138:

this section defines the dishonour of cheque is an offence. The same also defines the main ingredients which have to be fulfilled to made it, an offence.

Five basic ingredients of section 138 which shall have to be fulfilled for creating an offence for dishonour of a cheque
Cheque given by way of gift would not come under this provision.
The cheque should be presented within the validity period Return memo by the drawer bank to the drawee bank and subsequently by the drawee bank to the drawee reporting that the cheque got unpaid is must. The notice must be sent to drawer within 15 days (amended to 30 days by the 2002 amendment) of the receipt of the information from the drawee bank that the cheque got dishonoured. The drawer of the cheque fails to make the payment of the said amount of money to the payee or to the holder in due course within 15 days of the receipt of the said notice.

Moreover the section 138 also provides for the punishment for dishonour of cheque:

may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.
(the term of punishment extended to two years vide 2002 amendment )

viz. imprisonment for a term which

2002 Amendment
Through the said amendment: Section 138(a) amended regarding the term of imprisonment increased to Two years from One year and through 138(b) the period of giving notice of demand to the drawer increased from fifteen days to thirty days.

2002 Amendment

New sections - 143 to 147 have been inserted for the speedy disposal of the cases under section 138.

New sections inserted through the 2002 amendment:

Section 143 Section 144 Section 145

Section 146
Section 147

Digital Cash Purchasing Cards Smart Card

RuPay

Electronic Fund Transfer

M-Pesa
Biometrics

Digital cheque

CASE STUDY
Case Analysis of Rangappa v Sri Mohan To properly interpret Section 139 of the Negotiable Instruments Act and to

clarify the manner in which this statutory presumption can be rebutted.

CASE STUDY
In the present case, appellant and respondent knew each other
The respondent stated that appellant issued a post dated cheque to the respondent Against certain loan furthered by respondent on 8-2-2001 for the same amount which was presented on the same day for encashment by the complainant.

 Then on 21-02-2001, Bank issued a memo to the complainant stating that the `Payment has been stopped by the drawer, So complainant issued a notice to the appellant relating to such dishonour, which was neither replied nor honoured by the appellant. So, the respondent filed a complaint against the accused for dishonour of cheque.

Judgement at Trial Court

The Trial Court acquitted the appellant on the ground that dishonour was not due to insufficiency of funds but because of the instructions of the appellant So Section 138 is not attracted and Further there was no legally enforceable debt between two of them and hence the presumption under Section 139 cannot be raised.

Judgement of High Court

On appeal, he was convicted and fined by the high court On the ground that accused was unable to raise a probable defence to rebut the presumption placed on him by section 139 which is a mandatory But rebuttable presumption, in favour of the fact that the cheque relates to a legally enforceable debt or liability And the burden to prove otherwise or to rebut this is on the accused himself; And such presumption under section 139 is raised as soon as it is proved that the cheque bears his signature.

JUDGMENT OF THE SUPREME COURT:

Section 138 relating to dishonour of cheque comes into place when a cheque is dishonored irrespective of the fact that it was dishonour due to instruction of stop payment or insufficiency of funds The presumption is a rebuttable presumption and hence the accused is free to raise a presumption

 The

court pointed out that the accused was unable To raise a probable defence and To contest the existence of a legally enforceable debt, and Further he admitted the signature on the cheque to be his own

So this paved a way for the statutory presumption which was not rebutted by him. The supreme court didnt interfere with the judgment of the high court and dismissed the appeal.

Conclusion
Helps the trade & commerce world to grow Helps exporters and importers of goods Provides mechanism to drag their defaulters to court. Play a vital role in the economic development Necessary legislative support is essential to protect electronic banking and payment systems Common or universally accepted Negotiable Instrument Act