Nia

Nia

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

 

  1. 1. Define & explain the expression Negotiable Instrument.

 

Q.2. Define the nature and scope of the Act along with the historical background?

 

PAHUJA LAW ACADEMY (PLA)

Introduction to N.I.A.

 

NEGOTIABLE INSTRUMENT ACT, 1881

 

The Negotiable Instruments Act was enacted, in India, in 1881. Prior to its enactment, the provision of the English Negotiable Instrument Act were applicable in India, and the present Act is also based on the English Act with certain modifications. It extends to the whole of India including the State of Jammu and Kashmir. The Act operates subject to the provisions of Sections 31 and 32 of the Reserve Bank of India Act, 1934.

Section 31 of the Reserve Bank of India Act provides that no person in India other than the Bank or as expressly authorised by this Act, the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of 3 money payable to bearer on demand. This Section further provides that no one except the RBI or the Central Government can make or issue a promissory note expressed to be payable or demand or after a certain time. Section 32 of the Reserve Bank of India Act makes issue of such bills or notes punishable with fine which may extend to the amount of the instrument. The effect or the consequences of these provisions are:

  1. A promissory note cannot be made payable to the bearer, no matter whether it is payable on demand or after a certain time.

 

  1. A bill of exchange cannot be made payable to the bearer on demand though it can be made payable to the bearer after a certain time.

 

  1. But a cheque {though a bill of exchange} payable to bearer or demand can be drawn on a person’s account with a banker.

 

WHAT IS THE MEANING OF NEGOTIABLE INSTRUMENT

It is defined under which section?

 

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT

A negotiable instrument has the following characteristics:

 

  1. Property: The prossessor of the negotiable instrument is presumed to be the owner of the property contained therein. A negotiable instrument does not merely give possession of the instrument but right to property also. The property in a negotiable instrument can be transferred without any formality. In the case of bearer instrument, the property passes by mere delivery to the transferee. In the case of an order instrument, endorsement and delivery are required for the transfer of property.

 

  1. Title: The transferee of a negotiable instrument is known as ‘holder in due course.’ A bona fide transferee for value is not affected by any defect of title on the part of the transferor or of any of the previous holders of the instrument.

 

  1. Rights: The transferee of the negotiable instrument can sue in his own name, in case of dishonour. A negotiable instrument can be transferred any number of times till it is at maturity. The holder of the instrument need not give notice of transfer to the party liable on the instrument to pay.

 

  1. Presumptions: Certain presumptions apply to all negotiable instruments e.g., a presumption that consideration has been paid under it. It is not necessary to write in a promissory note the words ‘for value received’ or similar expressions because the payment of consideration is presumed. The words are usually included to create additional evidence of consideration.

 

  1. Prompt payment: A negotiable instrument enables the holder to expect prompt payment because dishonour means the ruin of the credit of all persons who are parties to the instrument.

 

PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENT

 

Sections 118 and 119 of the Negotiable Instrument Act lay down certain presumptions which the court presumes in regard to negotiable instruments. In other words these presumptions need not be proved as they are presumed to exist in every negotiable instrument. Until the contrary is proved the following presumptions shall be made in case of all negotiable instruments:

  1. Consideration: It shall be presumed that every negotiable instrument was made drawn, accepted or endorsed for consideration. It is presumed that, consideration is present in every negotiable instrument until the contrary is presumed. The presumption of consideration, however may be rebutted by proof that the instrument had been obtained from, its lawful owner by means of fraud or undue influence.
  2. Date: Where a negotiable instrument is dated, the presumption is that it has been made or drawn on such date, unless the contrary is proved.

 

  1. Time of acceptance: Unless the contrary is proved, every accepted bill of exchange is presumed to have been accepted within a reasonable time after its issue and before its maturity. This presumption only applies when the acceptance is not dated; if the acceptance bears a date, it will prima facie be taken as evidence of the date on which it was made.

 

  1. Time of transfer: Unless the contrary is presumed it shall be presumed that every transfer of a negotiable instrument was made before its maturity.

 

  1. Order of endorsement: Until the contrary is proved it shall be presumed that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon.

 

  1. Stamp: Unless the contrary is proved, it shall be presumed that a lost promissory note, bill of exchange or cheque was duly stamped.

 

  1. Holder in due course?

 

 

  1. Proof of protest: Section 119 lays down that in a suit upon an instrument which has been dishonoured, the court shall on proof of the protest, presume the fact of dishonour, unless and until such fact is disproved.

 

 

HISTORY & OBJECT

 

HISTORY

 

The history of the present Act is a long one. The Act was originally drafted in 1866 by the 3rd India Law Commission and introduced in December, 1867 in the Council and it was referred to a Select Committee. Objections were raised by the mercantile community to the numerous deviations from the English Law which it contained. The Bill had to be redrafted in 1877. After the lapse of a sufficient period for criticism by the Local Governments, the High Courts and the chambers of commerce, the Bill was revised by a Select Committee. In spite of this Bill could not reach the final stage. In 1880 by the Order of the Secretary of State, the Bill had to be referred to a new Law Commission. On the recommendation of the new Law Commission the Bill was re-drafted and again it was sent to a Select Committee which adopted most of the additions recommended by the new Law Commission. The draft thus prepared for the fourth time was introduced in the Council and was passed into law in 1881 being the Negotiable Instruments Act, 1881 (Act No.26 of 1881)

The most important class of Credit Instruments that evolved in India were termed Hundi. Their use was most widespread in the twelfth century, and has continued till today. In a sense, they represent the oldest surviving form of credit instrument. These were used in trade and credit transactions; they were used as remittance instruments for the purpose of transfer of funds from one place to another. In Modern era Hundi served as Travellers Cheques.

Law related to Negotiable Instruments prior to Independence

 

In those days if a question arose between parties, who were Europeans, on matters relating to the negotiable instrument, English Law was made applicable. If the parties were Hindus, Hindu Law governed; but if they were Muslims, Muslim Law governed. If there were no principles available in these personal laws, their respective customs governed. The customs prevailing amongst the merchants of the respective community were recognised by the courts, and applied to the transaction among them.

Which Section defines N.I.A.?

Section 13

According to Section 13 of the Negotiable Instruments Act, “A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Main Types of Negotiable Instruments are:

  1. Inland Instruments
  2. Foreign Instruments
  3. Bank Draft

 

 

What is it’s Object?

 

To achieve the objective of the act, the legislature has in its wisdom thought it proper to make provisions in the Act for conferring privileges to the mercantile instruments contemplated under it and provide special penalties and procedure in case the obligations under the instruments are not discharged – Dalmia Cement (Bharat) Ltd. Vs. Galaxy Traders & Agencies Ltd. AIR 2001 SC 676

 

Define the Scope of the Act?

 

 

The law relating to negotiable instrument is the law of commercial world legislated to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. In the absence of such instruments, including a cheque, the trade and commerce activities, in the present day world, are likely to be adversely affected as it is impracticable for the trading community to carry on with it the bulk of the currency of force.

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Pre Questions

 

  1. The Negotiable Instruments Act, 1881 applies to

 

(a) The whole of India including State of Jammu and Kashmir

(b) The whole of India except the State of Jammu and Kashmir

(c) Those states as notified by the Union Government from time to time in the Official Gazette

(d) The whole of India except the State of Jammu and Kashmir and the North-Eastern States.

 

  1. The Negotiable Instruments Act, 1881 came into force on

 

(a) 9th December, 1881

(b) 19th December, 1881

(c) 1st March, 1882

(d) None of the above.

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

 

 

  1. 1. Explain the meaning & essentials of Promissory Note.

 

  1. 2. Explain the meaning & essential features of bill of exchange. Distinguish between Promissory Note & Bill of Exchange.

