Bcom III BTP M 4

GOOD MORNING:

GOOD MORNING

NEGOTIABLE INSTRUMENTS CHEQUES:

NEGOTIABLE INSTRUMENTS CHEQUES The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. The word Negotiable means Transferable by delivery in return for consideration and the word Instrument means a written document by which a right is created in favor of some person.

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Meaning: NI is a written document which entitles a person to a sum of money and which is transferable by mere delivery or by endorsement and delivery. Definition: According to Sec.13 of the NI Act, 1881, “A NI means a promissory note, bill of exchange or cheques payable either to order or the bearer”.

CHEQUES:

CHEQUES Meaning: It is an instrument in writing, containing an unconditional order, signed by the customer, directing his banker, to pay on demand a certain sum of money only to or to the order of a certain specified person or to the bearer of the instrument.

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Definition: According to Sec. 6 of the NI Act, 1881, “A cheques is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand”. It is always drawn on a specified banker. It is always payable on demand.

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Features: It must be in writing. It must always be drawn on a specified banker. It must contain an order to pay. The order must be unconditional. The order must be to pay money and money only. Money paid by the banker must be certain. On demand. Signed by the drawer.

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Drawing of a Cheques: Date Payee’s name Amount Signature Payable to payee or order or bearer. Crossing Alterations

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Parties to a Cheques: Drawer Drawee Payee Holder Endorser Endorsee

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Drawer Is a person who draws the cheque. He is also called the customer of the bank. Drawee Is always the banker on whom the cheque is drawn.

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Payee Is a person named in the cheque to whom the amount of the cheque is payable. Holder Is a person who is entitled in his own name to the possession of the cheque & who has the right to receive or recover the amount of the cheque from the banker.

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Endorser Is a person who endorses the cheque to another person to entitle that person to receive the amount of the cheque. Endorsee Is a person to whom the cheque has been endorsed over by the endorser. He is entitled to receive the amount of the cheque in his own name.

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Kinds of Cheques: Bearer Cheques Order Cheques Stale or Out-of-date Cheques (Ante – Dated Cheques) Post Dated Cheques Lost Cheques Crossed Cheques Mutilated Cheques

CROSSING OF CHEQUES:

CROSSING OF CHEQUES Crossing: It means drawing across the face of the cheques two transverse parallel lines with or with out words ‘& co.’ or ‘Not Negotiable’ or ‘A/c Payee’ between the parallel transverse lines. Crossing may be written or stamped or printed.

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Types: General Crossing Special Crossing. General Crossing According to sec. 123 – “Where a cheques bears across its face an addition of the words ‘and company’ or any abbreviation thereof between two parallel transverse lines, or two parallel transverse lines simply, either with or without the words ‘not negotiable’, that addition shall be deemed a crossing, and the cheques shall be deemed to be crossed generally”.

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Special Crossing According to sec. 124 – “Where a cheques 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”.

MARKING OF A CHEQUE:

MARKING OF A CHEQUE It means making of a remark by the paying banker on the cheque testifying to the adequacy of funds to the credit of the drawer to meet the cheque. The paying banker while marking a cheque, simply initials the cheque or writes the words “marked good for payment” on the face of the cheque and initials under the seal of the bank.

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Effects of Marking: It indicates that the cheque is drawn by the drawer in good faith and against adequate funds to his credit. It gives an enhanced status to the drawee’s cheque by adding to the credit of the drawer the credit of the banker marking the cheque.

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THANK YOU