An Act to define and amend the law relating to Promissory Notes, Bills of. Exchange Short title: This Act may be called the Negotiable Instruments Act, PDF | This research paper deals with the following constellation of issues The Negotiable Instruments Act, provides for three kinds of. CHAPTER I PRELIMINARY. 1. Short title. Local extent Saving of usages relating to hundis, etc. Commencement. 1A. Application of the Act. 2. [Repealed]. 3.
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Understand various provisions of negotiable instrument Act,. regarding negotiation, assignment, endorsement, acceptance, etc. of negotiable instruments. Preamble1 - NEGOTIABLE INSTRUMENTS ACT, Chapter I. Section1 - Short title. Section2 - Repeal of enactments. Section3 - Interpretation clause. According to sec 13 Negotiable instruments act of Negotiable instruments means promissory note bills of exchange or cheque payable either to order or to .
A man dared not dishonor his own acceptance of bill of exchange, lest his credit be shaken in the commercial world. 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.
The statement of object and reasons attached to the Bill explaining the provisions of the added chapter read as follows: "This clause [clause 4 of The Bill] inserts a new Chapter XVII in the Negotiable Instruments Act, The provisions contained in the new chapter provide that where a cheque drawn by a person for the discharge of any liability is returned by the bank unpaid for the insufficiency of funds standing to the credit of the account on which he cheque was drawn or for the reason that it exceeds the arrangements made by the drawer of the cheque with the bankers for that account, the drawer of the cheque shall be deemed to have committed an offence.
In that case, the drawer without prejudice to the other provisions of the said Act, shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.
It has also been provided that it shall be presumed, unless the contrary is proved, that the holder of such cheque received the cheque in discharge of a liability.
Defenses which may or may not be allowed in any prosecution for such offence have also been provided to make the provisions effective. These safeguards included- that no court shall take cognizance of such offence except on a complaint, in writing made to the payee or the holder in due course of the cheque; that such complaint is made within one month of the date on which the cause of action arises; and that no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any such offence.
V Galaxy Traders and Agencies Ltd. The court observed that the Act was enacted and section 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 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 Till then, the offending acts referred to in section 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 to of the said Act were found deficient in dealing with dishonour of cheques.
Thereby, the Negotiable Instruments Amendment and Miscellaneous Provisions Act, , inter alia, amended sections , and and inserted new sections to in the said Act. These sections aimed at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. Punishment provided under section 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.
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. It has been provided for that in a case under the section of the Act, the Magistrate is empowered to pass a sentence of imprisonment upto one year and fine exceeding Rs. It further provides that if at the commencement or during the course of summary trial, MM finds that nature of case was such that a sentence of imprisonment exceeding one year may have to be passed or for some other reason MM comes to conclusion that case should not be tried summarily, the Magistrate has to pass an order after hearing the parties, giving reasons as to why he would like to try the case not in a summarily manner but as a summon trial and he could recall witnesses who may have been examined and proceed with the case to hear it as a summon trial case.
The absence of the parties for the hearing or the absence of the respective advocates, were highly detrimental to the objective behind prescribing a summary procedure to be followed in cases of dishonour of cheques. Subsequently, in the case of Rajesh Agarwal v. State and Others8, the Hon'ble Delhi High Court prescribed certain guidelines with respect to the summary trial procedure which would be followed with respect to offences under section Step IV: To hear arguments of both sides.
Since the Criminal courts are approached, the issue needs to be examined from the point of view of the Criminal Procedure Code, Section of CrPC provides that "Every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed". Section 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.
The jurisdiction is explained with reference to the Landmark cases of K. Position Before "K. Neelakandan11 Bellie, J. Pareed and Anr12 Kerala High court held thatthe place where the creditors resides or the place where the debtor resides cannot be said to be the place of payment unless there is any indication to that effect either expressly or impliedly.
The cause of action as contemplated in S. That can be the place where the Bank to which the cheque was issued is located. It can also be the place where the cheque was issued or delivered.
The Court within whose jurisdiction any of the above mentioned places falls has therefore got jurisdiction to try the offence under Section of the Act.