 

Define Promisory note

 

As per S –4 Promissory Note:

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date is termed as Promissory Note.

A promissory note typically contains all the terms pertaining to the indebtedness by the issuer or maker to the note’s payee, such as the amount, interest rate, maturity date, date and place of issuance, and issuer’s signature. The 1930 international convention that governs promissory notes and bills of exchange also stipulates that the term “promissory note” should be inserted in the body of the instrument and should contain an unconditional promise to pay.

Promissory notes that are unconditional and saleable become negotiable instruments that are extensively used in business transactions in numerous countries. A promissory note is usually held by the payee. Once the debt has been discharged, it must be cancelled by the payee and returned to the issuer.

The person who makes the Promissory Note and promise to pay is called the maker and the person to whom the payment is done is called the Payee. It is duly stamped.

In Bahadurunnisa Begum Vs. Vasudev Naik AIR 1967 AP 123, the following are the kinds of promissory note:

  1. Where the promise is to pay a certain sum of money to a certain person
  2. Where the promise is to pay a certain sum of money to the order of a certain person and
  3. Where the promise is to pay a certain sum of money to the bearer of instrument

 

What are the distinctive features of Promissory Note:

  1. 1The promissory note must be in writing

 

  1. It must contain an express promise or clear undertaking to pay.

 

  1. The promise to pay must be definite and unconditional.

 

  1. The maker of the pro-note must be certain
  2. 5. It should be signed by maker.

  3. The amount must be certain
    .

  4. The promise should be to pay money.
  5. The payee must be certain.

  6. It should bear the required stamping
    – The promissory note should, necessarily, bear sufficient stamp as required by the Indian Stamp Act, 1889.
  7. It should be dated– The date of a promissory note is not material unless the amount is made payable at particular time after date. Even then, the absence of date does not invalidate the pro-note and the date of execution can be independently proved. However to calculate the interest or fixing the date of maturity or lm\imitation period the date is essential. It may be ante-dated or post-dated. If post-dated, it cannot be sued upon till ostensible date.
  8. Demand– The promissory note may be payable on demand or after a certain definite period of time.

 

 What is Bill of exchange and is defined under which section?

BILL OF EXCHANGE

“Bill of Exchange” is a written, unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum, either immediately (a sight bill) or on a fixed date (a term bill), for payment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a post-dated check and a binding contract.

 

A bill of exchange is also called a draft but, while all drafts are negotiable instruments, only “to order”  bills of exchange can be negotiated. According to the 1930 Convention Providing A Uniform Law For Bills of Exchange and Promissory Notes held in Geneva (also called Geneva Convention) a bill of exchange contains:

 

(1) The term bill of exchange inserted in the body of the instrument and expressed in the language employed in drawing up the instrument.

(2) An unconditional order to pay a determinate sum of money.

(3) The name of the person who is to pay (drawee).

(4) A statement of the time of payment.

(5) A statement of the place where payment is to be made.

(6) The name of the person to whom or to whose order payment is to be made.

(7) A statement of the date and of the place where the bill is issued.

(8) The signature of the person who issues the bill (drawer).

 

 

Difference Between Bill of Exchange & Promissory Note

 

 

(1) Parties.

There are three parties to a bill of exchange, namely, the drawer, the drawee and the payee; while in a promissory note there are only two parties – maker and payee.

 

(2) Nature of payment.

In a bill of exchange, there is an unconditional order to pay, while in a promissory note there is an unconditional promise to pay.

 

(3) Acceptance.

A bill of exchange requires an acceptance of the drawee before it is presented for payment, while a promissory note does not require any acceptance since it is signed by the persons who is liable to pay.

 

(4) Liability.

The liability of the maker of a promissory note is primary and absolute, while the liability of a drawer of bill of exchange is secondary and conditional. It is only when the drawee fails to pay that the drawer would be liable as a surety.

 

(5) Notice of dishonor.

In case of dishonor of bill of exchange either due to non-payment or non-acceptance, notice must be given to all persons liable to pay. But in the case of a promissory note, notice of dishonor to the maker is not necessary.

 

(6) Maker’s position.

The drawer of a bill of exchange stands in immediate relationship with the acceptor and not the payee. While in the case of a promissory note, the maker stands in immediate relationship with the payee.

 

(7) Nature of acceptance.

A promissory note can never be conditional, while a bill of exchange can be accepted conditionally.

 

(8) Copies.

A bill of exchange can be drawn in sets, but a promissory note cannot be drawn in sets.

 

(9) Payable to bearer.

A promissory note cannot be made payable to a bearer, while a bill of exchange can be so drawn provided it is not payable to bearer on demand.

 

 

(10) Payable to maker.

In a promissory note, the maker cannot pay to himself. While in the case of a bill of exchange, the drawer and the payee may be one person.

 

(11) Protest.

Foreign bills must be protested for dishonor when such protest is required by the law of the place where they are drawn. But no such protest is required in the case of a promissory note.

 

 What is Cheque? And is defined under which section?

As per S-6.”Cheque” – A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

A cheque is a document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name the cheque has been issued. The person writing the cheque, the drawer, has a transaction banking account (often called a current, cheque, chequing or checking account) where their money is held. The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, known as the drawee, to pay that person or company the amount of money stated.

Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money. Paper money evolved from promissory notes, another form of negotiable instrument similar to cheques in that they were originally a written order to pay the given amount to whomsoever had it in their possession (the “bearer“).

Cheque and Demand draft(DD) are negotiable, both are mechanism used to make payments. A cheque is a Bill of Exchange drawn on a specified and not expressed to be payable otherwise than on demand. The Demand Draft is a pre-paid Negotiable Instrument, wherein the drawee bank acts as guarantor to make payment in full when the instrument is presented.

 

Demand draft(DD) are negotiable instrument, both are mechanism used to make payments. A cheque is a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. The Demand Draft is a pre-paid Negotiable Instrument, wherein the drawee bank acts as guarantor to make payment in full when the instrument is presented.

In business transaction cheque is not usually accepted as the drawer and payee and unknown and there will be credit risk. So, in such cases Demand draft where transfer of money is guaranteed.

 

Here are few basic difference between cheque and DD

  1. Cheque is issued by customer, whereas Demand draft issued by bank
  2. In cheque payment is made after presenting cheque to bank, while in DD is given after making payment to bank.
  3. Cheque can bounce due to insufficient balance . DD cannot be dishonored as amount is paid before hand.
  4. Payment of cheque can be stopped by drawee, whereas payment cannot be stopped in DD.
  5. A cheque can be paid to bearer or order. While, DD is paid to person on order.
  6. In cheque drawer and payee are different person. In DD, both parties are banks.
  7. A cheque needs signature to transfer amount, While DD does not require signature to transfer funds

‘Post-Dated Cheque’ is a cheque written by the drawer (payer) for a date in the future. Whether a post-dated cheque may be cashed or deposited before the date written on it depends on the country.

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Pre Questions

  1. The undertaking contained in a promissory note, to pay a certain sum of money is

 

(a) conditional

(b) Unconditional

(c) May be conditional or unconditional depending upon the circumstances

(d) None of the above.

 

  1. A bill of exchange contains a/an

 

(a) Unconditional undertaking

(b) Unconditional order

(c) Conditional undertaking

(d) Conditional order.

 

  1. Cheque is a

 

(a) promissory note

(b) Bill of exchange

(c) both (a) and (b) above

(d) None of the above.

  1. The term “a cheque in the electronic form” is defined in the Negotiable Instruments Act, 1881 – under

 

(a) Section 6(a)

(b) Section 6(1)(a)

(c) explanation 1(a) of section 6

(d) Section 6A.

  1. The term ‘Negotiable instrument’ is defined in the Negotiable Instruments Act, 1881, under section

 

(a) 12

(b) 13

(c) 13A

(d) 13B.

