Mumbai Educational Trust’s Institute of Management
Course: PGDM (e-BUSINESS)
Subject: Legal Aspects of Business
Topic: Evolution and Revolution of Negotiable Instruments as Facilitators for Trade and Commerce & 10 years taking forward
Introduction of Negotiable Instruments
Need of Negotiable Instrument
Features of Negotiable Instrument
Types of Negotiable Instruments
Evolutions in Promissory Notes
Bills of Exchange
Section 138, Negotiable Instruments Act
Ingredients of offence under section 138
Revolution in cheques
Necessity to Introduced Negotiable Instruments
Revolution of Payment Systems in India
Case Study 1
Case Study 2
Case Study 3
INTRODUCTION TO NEGOTIABLE INSTRUMENTS
The world as a whole has been the “cradle of commerce” because this exchange is not only between individuals but also between people and nations. This naturally implies the existence of certain surplus of wealth and certain provision for communication. Both of which are essential for growth of commerce. Unless there is a surplus of wealth and provision for communication, commerce cannot grow. Exchange of goods and services is the basis of every business activity. Goods are bought and sold for cash as well as on credit. All these transactions require flow of cash either immediately or after a certain time. In modern business, large number of transactions involving huge sums of money takes place every day. It is quite inconvenient as well as risky for either party to make and receive payments in cash. Therefore, it is a common practice for businessmen to make use of certain documents as means of making payment. Some of these documents are called negotiable instruments.
Meaning of Negotiable Instruments
It is an instrument which is transferable (by customs of trade) by delivery like cash and is also capable of being sued upon by the person holding it for the time being. The property in such an instrument passes to a bona fide transferee for value.
Section 13:- “A Negotiable instrument means a promissory note, bill of exchange or cheque either to order or bearer."
This definition does not say anything about the characteristics of a negotiable instrument but it mentions about instruments, which can be legally called as a negotiable instrument. It fortunately, however does not prohibit any other instrument which satisfies the features of negotiability from being designated as negotiable instruments.
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time with the payer named on the negotiable instrument. More specifically, it is a document contemplated by a contract, which warrants the payment of money without condition which may be paid on demand or at a future date.
The instrument should be freely transferable by the custom of trade. Transferability may be by (i) delivery or
(ii) endorsement and delivery
The person who obtains it in good faith and for consideration gets it free from all defects and can sue upon it in his own name The holder has the right to transfer.
The negotiability continues till the maturity
To understand the meaning of negotiable instruments let us take a few examples of day-to-day business transactions.
Suppose Mr.Ajay, a wholesaler has sold goods to Mr.Atul for Rs 10,000/- for three months credit. To be sure that Atul will pay the money after three months, Ajay may write an order addressed to Atul that he is to pay after three months, for value of goods received by him, Rs.10,000/- to...
Bibliography: x. Stamping of Bills of Exchange and Promissory Notes is mandatory
This is required as per the Indian Stamp Act, 1899
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