Essbee Food Specialties and Ors. Kapoor Brother13 High Court of Punjab and Haryana on the question of jurisdiction stated as under: As to the question of jurisdiction, it is to be considered that the issuance of the cheques and their dishonoring are only a part of cause of action; the offence was complete only when the petitioner failed to discharge their liability to the respondent-firm.
For discharging a debt, it is the debtor who has to find out his creditor and since in the present case, the respondent, who is the creditor, has its office at Panchkula, the Court at Ambala had the territorial jurisdiction.
It is true that the cheques may have been issued by the accused at his place of residence or business, the Bank on which it is drawn being often located at a second spot and inevitably the complainant or the payee has his place of residence or business at yet another location.
It was for this reason that the Kerala High Court in the case of P. KPareed15, took the view that any of the three Courts could exercise jurisdiction. In our considered view, where undoubtedly each of the components constitute a stage in the commission of the of- fence, the final non-payment being the ultimate one, S.
Centre v. Apex Agencies16 High Court of Andhra Pradesh held that the Court within whose jurisdiction the cheque is given, or where the information of dishonour is received or where the office of the payee is situate, will have jurisdiction to try the offence.
Canbank Financial Services Ltd. Also held, "Then as per Section when an act is an offence by reason of anything which has been done and of a consequence which has ensued. The offence may be inquired into or tried by a court within those legal jurisdiction such thing has been done or such consequence has ensued. Payment of cheque against an account having sufficient funds to meet the liability under the cheque is one act while dishonor of the cheque is a consequence of such an act.
Therefore as per Section also the place where the cheque was given or handed over will have jurisdiction and the courts of that place will have jurisdiction to try the offence. Likewise for purposes of Section b payment of cheque may be one part of an offence and dishonor of the cheque may be another part and, therefore, both places i. Saraswati Industrial Syndicate Limited and Ors. SankaranVaidhyanBalan and Anr19 It was held in paragraph 12 of the judgment that "Under Section of the Code "every offence shall ordinarily be inquired into and tried in a court within whose jurisdiction it was committed.
Aplace, for that purpose, would depend upon a variety of factors. It can either be at the place where the drawer resides or at the place where the payee resides or at the place where either of them carries on business.
Hence, the difficulty to fix up any particular locality as the place of occurrence for the offence under Section of the Act. It is not necessary that all the above five acts should have been perpetrated at the same locality. It is possible that each of those five acts could be done at 5 different localities. But concatenation of all the above five is a sine qua non for the completion of the offence under Section of the Code.
In this context a reference to Section d of the Code is useful Thus it is clear, if the five different acts were done in five different localities any one of the courts exercising jurisdiction in one of the five local areas can become the place of trial for the offence under Section of the Act. In other words, the complainant can choose any one of those courts having jurisdiction over any one of the local areas within the territorial limits of which any one of those five acts was done".
Sunil SrivastavaVs. Shri Ashok Kalra20 It is manifest from the law laid down in the aforementioned judgment that the cause of action for filing a complaint under Section of the Act may also be at a place where the drawer of the cheque resided or the place where the payee resided for the place where either of them carried on business or the place where payment was to be made.
The complaint can be filed before the court which has jurisdiction over any of these places. In the cited case a complaint under Section was filed before a Magistrate at Adoor in Pathanamthitta District in Kerala. The accused challenged the territorial jurisdiction of the court of try the case. His contention was that the cheque was dishonoured at the bank of the Branch at Kayamkulam, situated in another District.
The later two objections were decided against the accused. On the first question the Supreme Court enunciated the law as reproduced above. Shri Ishar Alloy Steels Ltd. JayaswalsNeco Ltd. The question before the Court was whether the bank within the postulation of Section read with Sections 3 and 72 of the NI Act was the drawee bank or the collecting bank and this Court held that it was the former.