 

 

 

  1. The term ‘negotiation’ in section 14 of the Negotiable Instruments Act, 1881 refers to

 

f(a) The transfer of a bill of exchange, promissory note or cheque to any person, so as to constitute the person the holder thereof

(b) The payment by a bank on a negotiable instrument after due verification of the instrument

(c) The bargaining between the parties to a negotiable instrument

(d)  all of the above.

 

  1. If an instrument may be construed either as a promissory note or bill of exchange, it is

 

(a) A valid instrument

(b) An ambiguous instrument

(c) A returnable instrument

(d) None of the above.

 

  1. If in an instrument the amount undertaken or ordered to be paid is stated differently in figures and in words.

 

(a) The instrument is void due to uncertainty

(b) The amount stated in figure shall be the amount undertaken or ordered to be paid

(c) The amount stated in words shall be the amount undertaken or ordered to be paid

(d) None of the above.

 

 

 

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

 

Q.1. Define the following terms?

(e) Holder (f) Holder in due course.

(g) Payment in due course (h) Hundi

Q.2.  What do you understand by endorsement of negotiable instrument?

 

Q.3.  (a) What do you understand by the term ‘maturity’ and ‘days of grace? What is the procedure prescribed for calculating maturity of a bill of exchange payable at a started number of months? What is the rule for counting the time when the day of maturity is a holiday?

 

Q.4.  What is meant by ‘negotiation’? What are different modes of transfers of a negotiable instrument? Clearly mention the points of difference between Assignability and Negotiation.

 

  1. 5. Explain about Inchoate stamped instrument.

 Distinguish between Holder and Holder in due couse?

 

SECTION-8.”Holder”– The “holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.

 

SECTION-9.”Holder in due course”– “Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if 9[payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

.

SECTION-10.”Payment in due course”– “Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.

 

SECTION-11.”Inland instrument” – A promissory note, bill of exchange or cheque drawn or made in 10[India] and made payable in, or drawn upon any person resident in 10[India] shall be deemed to be an inland instrument.

 

 

SECTION-12.”Foreign instrument”- Any such instrument not so drawn, made or made payable shall be deemed to be foreign instrument.

 

SECTION-13.”Negotiable instrument” – (1 ) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.

 

Explanation 1 : A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation 2 : A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation 3 : Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.]

 

[(2)] A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.]

 

SECTION-14. Negotiation – When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute the person the holder thereof, the instrument is said to be negotiated.

 

SECTION-15.Indorsement –When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the same, and is called the “indorser”.

 

SECTION-16 Indorsement “in blank” and “in full”-“indorsee” -= (1) If the indorser signs his name only, the indorsement is said to be “in blank”, and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be “in full”, and the person so specified is called the “indorsee” of the instrument.

 

(2) The provisions of this Act relating to a payee shall apply with the necessary modifications to an indorsee.]

 

SECTION-17.Ambiguous instruments –Where an instrument may be construed either as a promissory note or bill of exchange, the holder may at his election treat it as either and the instrument shall be thenceforward treated accordingly.

 

SECTION-18.Where amount is stated differently in figures and words –If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.

 

SECTION-19. Instruments payable on demand –A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand.

 

SECTION-20.Inchoate stamped instruments –Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in 14[India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount; provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.

Section 20 of the act gives general authority to a person to whom a stamped and signed paper is delivered to convert it into negotiable instrument payable to any specified person and accordingly it is open to a person receiving a balance inchoate instrument  to complete it in favour of any person besides himself.

SECTION-21 ″At sight”, “On presentment”, “After sight” – In a promissory note or bill of exchange the expressions “at sight” and “on presentment” means on demand. The expression “after sight” means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.

 

SECTION-22. ”Maturity” – The maturity of a promissory note or bill of exchange is the date at which it falls due.

Days of grace: Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable.

 

SECTION-23. Calculating maturity of bill or note payable so many months after date or sight – In calculating the date at which a promissory note or bill of exchange, made payable at stated number of months after date or after sight, or after a certain event, is at maturity, the period stated shall be held to terminate on the day of the month, which corresponds with the day on which the instrument is dated, or presented for acceptance or sight, or noted for non-acceptance, or protested for non-acceptance, or the event happens or, where the instrument is a bill of exchange made payable at stated number of months after sight and has been accepted for honor, with the day on which it was so accepted. If the month in which the period would terminate has no corresponding day, the period shall be held to terminate on the last day of such month.

 

Illustrations

(a) A negotiable instrument dated 29th January, 1878, is made payable at one month after date. The instrument is at maturity on the third day after the 28th February, 1878.

(b) A negotiable instrument, dated 30th August, 1878, is made payable three months after date. The instrument is at maturity on the 3rd December, 1878.

 

SECTION-24. Calculating maturity of bill or note payable so many days after date or sight – In calculating the date at which a promissory note or bill of exchange made payable at certain number of days after date or after sight or after a certain event is at maturity, the day of the date, or of presentment for acceptance or sight, or of protest for non-acceptance, or on which the event happens, shall be excluded.

 

SECTION-25 When day of maturity is a holiday – When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day.

 

SECTION – 26. Capacity to make, etc., promissory notes, etc.- Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.

 

Minor: A minor may draw, endorse, deliver and negotiate such instruments so as to bind all parties except himself.

 

Nothing herein contained shall be deemed to empower a corporation to make, endorse or accept such instruments except in cases in which, under the law for the time being in force, they are so empowered.

 

SECTION -27. Agency –Every person capable of binding himself or of being bound, as mentioned in section 26, may so bind himself or be bound by a duly authorized agent acting in his name.

A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or endorsing bills of exchange so as to bind his principal.

An authority to draw bills of exchange does not of itself import an authority to endorse.

 

SECTION -29 Liability of legal representative signing – A legal representative of a deceased person who signs his name to a promissory note, bill of exchange or cheque is liable personally thereon unless he expressly limits his liability to the extent of the assets received by him as such.

 

SECTION -30. Liability of drawer – The drawer of a bill of exchange or cheque is bound in case of dishonor by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonor has been given to, or received by, the drawer as hereinafter provided.

 

SECTION -31. Liability of drawee of cheque- The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default.

 

SECTION -32. Liability of maker of note and acceptor of bill – In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand.

 

In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.

 

SECTION -33. Only drawee can be acceptor except in need or for honor – No person except the drawee of a bill of exchange, or all or some of several drawees, or a person named therein as a drawee in case of need, or an acceptor for honor, can bind himself by an acceptance.

 

SECTION -34. Acceptance by several drawees not partners – Where there are several drawees of a bill of exchange who are not partners, each of them can accept it for himself, but none of them can accept it for another without his authority.

 

 

SECTION -35.Liability of endorser – In the absence of a contract to the contrary, whoever endorses and delivers a negotiable instrument before maturity, without, in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonor by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonor has been given to, or received by, such endorser as hereinafter provided.

 

Every endorser after dishonor is liable as upon an instrument payable on demand.

 

 

SECTION -36. Liability of prior parties to holder in due course – Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.

 

SECTION -37. Maker, drawer and acceptor principals – The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be.

 

SECTION -38- Prior party a principal in respect of each subsequent party – As between the parties so liable as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a principal debtor in respect of each subsequent party.

 

 

SECTION -39. Suretyship –When the holder of an accepted bill of exchange enters into any contract with the acceptor which, under section 134 or 135 of the Indian Contract Act, 1872 (9 of 1872), would discharge the other parties, the holder may expressly reserve his right to charge the other parties, and in such case they are not discharged.

 

SECTION -40. Discharge of endorser’s liability – Where the holder of a negotiable instrument, without the consent of the endorser, destroys or impairs the endorser’s remedy against a prior party, the endorser is discharged from liability to the holder to the same extent as if the instrument had been paid at maturity.

