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<ul><li> 1. NEGOTIABLE INSTRUMENTS </li> <li> 2. NEGOTIABLE INSTRUMENT ACT-1881 A Negotiable Instrument means a promissory note ,bill of exchange or cheque payable either to order or bearer A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable to particular person and doesnt contain words prohibiting transfer or indicating an intention that shall not be transferable. 2 </li> <li> 3. Holder in due course Section 9 of Negotiable Instrument ACT- 1881 defines a holder in due course as any person who for consideration , become the possessor of the instrument before the amount mentioned in it becomes payable and with out having sufficient cause to that any defect existed in the title of the person from who derives his title 3 </li> <li> 4. Criteria He must be holder. He obtained the instrument for a valuable consideration. He must have become the holder of the instrument before maturity. He must have obtained the instrument in good faith. He must take the instrument complete and regular on the face of it. 4 </li> <li> 5. Privileges of a holder in due course right in case of inchoate instrument Liability of a prior parties to holder in due course. Acceptors liability to the holder in due course when endorsement forged. Acceptor bound, although bill drawn in fictitious name. No effect of conditional delivery. Instrument made with out consideration. 5 </li> <li> 6. Good title deriving from holder in due couse Better title than that of the transferor. Every holder is a holder in due course. Estoppel against denying original validity of instrument. Estoppel denying capacity of payee to endorse. 6 </li> <li> 7. SPECIAL RULES FOR CHEQUE 7 </li> <li> 8. Cheque According to sec 6, a cheque is a bill of exchange drawn on a specified banker &amp; not express to be payable otherwise than on demand A cheque has three parties ; drawer, drawee, payee. Only banker can be a drawee. Acceptance is not required. The amount is always payable on demand. A cheque may be crossed. It requires no stamp. A cheque is not to be noted or protested in case of dishonour. The payment of a cheque may be countermanded by the drawer. 8 </li> <li> 9. TYPES OF CROSSING General crossing. Special crossing. 9 </li> <li> 10. General crossing: A cheque is said to contain a general crossing when two parellel lines are drawn across the face of the cheque. According to sec 123 Where a cheque bears across its face an addition of the words and company or any abbreviation there of between two parallel transverse lines , or of two parallel transverse lines simply , either with or without the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed generally. 10 </li> <li> 11. Specimen of general crossing 1) &amp; Co 2) Not Negotiable 3) &amp; Co. Not Negotiable 4) 11 </li> <li> 12. Special crossing Sec 124 of the act defines special crossing as Where cheque bears across its face an addition of the name of the banker , either with or without the words not negotiable that addition shall be deemed a crossing and cheque shall be deemed to be crossed specially and to be crossed to that banker. 12 </li> <li> 13. Specimens of specialcrossings In the case of special crossing the paying banker is to honour the cheque only when it is presented through the bank mentioned in the crossing or an agent of such bank. Further, sec.127 states, Where a cheque is crossed specially to more than one banker, expect when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereof. 13 </li> <li> 14. Ca n ara Crossing ba nk Ca na ra ba nk No tN eg oti a ble C Specimens of Special an ara ba nk14 </li> <li> 15. Account payee (restrictive crossing): Although the act is silent with regard to this form of crossing, it has been recognized by custom amongst businessmen and banker. Not Negotiable crossing: The words Not Negotiable may also be written in both types of crossing-general and special and a crossing with these words is said to be Not Negotiable crossing. 15 </li> <li> 16. Who may cross a cheque? Crossing of an uncrossed cheque does not amount to a material alteration so as to affect the validity of the instrument. 1. (Sec.125) Where a cheque is uncrossed, the holder may cross it generally or specially. 2. Where a cheque is crossed generally, the holder may cross it specially. 3. Where a cheque is crossed generally, or specially, the holder may add the word Not Negotiable. 4. 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. Where a cheque is crossed account payee and the holder alters it into a general crossing by striking out the words account payee, the alteration is irregular and discharges the instrument. 16 </li> <li> 17. 17 </li> <li> 18. ENDORSEMENT According to sec 15,endorsement is the signing by the maker or holder of his name on a negotiable instrument for the purpose of its negotiation to another person. The person signing the instrument is called an ENDROSER. The person to whom the instrument is transferred is called the ENDROSEE. 18 </li> <li> 19. WHO CAN ENDORSE ? (sec 51) Payee: Rightful person to make the first endorsement. Endorsee: Person who has become the holder of the negotiable instrument, may endorse the same. Maker or drawer: The maker of a promote or the drawer of a bill cannot endorse. But if any one of them has become the holder in his own right, he can endorse. Stranger: A person who is not a party to the instrument cannot endorse it. 19 </li> <li> 20. KINDS OF ENDORSEMENT1. Blank or General Endorsement [Section 16(1)]2. Special or full Endorsement [section 16(1)] Conversion of blank endorsement into special endorsement Effect of full endorsement following a blank endorsement.3. Restrictive Endorsement4. Partial Endorsement5. Conditional Endorsement Sans recourse endorsement Facultative endorsement Sana frais endorsement Contingent endorsement 20 </li> <li> 21. EFFECT OF ENDORSEMENT [sec.30 The ownership of the instrument is transferred from the endorser to the endorsee. The endorsee gets the right of further negotiation, The endorsee can bring an action for recovery against all the parties whose names appear on the instrument. 21 </li> <li> 22. 22 </li> <li> 23. DISCHARGE OF NEGOTIABLEINSTRUMENTS 23 </li> <li> 24. Meaning of discharge of aninstrument An instrument is said to be discharged only when the party who is ultimately liable thereon is discharged from liability. All rights of action under the instrument are completely extinguished and the instrument ceases to be negotiable. 24 </li> <li> 25. Sec . 119. how. - A negotiable instrumentis discharged: By payment in due course by or on behalf of the principal debtor; By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; By the intentional cancellation thereof by the holder; By any other act which will discharge a simple contract for the payment of money; When the principal debtor becomes the holder of the instrument at or after maturity in his own right. 25 </li> <li> 26. Modes of discharge of a partya) By Payment [Section 82(c) ]b) By Cancellation [Section 82(a) ]c) By Release [Section 82(b) ]d) By Allowing drawee more than 48 hours to accept [ Section 83 ] 26 </li> <li> 27. e) By Non-presentment of Cheque within a Reasonable Time [Section 84]f) By Payment of a Cheque payable to order or bearer by the drawee banker [ Section 85]g) By Qualified Acceptance [Section 86] 27h) By Material Alteration [Section 87] </li> <li> 28. i) By Payment of an Instrument on which Alteration is not Apparent [Section 89]j) By acceptor becoming holder of a bill at or after maturity [Section 90]k) By operation of law:- 1) law of Limitation Act 2) law of Insolvency 28 </li> </ul>