It was observed that "non-presentation of the cheque to the drawee bank within the period specified in the Section would absolve the person issuing the cheque of his criminal liability under Section of the NI Act, who otherwise may be liable to pay the cheque Page 8 8 amount to the payee in a civil action initiated under the law. This decision clarifies that the place where a complainant may present the cheque for encashment would not confer or create territorial jurisdiction Prem Chand Vijay Kumar v.
Yashpal Singh22 Held that upon a notice under Section of the NI Act being issued, a subsequent presentation of a cheque and its dishonour would not create another 'cause of action' which could set the Section machinery in motion. Instead of the five Bhaskaran concomitants, only four have been spelt out in the subsequent judgment in Prem Chand. A slightly new face to law existing post K. Bhaskaran case was given in Harman Electronics Pvt.
National Panasonic India Pvt. Appellant, was from Chandigarh and had issued a cheque which was returned dishonored, the cheque was issued in Chandigarh to the complainant where he had a branch and was actually present. Notice of payment for the dishonored cheque was issued from the head office of the complainant in Delhi to the accused office in Chandigarh.
Due to failure on the part of the drawer a complaint was filed in Delhi. When the case came before the lower courts as well as high court, emphasis and reliance was laid down on 'K. Bhaskaran Case' and finally coming to a conclusion so as to that Delhi Court also have the 'jurisdiction'.
The holder must be present the bill to the drawee for his acceptance. When the drawee accepts the bill, he becomes the acceptor.
Which means one person can plays the two roles at a time of drawee and acceptor. Order to Pay: The bill of exchange must contain an order by the drawer to drawee to pay certain sum of money under any circumstances. The order must be imperative; it should not be in a request form. An Unconditional Order to Pay: The bill of exchange must contain an order for promise to pay certain amount it should be unconditional. If there is conditional order which is invalid means their should not be like that if this event is happen then only I will pay to you, it is invalid.
Conditional bill should not be their because it is invalid. Signed by Drawer: The bill of exchange must be signed by the drawer. Payee must be certain: It must be payable to a definite person or his order.
The payee must be certain. Bill may be made payable to two or more payees jointly or in the alternative. Bill of exchange is chargeable with stamp duty. There are five types of bills of exchange namely, 1 bill of exchange payable on demand. A Bill of Exchange Payable on Demand: When a bill is made payable on demand, or at sight, or on presentment, it is known as a bill of exchange payable on demand.
Following is a specimen of a bill of exchange payable on demand:. Stamp thousand only for value received. Road, Mumbai To Prof. Prakash, 25, Raja Mahan, Accepted Mumbai Hence, such a bill cannot be drawn by a firm or an individual. When a bill is made payable after the expiry of a stipulated period, or payable so many days after sight, it is known as a bill of exchange payable after date, or a time bill.
Three months after pay M.
Patel, 12 V. Road, Surat, or order, the sum. Stamp of rupees ten thousand only for value received. Joshi, , Mahatma Gandhi Road, Mumbai Shah In the above bill, A. Joshi is the drawer; B. Shah is the drawee who has accepted the bill; therefore acceptor; and M. Patel is the payee. The bill is made payable after date. An Inland Bill of Exchange: An Inland Bill of Exchange is one, which is— a.
Drawn and made payable in India, or b. Drawn in India on a resident of India though the place of payment may be outside India. For example, a bill of exchange, drawn by a merchant in Mumbai upon another merchant in Calcutta, made payable in India, is inland bill. Similarly, a bill of exchange, drawn by a merchant in Chennai upon another merchant in Delhi and payable in Washington, is an inland bill.
A Foreign Bill of Exchange: A foreign bill of exchange is one, which is — a. Drawn in India and made payable in some other country other than India. Drawn upon a person who is a resident of a foreign country. Section 6 defines a cheque as under: Instrument in Writing: A cheque must be writing. It can be written in ink, ball point pen, typed or even printed. The ink used for writing the cheque should not be easily erasable.
Any overwriting or alteration will make the cheque dishonor. Oral orders are not considered as cheques. Unconditional Order: In cheque there must be an order by a depositor drawer on its bank drawee for paying money to the holder payees and order should be unconditional. A cheque containing conditional order is dishonoured by the bank. Payable on Demand: A cheque when presented for payment must be paid on demand.