 

.

SECTION -41. Acceptor bound, although endorsement forged – An acceptor of a bill of exchange already endorsed is not relieved from liability by reason that such endorsement is forged, if he knows or had reason to believe the endorsement to be forged when he accepted the bill.

 

SECTION -42- Acceptance of bill drawn in fictitious name – An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an endorsement by the same hand as the drawer’s signature, and purporting to be made by the drawer.

 

SECTION -43 Negotiable instrument made, etc. without consideration – A negotiable instrument made, drawn, accepted, endorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for a consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

 

Exception I: No party for whose accommodation a negotiable instrument has been made, drawn, accepted or endorsed can, if he has paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation.

 

Exception II: No party to the instrument who has induced any other party to make draw, accept, endorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover therein an amount exceeding the value of the consideration (if any) which he has actually paid or performed.

 

SECTION – 44. Partial absence or failure of money-consideration – When the consideration for which a person signed a promissory note, bill of exchange or cheque consisted of money and was originally absent in part, or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

Explanation: The drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and the endorser with his endorsee. Other signers may by agreement stand in immediate relation with a holder.

 

 

SECTION – 45. Partial failure of consideration not consisting of money- Where a part of the consideration for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that party, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

 

45A. Holder’s right to duplicate of lost bill – Where a bill of exchange has been lost before it is overdue, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again.

 

If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.

 

SECTION -46. Delivery – The making, acceptance or endorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive.

 

As between parties standing in immediate relation, delivery to be effectual must be made by the party making, accepting or endorsing the instrument, or by a person authorized by him in that behalf.

 

As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein.

A promissory note, bill of exchange or cheque payable to bearer is negotiable by the delivery thereof.

 

A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by endorsement and delivery thereof.

 

 

SECTION -47.Negotiation by delivery – Subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to bearer is negotiable by delivery thereof.

Exception: A promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in a certain event is not negotiable (except in the hands of a holder for value without notice of the condition) unless such event happens.

 

SECTION -48. Negotiation by endorsement – Subject to the provisions of section 58, a promissory note, bill of exchange or cheque  is negotiable by the holder by endorsement and delivery thereof.

 

SECTION -49. Conversion of endorsement in blank into endorsement in full –The holder of a negotiable instrument endorsed in blank may, without signing his own name, by writing above the endorser’s signature a direction to pay to any other person as endorsee, convert the endorsement in blank into an endorsement in full; and the holder does not thereby incur the responsibility of an endorser.

 

SECTION -50. Effect of endorsement – The endorsement of a negotiable instrument followed by delivery transfers to the endorsee the property therein with the right of further negotiation, but the endorsement may by express words, restrict or exclude such right, or may merely constitute the endorsee an agent to endorse the instrument, or to receive its contents for the endorser, or for some other specified person.

 

SECTION –51. Who may negotiate – Every sole maker, drawer, payee or indorsee, or all of several joint makers, drawers, payees or endorsees, of a negotiable instrument may, if the negotiability of such instrument has not been restricted or excluded as mentioned in section 50, endorse and negotiate the same.

 

SECTION –52. Indorser who excludes his own liability or makes it conditional – The indorser of a negotiable instrument may, by express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen.

Where an endorser so excludes his liability and afterwards becomes the holder of the instrument all intermediates endorsers are liable to him.

 


 

SECTION –53. Holder deriving title from holder in due course – A holder of a negotiable instrument who derives title from a holder in due course has the rights thereon of that holder in due course.

COMMENTS

A holder of a negotiable instrument who derives title from a holder in due course has the same right as the right of a holder in due course. This is the provision in section 53. When the title has gone through the hands of a holder in due course once, it remains immune from any defect that might have been there prior to the taking by the holder in due course.

SECTION –54. Instrument indorsed in blank – Subject to the provisions hereinafter contained as to crossed cheques, a negotiable instrument endorsed in blank is payable to the bearer thereof even although originally payable to order.

 

SECTION –55. Conversion of indorsement in blank into indorsement in full – If a negotiable instrument, after having been indorsed in blank, is indorsed in full, the amount of it cannot be claimed from the indorser in full, except by the person to whom it has been indorsed in full, or by one who derives title through such person.

 

SECTION –56. indorsement for part of sum due- No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid a note to that effect may be indorsed on the instrument, which, may then be negotiated for the balance.

COMMENTS

 

The objection of the section 56 is simply to prevent a promissory note from being transferred for a portion only of the sum at the time due upon it. It has not application to the transfer of the whole of the balance due upon a pronote – Jai Chand Vs. Sardar Singh AIR 1918 Lah. 383 (1)

SECTION –57. Legal representative cannot by delivery only negotiate instrument endorsed by deceased – The legal representative of a deceased person cannot negotiate by delivery only a promissory note, bill of exchange or cheque payable to order and endorsed by the deceased but not delivered.

 

COMMENTS

Section 2(11) of Cr P.C. states that a “Legal Representative” means a person who in law represents the estate of a deceased person and includes any person who intermeddles with the estates of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued.

 

SECTION –58. Instrument obtained by unlawful means or for unlawful consideration  –When a negotiable instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, no possessor or endorsee who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party prior to such holder, unless such possessor or endorsee is, or some person through whom he claims was, a holder thereof in due course.

COMMENTS

Ante-dating endorsement by the holder does not amount to obtaining a pronote by means of an offence or fraud within the meaning of this section – Nallaya V Palani AIR 1926 Mad 1154

A promissory note given for celebrating marriage against the provisions of the Child Marriage Restraint Act is not enforceable being against public policy as well as statute – Ranganayakalu Vs., Narayanaswami 1958 An. LT 14

Section 58 of the act provides that when a negotiable instrument has been obtained from any maker, acceptor, holder of it, by means of an offence or fraud, or for an unlawful consideration no possessor or indorsee who claims through such person who thus obtained it, is entitled to received such amount from such maker or indorser unless such possessor is a holder in due course.

SECTION –59. Instrument acquired after dishonor or when overdue – The holder of a negotiable instrument, who has acquired it after dishonor, whether by non-acceptance or non-payment, with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor:

Accommodation note or bill : Provided that any person who, in good faith and for consideration, becomes the holder, after maturity, of a promissory note or bill of exchange made, drawn or accepted without consideration, for the purpose of enabling some party thereto to raise money thereon, may recover the amount of the note or bill from any prior party.

COMMENTS

There is no provision of law which prohibits a bank from discounting accommodation bill as distinguished from genuine trade bills – Bezongi Byranji and Co. Jalina Vs. Central Bank of India Ltd. Bombay – AIR 1963 AP 348

Section 59 applies only to a holder and not to a holder in sue course – SD Asirvatam Vs. G. Palniraju Mudaliar AIR 1973 Mad, 439 DB

SECTION -60. Instrument negotiable till payment or satisfaction – A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after maturity) until payment or satisfaction thereof by the maker, drawee or accepter at or after maturity, but not after such payment or satisfaction.

 

 

SECTION –61. Presentment for acceptance – A bill of exchange payable after sight must, if no time or place is specified therein for presentment, be presented to the drawee thereof for acceptance, if he can, after reasonable search, be found, by a person entitled to demand acceptance, within a reasonable time after it is drawn, and in business hours on a business day. In default of such presentment, no party thereto is liable thereon to the person making such default.

 

If the drawee cannot, after reasonable search, be found, the bill is dishonored.

 

If the bill is directed to drawee at a particular place, it must be presented at that place, and if at the due- date for presentment he cannot, after reasonable search, be found thereon, the bill is dishonored.

 

[When authorized by agreement or usage, a presentment through the post office by means of a registered letter is sufficient.]

