Negotiable Instruments Ppt

Negotiable Instruments

Definition According to the section 13(1) of the Negotiable Instruments act of 1881-

A Negotiable instrument means a promissory note, Bill of exchange or cheque payable either to order or to the bearer.

Typically

Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain point of time. .

Types of Negotiable Instruments  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 a certain person or the bearer of the instrument.

Bill of

Exchange:

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

 Cheque:

A cheque is a bill of exchange on a s pecified banker and not expressed to be payable otherwise than on demand.

Hundi Hundies

are the negotiable instrument written in vernacular language ,some

times these are even like promissory notes.

It covers all indigenous negotiable instruments whether they be in the form of   notes or bills.

The word hundi is derived from the Sanskrit word hund which means to

collect.

Basically Hundis

refer to financial instruments evolved on the Indian sub-continent used in trade and credit transactions. They were used -

as remittance instruments (to transfer funds from one place to another), as credit instruments (to borrow money [IOUs]), for trade transactions (as bills of exchange).

Though normally regarded as bills of  exchange, they were more often used as equivalents of cheques issued b y indigenous

bankers.

Parties

to Negotiable Instruments

 Promissory

Note

Maker Payee Holder Endorser Endorsee  Cheque

Drawer Drawee

Payee Holder Endorser/Endorsee

 Bill

of Exchange Drawer Drawee Acceptor Payee Holder Endorser Endorsee

Acceptor of Honour

Distinction Promissory

-I Note

Bill

Promise

Nature

Maker & Payee

Payee

of Exchange Order Drawer

Not Required

& Payee

Required

Maker

Liable

Drawer

Not Necessary

Notice

Given to all Prior Parties

Bearer

Payable to«

Bearer on

Demand

Distinction Bill

II

of Exchange

Anyone Needs Demand

- Time

Never Crossed

Cheque Drawee

Only Banker

 Acceptance

Not Required

Payment  Crossing

Properly

Stamp

Needed

Noting - Protesting

Not Possible Necessary 3

Days

Demand

May be Crossed Stamp Not Needed Possible

Countermandate Notice of Dishonour  Grace

Necessary 0

Days

10

Days

Types of Cheques There are two types of cheques

1). Open chequesA cheque is payable in cash across the counter of a bank is called an open cheque.

2). Crossed chequesA crossed cheque is one on which has two parallel lines or without the words & co.

Types of crossing 1). General crossing Two transverse parallel lines are marked across its face

It bears the words not negotiable between these parallel lines

2). Special crossing. Cheques crossed by two parallel lines with the Bankers name written in between. The banker to whom it is drawn shall pay only to the banker to whom it is

crossed or his agent.

3). Crossed A/c Payee It is also called restrictive crossing When the words a/c payee are written between the transverse parallel lines , it means that the proceeds of the cheque are to be credited to the account of the payee only.