If cheque is made payable after the expiry of certain period of time then it will not be require. Certain Sum of Money: Cheque must be for money only and it must be written in words and figures. If the amount in words and figured will differ from each other or if there will be insufficient balance in the account then the cheque will be dishonoured.
Payee must be Certain: The payee of the cheque should be certain person i. Joint Stock Company. The name of payee must be written on the cheque or it can be made payable to bearer. Bearer or open cheques are payable at the counter of drawee banker on presentment. As the bearer cheques carry risk of being lost or stolen and the finder may be able to get it encashed, crossing of cheques avoids such a contingency and secures payment. Crossing of cheques is of different types:. Cheques crossed generally Sec.
A cheque crossed generally will be paid to the banker through which it is presented. It is a direction to the drawee banker to pay the sum only through a banker. Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise than to a banker Sec. Cheques crossed specially Secs. It is to be payable to that person only on which the bill is drawn which means it is not a risky document as Bearer Cheque is. 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 Sec.
It will paid only when presented by the banker. Specimens of Special Crossing. Payment of cheque crossed especially more than once Sec. If the cheque is crossed especially more than once, the banker has a right to refuse payment thereof. This means that the proceeds of the cheque are to be credited to the account of the payee only. It serves a good protection to drawer from loss or theft.
Crossing after issue Sec. Crossing of cheque other than that authorized by the act is unlawful. The following crossings are permissible: 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 specially, the banker to whom it is crossed may again cross it specially to another banker or his agent, for collection.
The amount of money, standing to the credit of that account, is insufficient to honour the cheque or, II. It exceeds the amount, arranged to be paid from that account by an agreement made with that Bank, or, III. Instructions were issued to the bank for stop payment, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished — With imprisonment for a term extending to one year, or, With fine, which may extend to twice the amount of the cheque, or.
The following three conditions, however, are required to be fulfilled to constitute the said offence under Sec. The cheque must have been presented to the bank within a period of six months from the date, on which, it was drawn, or, within the period of its validity, whichever is earlier II. The payee, or the holder in due course of the cheque, as the case may be must have made a demand for the payment of the said amount of money, by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank, regarding the return of the cheque as unpaid; and III.
The drawer of such cheque must have failed to make the payment of the said amount of money to the person within fifteen days of the receipt of the said notice. Presumption in Favour of Holder Sec. 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 , for the discharge, in whole or in part, of any debt, or their liability.
Defence, which may not be allowed in Any Prosecution, Under Section Such Offences by Companies: If the person, committing an offence under section , is a company, every person, who at the time of commission of the said offence, 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 [Sec.
Cognisance of Offences: No court shall take cognizance of any offence punishable under Section except upon a complaint, in writing, made by the payee, or as the case may be, the holder in due course of the cheque. Such complaint is made within a period of one month of the date, on which, the cause of action arises, under clause c of the provision to section Negotiable Instrument Act Uploaded by Shaktikumar.
This is research study on Negotiable Instrument Act it is helpful for lawyers and businessmen. Flag for inappropriate content. Related titles. Chapter 05 Negotiable Instruments Act 1.
Jump to Page. Search inside document. Stamp 4. Following is a specimen of a bill of exchange payable on demand: Prakash, or order, a sum of rupees twenty Stamp thousand only for value received. Road, Surat, or order, the sum Stamp of rupees ten thousand only for value received. Shah In the above bill, A. Types of Cheques: There are two types of cheques: Crossing of cheques is of different types: Specimens of General Crossing II.
Specimens of Special Crossing Payment of cheque crossed especially more than once Sec. Teena Varma. Pranjal Srivastava. Prabhdeep Singh Grewal. Anonymous WtjVcZCg.
Amritha Ks. Babasab Patil Karrisatte. Vishal Gattani. Dilfaraz Kalawat. Mohit Singh. Nitika Nagar. Shantanu Srivastava. Professor Sameer Kulkarni.
Kamehameha Rasengan. Chowkidar Ravi Prakash M. Speedie records.