 

SECTION –62. Presentment of promissory note for sight – A promissory note, payable at a certain period after sight, must be presented to the maker thereof for sight (if he can after reasonable search be found) by a person entitled to demand payment, within a reasonable time after it is made and in business hours on a business day. In default of such presentment, no party thereto is liable thereon to the person making such default.

 

SECTION –63. Drawee’s time for deliberation – The holder must, if so required by the drawee of a bill of exchange presented to him for acceptance, allow the drawee  [forty-eight] hours (exclusive of public holidays) to consider whether he will accept it.

 

SECTION –64. Presentment for payment –Promissory notes, bill of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder.

 

[Where authorized by agreement or usage, a presentment through the post office by means of a registered letter is sufficient.]

 

Exception: Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof.

 

Notwithstanding anything contained in section 6, where an electronic image of a truncated cheque is presented for payment, the drawee bank is entitled to demand any further information regarding the truncated cheque from the bank holding the truncated cheque in case of any reasonable suspicion about the genuineness of the apparent tenor of instrument and if the suspicion is that of any fraud, forgery, tampering or destruction of the instrument it is entitled to further demand the presentation of the truncated cheque itself for verification:

 

Provided that the truncated cheque so demanded by the drawee bank shall be retained by it, if the payment is made accordingly.

 

SECTION –65. Hours for presentment  – Presentment for payment must be made during the usual hours of business and, if at a banker’s, within banking hours.

 

SECTION –66. Presentment for payment of instrument payable after date or sight – A promissory note or bill of exchange, made payable at a specified period after date or sight thereof, must be presented for payment at maturity.

 

SECTION –67. Presentment for payment of promissory note payable by instalments- A promissory note payable by instalments must be presented for payment on the third day after the date fixed for payment of each instalment; and non-payment on such presentment has the same effect as non-payment of a note at maturity.

 

SECTION –68. Presentment for payment of instrument payable at specified place and not elsewhere – A promissory note, bill of exchange or cheque made, drawn or accepted payable at a specified place and not elsewhere must, in order to charge any party thereto, be presented for payment at that place.

 

SECTION –69. Instrument payable at specified place –A promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the maker or drawer thereof, be presented for payment at the place.

SECTION –70. Presentment where no exclusive place specified –A promissory note or bill of exchange, not made payable as mentioned in sections 68 and 69, must be presented for payment at the place of business(if any) or at the usual residence, of the maker, drawee or acceptor thereof, as the case may be.

S.70 of the Act deals in a general way with the presentment of promissory notes or bills of exchange which are not covered by section 68 and 69 and its applicability is not confined only to those cases where the presentment of the instrument is necessary as a part of the cause of action

SECTION –71. Presentment when maker, etc., has no known place of business or residence  – If the maker, drawee, or acceptor of a negotiable instrument has no known place of business or fixed residence, and no place is specified in the instrument for presentment for acceptance or payment, such presentment may be made to him in person wherever he can be found.

SECTION –72. Presentment of cheque to charge drawer – Subject to the provisions of section 84] a cheque must, in order to charge the drawer, be presented at the bank on which it is drawn before the relation between the drawer and his banker has been altered to the prejudice of the drawer.

 

SECTION –73. Presentment of cheque to charge any other person – A cheque must, in order to charge any person except the drawer, be presented within a reasonable time after delivery thereof by such person.

 

SECTION –74. Presentment of instrument payable at demand – Subject to the provisions of section 31, a negotiable instrument payable on demand must be presented for payment within a reasonable time after it is received by the holder.

 

SECTION –75. Presentment by or to agent, representative of deceased, or assignee of insolvent – Presentment for acceptance or payment may be made to the duly authorized agent of the drawee, maker or acceptor, as the case may be, or, where the drawee, maker or acceptor has died, to his legal representative, or, where he has been declared an insolvent, to his assignee.

 

SECTION –75A. Excuse for delay in presentment for acceptance or payment- Delay in presentment [for acceptance or payment] is excused if the delay is caused by circumstances beyond the control of the holder, and not imputable to his default, misconduct or negligence. When the cause of the delay ceases to operate, presentment must be made within a reasonable time.]

 

SECTION –76. When presentment unnecessary – No presentment for payment is necessary, and the instrument is dishonored at the due date for presentment, in any of the following cases:

(a) if the maker, drawee or acceptor intentionally prevents the presentment of the instrument, or

If the instrument being payable at his place of business, he closes such place on a business day during the usual business hours, or

If the instrument being payable at some other specified place, neither he nor any person authorized to pay it attends at such place during the usual business hours, or If the instrument not being payable at any specified place, he cannot after due search be found;

(b) as against any party sought to be charged therewith, if he has engaged to pay notwithstanding non-presentment;

(c) as against any party if, after maturity, with knowledge that the instrument has not been presented-

he makes a part payment on account of the amount due on the instrument, or promises to pay the amount due therein whole or in part, or otherwise waives his right to take advantage of any default in presentment for payment;

(d) as against the drawer, if the drawer could not suffer damage from the want of such presentment.

 

SECTION –77. Liability of banker for negligently dealing with bill presented for payment  – When a bill of exchange, accepted payable at a specified bank, has been duly presented there for payment and dishonored, if the banker so negligently or improperly keeps, deals with or delivers back such bill as to cause loss to the holder, he must compensate the holder for such loss.

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Pre Questions

 

  1. Under section 16 of the Negotiable Instrument Act, ‘indorsement in blank’ of an instrument means

 

(a) where the indorser \ does not write anything on the instrument

(b) where the indorser signs his name only on the instrument

(c) where the indorser writes the name of the person who is directed to pay

(d) none of the above.

  1. ‘At sight’ under section 21 of the Negotiable instrument Act, 1881, means

 

(a) On presentation

(b) On demand

(c) On coming into vision

(d) None of the above.

 

  1. A promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity

 

(a) On the 30th day after the day on which it is expressed to be payable

(b) On the 3rd day after the day on which it is expressed to be payable

(c) On the 5th day after the day on which it is expressed to be payable

(d) On the 4th day after the day on which it is expressed to be payable.

  1. If a minor draws, indorses, deliver or negotiates an instrument, such instrument binds

 

(a) all parties to the instrument including the minor

(b) only the minor and not other parties to the instrument

(c) all parties to the instrument except the minor

(d) none of the above.

 

  1. In a promissory note, the amount of money payable

 

(a) must be certain

(b) may be certain or uncertain

(c) is usually uncertain

(d) none of the above.

 

  1. An authority to draw bills of exchange

 

(a) itself import an authority to indorse

(b) does not itself import an authority to indorse

(c) sometime import an authority to indorse

(d) none of the above.

  1. The term ‘legal representative’ in section 29 of the Negotiable Instruments‘ Act, 1881

 

(a) does not include. executors or administrator (Rama v. Pravin, AIR 1926 Mad 389)

(b) includes executors or administrator (K. Subbarma v. K. Subbarayudu, AIR 1926 Mad 390) ‘

(c) includes executors but does not include administrators (P. Nayar v. T. Ramanna,AIR 1929 Mad 389)

(d) includes only administrators but does not include executors (P.K. Pati v. Damodar Sahu, AIR 1953 Ori 179).

 

  1. Can a drawer escape from his liability?

 

(a) no, a drawer can never escape from his liability

(b) yes, a drawer can limit or exclude his liability by inserting in the bill an express stipulation to that  effect

(c) in certain cases although he can escape from his liability but always he cannot so escape

(d) none of the above.

  1. In which of the following case the elementary law is laid down that where there is no acceptance, no cause of action can have arisen to the payee against the drawee

 

(a) Khandas Narandus v. Dahiabhai, ILR 3 Bom 182 (183)

(b) Venkayya Pantulu v. Surya Prakasamma, AIR 1940 Mad 879

(c) Karak Rubber C0. Ltd. v. Burden, (1972) 1 All ER 1210

(d) k.A. Lona v. D.H. Ibrahim, AIR 1981 Ker 816 (DB).

 

  1. A bill is drawn payable to ‘A’ or order. ‘A’ indorses it to ‘B’, the indorsement not containing the words “or order” or any equivalent words. Can ‘B’ negotiate the instrument?

 

(a) yes

(b) no

(c) not always

(d) none of the above.

  1. Where an indorser of an instrument excludes his liability and afterwards becomes the holder of the instrument, who are liable to him?

 

(a) no one is liable to him

(b) all intermediate indorsers are liable to him

(c) only the immediate prior indorser is liable to him

(d) none of the above.

  1. Can the legal representative of a deceased person negotiate a promissory note, bill of exchange or cheque payable to order by delivery only which was indorsed by the deceased but not delivered by him?

 

(a) yes, the legal representative can negotiate the instrument by delivery only

(b) no, the legal representative can not negotiable an instrument by delivery only. He must re-indorse and deliver the instrument for negotiating it

(c) an instrument indorsed by a deceased person has no legal validity and is void

(d) none of the above.

 

  1. Can the holder of a negotiable instrument indorsed in blank convert the indorsement into an indoisement in full?

 

 

  • no, such a conversion is not possible under the Negotiable Instruments Act, 1881 (Section 49) (b) yes, the holder can, without signing his
  • own name, and by writing a ove the indorser’s signature a direction to pay to any other person as indorsee, convert the indorsement in blank into an indorsement in full (Section 49)
  • yes, the holder can by signing his own name and by writing above the indorser’s signature a direction to pay to any other person as indorsee, convert the indorsement in blank to an indorsement in full (Section 49)
  • none of the above.
  1. The indorsement of a negotiable instrument followed by delivery

 

(a) transfers to the indorsee the property in the bill, provided the indorsement must be an indorsement in full

(b) does not transfer the property in the bill to  anyone

(c) transfers to the indorsee ‘the property in the bill

(d) transfers to the holder the property in bill.

  1. When presentment for payment is to be made under section 65 of the Act?

 

  • Presentment for payment can be made at any reasonable time.
  • Presentrnent for payment must be made during the usual hours of business and, if at a banker’s, within banking hours.
  • There is no such stipulation on the time for presentment.
  • (d) none of the above.

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

 

 

 Q.1. What is crossing of Cheques? How many types of  crossing are their?

 

 

 

What is the significance of crossing?

 

SECTION -123. Cheque crossed generally – Where a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines or of two parallel transverse lines simply, either with or without the word “not negotiable”, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed generally.

 

SECTION -124. Cheque crossed specially – Where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable”, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially, and to be crossed to that banker.

 

SECTION -125. Crossing after issue – Where a cheque is uncrossed, the holder may cross it generally or specially.

 

Where a cheque is crossed generally, the holder may cross it specially.

 

Where a cheque is crossed generally or specially, the holder may add the words “not negotiable”.

 

Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker, his agent, for collection.

 

SECTION -126. Payment of cheque crossed generally – Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker.

Payment of cheque crossed specially: Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection.

 

SECTION -127. Payment of cheque crossed specially more than once – Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof.

 

SECTION -128. Payment in due course of crossed cheque – Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be entitled to the same rights, and be placed in the same position in all respects, as they would respectively be entitled to and placed in if the amount of the cheque had been paid to and received by the true owner thereof.

 

SECTION -129. Payment of crossed cheque out of due course – Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.

 

 

SECTION -130. Cheque bearing “not negotiable” –A person taking a cheque crossed generally or specially, bearing in either case the words “not negotiable”, shall not have and shall not be capable of giving, a better title to the cheque than that which the person from whom he took it had.

 

SECTION -131. Non-liability of banker receiving payment of cheque – A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.

 

Explanation I: A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer’s account with the amount of the cheque before receiving payment thereof.

 

Explanation II : it shall be the duty of the banker who receives payment based on an electronic image of truncated cheque held with him to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.

SECTION -131A. Application of chapter to drafts – The provisions of this chapter shall apply to any draft, as defined in section 85A, as if the draft were a cheque.

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

 

  1. If the words “not negotiable” are used with special crossing in a cheque, the cheque is

 

(a) not transferable

(b) transferable

(c) negotiable under certain circumstances

(d) none of the above.

  1. Crossing of a cheque effects the

 

(a) negotiability of the cheque

(b) mode of payment on the cheque

(c) both (a) and (b)

(d) none of the above.

 

 

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Mains Questions

Q.1.What is meant by dishonor of an instrument? Also discuss the about requirement of notice.

  1. 2. What are the special rules of evidence?
  2. 3. (a) State the pro visions of penalties for dishonor of a cheque for insufficiency of funds in the bank account.

(b) Explain the cognizance of offences under Section 138 of the Negotiable Instrument Act.

(c) What defense is not allowed in any prosecution under chapter XVII of the Negotiable Instrument Act?

(d) ‘A’ draws a cheque of Rupees five thousand in favour of ‘B’ for his birthday’s gift. The cheque was dishonoured on the ground of insufficient fund in the bank account of ‘A’. Discuss the liability of ‘A’ under Negotiable Instrument Act.

 

PENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS

 IN THE ACCOUNTS

 

SECTION -138. Dishonor of cheque for insufficiency, etc., of funds in the accounts  – Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years  or with fine which may extend to twice the amount of the cheque, or with both:

 

Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

 

Explanation: For the purpose of this section, “debt or other liability” means a legally enforceable debt or other liability.

 

It is manifest that to constitute an offense under Section 138 of the Act; the following ingredients are required to be fulfilled:

 

  1. a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account.
  2. the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
  3. that cheque has been presented to bank within a period of three months from the date on which it is drawn or within the period of its validity whichever is earlier;
  4. that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
  5. the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
  6. the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice;

 

Section 138 is the principal section dealing with dishonor of cheques. It delves into the history of its establishment, with the reason for its necessary enactment and moves to explain the procedures and process as laid out by the statute as well as the decision of the Hon’ble Delhi High Court in Rajesh Agarwal & Others v State & Another. Seeking to set out clarity on the points of law on relevant territorial jurisdiction for filing a complaint under Section 138 various decisions of the Courts are set out, finally concluding with the latest development in law, The Negotiable Instruments (Amendment) Ordinance, 2015.

 

INTRODUCTION

 

The term “Negotiation” is a does not necessarily imply anything more than the assertion that the paper possesses the negotiable quality. Generally speaking, it applies to any written statement given as security, usually for the payment of money, which may be transferred by endorsement or delivery, vesting in the party to whom it is transferred a legal title on which he can support a suit in his name. The term signifies that the note or paper writing to which it is applied, possesses the requisites of negotiability.

A negotiable instrument is one, therefore, which when transferred by delivery or by endorsement and delivery, passes to the transferee a good title to payment according to its tenor and irrespective of the title of the transferor, provided he is bona fide holder for value without notice of any defect attaching to the instrument or in the title of the transferor; in other words, the principle nemo dat quod non habit does not apply, It is the element of negotiability that make a contract founded upon paper thus adopted for circulation different in many particulars from other contracts known to law.

 

The early origin of these instruments is a matter of speculation among text writers. In primitive societies, the system of bills of exchange could not, of course, have existed; for firstly, money which it represents was not invented till long after, and secondly, the art of writing was a thing unknown to them. When the system of bartering became inconvenient, a common medium of exchange and an instrument of an easily convertible character was found necessary, and money came into use. It might have had its humble origin, but when once the utility of money was found, it was never lost sight of.

 

In the case of Rangachari(N.) v Bharat Sanchar Nigam Ltd. , the Apex Court pointed out that The Law merchant treated negotiable instruments as instruments that oiled the wheels of commerce and facilitated quick and prompt deals and transactions. This continues to be in the position as now recognized by legislation, though possibly a change is taking place with the advent of credit cards, debit cards and so on. It was said that negotiable instruments are merely instruments of credit, readily convertible into money and easily passable from one hand to another. With expanding commerce, growing demand for money could not be met by mere supply of coins and the instrument of credit took function of money which they represented and thus became by degrees, articles of traffic. A man dared not dishonor his own acceptance of bill of exchange, lest his credit be shaken in the commercial world.

 

HISTORY AND EVOLUTION OF THE ACT IN PURSUANCE WITH SECTION 138, NEGOTIABLE INSTRUMENTS ACT, 1881

 

Negotiable Instruments have been used in commercial world for a long period of time as one of the convenient modes of transferring money. Development in banking sector and with the opening of new branches, cheque became one of the favourite Negotiable Instrument.

A cheque is an acknowledged bill of exchange that is readily accepted in lieu of payment of money and it is negotiable. However, by the fall of moral standards, even these Negotiable Instruments like cheques issued, started losing their credibility by not being honoured on presentment. It was found that an action in the civil court for collection of the proceeds of negotiable instrument like a cheque tarried, thus defeating the very purpose of recognizing a negotiable instrument as a speedy vehicle of commerce.

Consequently, the Section 4 of the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, inserted Chapter XVII in the Negotiable Instruments Act, 1881 (hereinafter the “NI Act”).

 

In the case of Dalmia Cement(Bharat) Ltd. V Galaxy Traders and Agencies Ltd., the Apex Court referred to the object of Section 138 of the Act. The court observed that the Act was enacted and section 138 thereof incorporated with a specified object of making a special provision by incorporating a strict liability so far as the cheque, a negotiable instrument, is concerned. The law relating to the negotiable instruments is the law of commercial world legislated to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another.

The offence under section 138 is not a natural crime like hurt or murder. It is an offence created by a legal fiction in the statute. It is a civil liability transformed into a criminal liability, under restricted conditions by way of an amendment to the Act, which is brought into force only in 1989. Till then, the offending acts referred to in section 138 constituted only a pure civil liability. Legitimately, the legislature thought it fit to provide for adequate safeguards in the Act to protect honest drawers from unnecessary harassment.

 

However, the sections 138 to 142 of the said Act were found deficient in dealing with dishonour of cheques. Punishment provided under section 138 too was enhanced from one year to two years. These legislative reforms aimed at encouraging the usage of cheque and enhancing the credibility of the instrument so that the normal business transactions and settlement of liabilities could be ensured.6

What came into the forefront of all the disputed regarding section 138, was essentially with regard to the appropriate court in which the complaint could be filed by the payee in case a cheque has been dishonoured. This jurisdiction issue has been interpreted by the courts from time to time and the law has witnessed a considerable number of changes throughout. The developments in the law relating to the dishonor of cheques have been traced further in the paper.

 

JURISDICTIONAL DEVELOPMENT UNDER SECTION 138

The Act is silent on the matter pertaining to the relevant jurisdiction with respect to filing of criminal complaint in case the offence of Dishonour of the cheque is committed under Section 138. Since the Criminal courts are approached, the issue needs to be examined from the point of view of the Criminal Procedure Code, 1973. Section 177 of CrPC provides that “Every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed”. Section 178 provides that “(a) When it is uncertain in which of several local areas an offence was committed, or (b) Where an offence is committed partly in one local area and party in another, or (c) Where an offence is a continuing one, and continues to be committed in more local area has one, or (d) Where it consists of several acts done in different local areas, It may be inquired to or tried by a court having jurisdiction over any of such local areas.”

 

 

Circumstances of dishonour:
The circumstances under which dishonour of cheque takes place or that may contribute to the situation would be irrelevant and are required to be totally ignored.

 

Ingredients and requirements of the penal provisions:

Section 138 creates an offence for which the mental elements are not necessary. It is enough if a cheque is drawn by the accused on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for discharge in whole or in part, of any debt or other liability due. Therefore, whenever the cheques are on account of insufficiency of funds or reasons referable to the drawer’s liability to provide for funds, the provisions of section 138 of the Act would be attracted, provided the following conditions are satisfied:

 

  1. Existence of a live account

 

Existence of a “live account” at the time of issue of cheque is a condition precedent for attracting penal liability for the offence under this section. A cheque cannot be issued de hors an account maintained by its drawer with the banker. When the cheque is returned by the bank unpaid because of the account of money standing to the credit of the cheque, to make demand for payment as provided for payment as indicated in clause (b) of the proviso. The words “that account” in the section denote to the account in respect of which the cheque was drawn. No doubt if any person manages to issue a cheque without an account with the bank concerned its consequences would not snowball into the offence described under section 138 of the Act. For the offence under section 138 of the Act there must have been an account maintained by the drawer at the time of the cheque was drawn.

 

  1. Issue of Cheque in discharge of a debt or liability

The cheque issued unpaid by the bank must have been issued in discharge of a debt or other liability wholly or in part. Where a cheque is issued not for the purposes of discharge of any debt or other liability, the maker of the cheque is not liable for prosecution under section 138 of the Act. A cheque given as a gift or for any other reasons and not for the satisfaction of any debt or other liability, partly or wholly, even if it is returned unpaid will not meet the penal consequences.
If the above conditions are fulfilled, irrespective of the mental conditions of the drawer he shall be deemed to have committed an offence, provided the other three requisites are fulfilled:

 

  1. a)  Presentation of the cheque within six months or within the period of its validity
    The cheque must have been presented to the bank within a period of six months from the date on which it is drawn or its period of validity, whichever is earlier. Thus if a cheque is valid for three months and is presented to the bank within a period of six months the provisions of this section shall not be attracted. However if the period of validity of the cheque is not specified or prescribed the cheque is presented within six months from the date the cause of action can arise. The six months are taken from the date the cheque was drawn.

 

  1. b)   Return of the cheque unpaid for reason of insufficiency of funds
    The cheque must be returned either because the money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the arrangement made to be paid from that account by an agreement with the bank. Even if the cheque is returned with the endorsement “account closed” section 138 is attracted.

c)   Issue of the notice of dishonour demanding payment within thirty days of receipt of information as to dishonour of the cheque. The payee or the holder in due course of the cheque has to give a notice in writing making a demand for payment of the said amount of money to the drawer of the cheque. Such notice must be given within 30 days of information from the bank regarding the return of cheque as unpaid

 

  1. d)  Failure of the drawer to make the payment within fifteen days of the receipt of the paymentAfter the receipt of the above notice the drawer of the cheque has to make payment of said amount of money to the payee or to the holder in due course of the cheque within 15 days of the receipt of the notice. If the payment is not made after the receipt of the notice within stipulated time a cause of action for initiating criminal proceedings under this section will arise.

 

Constitutional validity of the provisions

 

In B. Mohana Krishna v. Union of India, the question came up for consideration that whether the presumption raised in section 139 that the holder of the cheque received the cheque of the nature referred to in section 138, unless the contrary is established is violative of Article 20 (3) of the Constitution of India. The Court while answering negative held that:
“Unless a person is compelled to be a witness against himself Article 20 (3) has no application. The person charged under section 138 is not compelled to be a witness against himself. The presumption of the nature incorporated in section 139 is a common feature in criminal statutes for example section 12 of the Protection of Civil rights Act. The presumption under section 139 in favour of holder of cheque would not, therefore be violative of Article 20 (3).”
Section 138 was also put to test in Ramawati Sharma v. Union of India in light of Article 21 of the Constitution of India where the court held that; Mere taking of loan is not, thus, made punishable under certain circumstances and after following certain conditions. It may not, therefore, be stated that the liberty of a person was being curtailed by an arbitrary procedure or that such a provision is violative of Article 21 of the Constitution.

 

  1. Presumption in favor of holder – It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability.

 

  1. Defence which may not be allowed in any prosecution under section 138 – It shall not be a defence in a prosecution of an offence under section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonored on presentment for the reasons stated in that section.

 

 

 

  1. Offences by companies – (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

 

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

 

Provided further that where a person is nominated as Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or State Government as the case may be, he shall not be liable for prosecution under this Chapter.

 

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act, has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

 

 

  1. Cognizance of offences – Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause -of- action arises under clause (c) of the proviso to section 138;

Provided that the congizance of a complaint may be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such period.

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

(2) the offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction –

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course as the case may be, maintains the account, is situated; or

(b) if the cheque is delivered for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account is situated.

Explanation – For the purposes of clause (a) where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course then the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course as the case may be, maintains the account.

 

142A. Validation for Transfer of pending cases – (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 or any judgment, decree, order or directions of any court, all cases arising out of section 138 which were pending in any court, whether filed before it, or transferred to it, before the commencement of the Negotiable Instruments (Amendment) Act, 2015, shall be transferred to the court having jurisdiction under sub-section (2) of section 142 as if that sub-section had been in force at all material times.

(2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1), all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were presented for payment within the territorial jurisdiction of that court.

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act, 2015, more than one prosecution filed by the same person against the same drawer of cheques is pending before different courts, upon the said fact having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142 before which the first case was filed as if that sub-section had been in force at all material times.’’

 

  1. Power of Court to try cases summarily.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences under this Chapter shall be tried by a Judicial Magistrate of the first class or by a Metropolitan Magistrate and the provisions of sections 262 to 265 (both inclusive) of the said Code shall, as far as may be, apply to such trials:

Provided that in the case of any conviction in a summary trial under this section, it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not exceeding one year and an amount of fine exceeding five thousand rupees:

Provided further that when at the commencement of, or in the course of, a summary trial under this section, it appears to the Magistrate that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the Magistrate shall after hearing the parties, record an order to that effect and thereafter recall any witness who may have been examined and proceed to hear or rehear the case in the manner provided by the said Code.

(2)  The trial of a case under this section shall, so far as practicable, consistently with the interests of justice, be continued from day to day until its conclusion, unless the Court finds the adjournment of the trial beyond the following day to be necessary for reasons to be recorded in writing.

(3)  Every trial under this section shall be conducted as expeditiously as possible and an endeavour shall be made to conclude the trial within six months from the date of filing of the complaint.

 

  1. Mode of service of summons.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), and for the purposes of this Chapter, a Magistrate issuing a summons to an accused or a witness may direct a copy of summons to be served at the place where such accused or witness ordinarily resides or carries on business or personally works for gain, by speed post or by such courier services as are approved by a Court of Session.

(2)  Where an acknowledgement purporting to be signed by the accused or the witness  or an endorsement purported to be made by any person authorised by the postal department or the courier services that the accused or the witness refused to take delivery of summons has been received, the Court issuing the summons may declare that the summons has been duly served.

 

  1. Evidence on affidavit.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the evidence of the complainant may be given by him on affidavit and may, subject to all just  exceptions be read in evidence in any enquiry, trial or other proceeding under the said Code.

(2)  The Court may, if it thinks fit, and shall, on the application of the prosecution or the accused, summon and examine any person giving evidence on affidavit as to the facts contained therein.

 

 

Section 145 (1) of the act which was inserted with an objective to prescribe the procedure for dispensing with preliminary evidence of the complainant and for speedy disposal mandates notwithstanding anything contained in the CrP.C. the evidence of the complaint may be given by him on an affidavit and may subject to all just exceptions, be read in evidence in any enquiry – Dantuluri /Venkataramaraju Vs. Katta Narajan Rao 20074 Crl. LJ 892 AP

  1. Bank’s slip prima facie evidence of certain facts.-The Court shall, in respect of every proceeding under this Chapter, on production of bank’s slip or memo having thereon the official mark denoting that the cheque has been dishonoured, presume the fact of dishonour of such cheque, unless and until such fact is disproved.

 

  1. Offences to be compoundable.-Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.

 

PAHUJA LAW ACADEMY

Negotiable Instruments Act

Pre Questions

 

  1. As per section 147 of the Negotiable Instruments Act, 1881, every offence punishable under the Act are

 

(a) compoundable

(b) non-compoundable

(c) cognizable

(d) both (b) and (c) above.

  1. Under the provisions of section 143 of the Negotiable Instruments Act, 1881, all offences under the Act are to be tried by

 

(a)  any judicial Magistrate

(b) Judicial Magistrate of the First Class or by a Metropolitan Magistrate

(c) only a District Judge

(d) none of the above.

 

  1. For what term of imprisonment an offender under section 138 of the Negotiable Instruments Act can be punished?

 

(a) for a term which may extend to two years

(b) for a term which may extend to one year

(c) for a term not exceeding three years

(d) none of the above.

 

  1. Dishonour by non-acceptance takes place

 

(a) when the bill is properly presented for acceptance, except where presentment is excused, but the drawee makes the default in accepting it

(b) when the bill is properly presented for acceptance, except where presentment is excused, but the drawee makes the default in paying it

(c) when the bill is properly presented for payment, except where presentment is excused, but the drawee fails to accept it

(d) none of the above.

 

  1. The presumption as to the date of a negotiable instrument under section 118 is that, every negotiable instrument bearing a date was made or drawn

 

(a) prior to that date

(b) on such date

(c) may be on or prior to that date

(d) none of the above.

 

  1. In the absence of a contract to the contrary, the liability of the maker or drawer of a foreign negotiable instrument is regulated in all essential matters

 

(a) by the law of the place where the instrument is made payable (section 134)

(b) by the law of the place where the instrument is indorsed (section 134)

(c) by the law of the place where the instrument is made (section 134)

(d) none of the above.

  1. Chapter XVII was inserted into the Negotiable Instruments Act, 1881, by amendment of the Act in the year

 

(a) 1888

(b) 1988

(c) 1998

(d) none of the above.

 

  1. Chapter XVII contain sections

 

(a) 138 to 142

(b) 136 to 142

(c) 112 to 124

(d) none of the above.

  1. With effect from which date, the term of imprisonment under section 138 was increased to two years from one year?

 

(a) from 6-2-2002

(b) from 6-2-2003

(c) from 1-4-1989

(d) none of the above

  1. Section 138 of the Negotiable Instruments Act, 1881, mens rea

 

(a) partially excludes

(b) includes

(c) sometime includes

(d) none of the above.

 

  1. When a cheque has become invalid because of the expiry of the stipulated period, can it be re-validated by the drawer by alteration of dates?

 

(a) yes, the drawer can re-validate the cheque by alteration of dates

(b) no, the drawer cannot re-validate it by so alteration of dates

(c) although the drawer cannot revalidate the cheque, but the drawee can at his discretion revaliate it

(d) none of the above.

ABOUT PLA

PLA offers extensive Training Programmes to help you succeed in fiercely competitive examinations like CLAT and other Law entrance exams in India. Our passion is to help you create a successful career in Law.

Who’s Online

Profile picture of Mrundenieviz
Profile picture of inencielmAY
Profile picture of DrumnPernNZ
top
Copyright © 2017. Pahuja Law Academy
Designed & Developed By : Asap Comm Ind
Registration Opens For Judiciary Coaching


X
Free Demo Class Every Sunday - 10 AM & Every Wednesday - 04 PM                                    Free Demo Class Every Sunday - 10 AM & Every Wednesday - 04 PM