Evolution and Revolution of

Negotiable Instruments asFacilitators for

Trade and Commerce &

10 Years taking forward

MET LEAGUES OF COLLEGES

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MASTER IN MANAGEMENT STUDIES

Semester II

Division (B)

A paper submitted under the partial fulfillment for the subject

LEGAL ASPECTS OF BUSINESS

Under the Guidance of

Prof. Anant Amdekar

Batch: 2014-2016

GROUP NO: 4

SR.NO GROUP MEMBER ROLL NO

1. Chintan Mhatre 82

2. Vinay Mhatre 84

3. Sumedh Munje 86

4. Abhiskek Nagdeve 88

5. Aadya Naik 90

6. Prachiti Niwate 92

7. Tushar Oswal 94

8. Riddhi Palkar 96

9. Vivek Pange 98

10. Amit Paratwar 100

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PROJECT CONTENTS

Sr.No. Topic Page No.A. CHAPTER I.

Introduction to Negotiable Instruments1. Meaning2. Need and features for Negotiable Instruments.

B. CHAPTER II.Evolution of Negotiable Instruments

1. History2. World Economy & World Market with respect to

Economy & Growth of Commerce

C. CHAPTER III.The Negotiable Instrument Act, 1881

1. Meaning under SECTION 132. Reserve Bank of India Act, 1934 SECTIONS 31 and 323. Essentials under SECTIONS 118 and 1194. History of the Act5. Modern Era and Amendments

D. CHAPTER IV.Types of Negotiable Instruments

1. HundisMeaning and Parties involvedRequisites of a HundiDecoding a HundiTypes of HundisDishonor of Hundi

2. Promissory Note under SECTION 4Meaning and Parties involvedRequisites of a Promissory NoteDecoding a Promissory Note

CHAPTER SCHEME.

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Types of Promissory NotesDishonor of Promissory Notes under SECTION 93

3. Bills of Exchange under SECTION 5Meaning and Parties involvedRequisites of Bills of Exchange.Decoding a Bills of ExchangeTypes and Classification of Bills of ExchangeDishonor of Bill of Exchange

4. Cheques under SECTION 6Meaning and Parties involvedRequisites of Cheque

Decoding a Cheque

Types of Cheques & Cheque CrossingDishonor of Cheques under SECTION 138Cheque Forgery

E. CHAPTER V.Revolution in Negotiable Instruments and Global Trade

1. Current trends in Payment Structure2. Payment Systems in India3. Comparison between India and Australia on bases of

Negotiable Instruments4. Changing face of Trade and Commerce

F. CHAPTER VI.Primary Research On Scope Of Negotiable Instruments

1. Preliminary Research Analysis2. Research Methodology and Interpretation Database3. Interview with Allahabad Bank Manager

4. Statistical Data on Disposal and Pendency ofNegotiable Instruments

G. CHAPTER VII.1. Conclusion: 10 Years Going Forward2. Suggestions: Social networking & Negotiable Instruments3. Recommendations: Future Prospects on Transactions

H. CASE STUDIES

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INTRODUCTION TO NEGOTIABLE INSTRUMENTS

MEANING

Exchange of goods and services has always been 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.

Today the world as a whole has been the CENTRE 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. Increase in Globalization led to the

EVOLUTION of negotiable instruments which further REVOLUTIONZED with the course

of time, acting as a FACILITATOR to trade and commerce and with the advent of

technology in transactions, it’s become a modernized concept

Negotiable Instruments are moreover a document of title which clearly explains the

rights towards the payment of money or a security for money which is transferable by

delivery either by custom or by legislation. The use of Negotiable Instrument is mainly to

facilitate payment for exports and imports of trade. Because money is promised to be paid,

the instrument itself can be used by the holder in due course as a store of value. The

instrument may be transferred to a third party; it is the holder of the instrument who will

ultimately get paid by the payer on the instrument.

The rapid growth of technology has revolutionized the world with computer, which is

used in every field of profession. This has reduced the use of negotiable instrument and in

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future it may decline more. Even though the electronic revolution has got more advantages it

may be considered as the next step because the world needs time to get used to it.

Example 1:

If Chintan issues a cheque worth Rs. 15,000/ - in favor of Vinay, then Vinay can

claim Rs. 15,000/- from the bank, or he can transfer it to Sumedh to meet any business

obligation, like paying back a loan that he might have taken from Sumedh. Once he does it,

Sumedh gets a right to Rs. 15,000/- and he can transfer it to Abhiskek, if required. Such

transfers may continue till the payment is finally made to somebody.

In the above examples, we find that there are certain documents used for payment in

business transactions and are transferred freely from one person to another. Such documents

are called Negotiable Instruments. Thus, we can say negotiable instrument is a transferable

document, where negotiable means transferable and instrument means document. To

elaborate it further, an instrument, as mentioned here, is a document used as a means for

making some payment and it is negotiable i.e., its ownership can be easily transferred.

The term ‘Negotiable Instrument’ is made up of two parts, ‘Negotiable’ and

‘Instrument’. The word, ‘negotiable’ means being transferable (from one person to

another), and the word ‘instrument’ signifies ‘any written document’ through which a

right is created in favor of some person. Thus, the term ‘Negotiable Instrument’ signifies

any ‘document, necessarily in writing’, through which the rights, vested in one person,

could be transferred in favor of another person, of course, in accordance with the

provisions of the Negotiable Instruments Act, 1881

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NEED FOR NEGOTIABLE INSTRUMENTS

Negotiable instruments such as Hundi, Promissory Notes, Bills of Exchange and

Cheques are playing a vital role in today's boosting trade and commerce. One of the reasons

behind the expansion of trade and commerce so rapidly are because of the negotiable

instruments. In trade the transactions are now becoming much depending on the negotiable

instruments. Wherein commerce also the negotiable instruments are helping us in the

following ways.

Helpful in Dealing Business on Credit bases

Imagine how it is possible to get the business products for resale purpose without the

use of money. This is happening just because of the negotiable instruments. Further suppose

that, you want to do a business of computers but you do not have the money to purchase the

computers for resale purpose. And also if you do not have any other resource to get the

money for purchase you can still purchase the products for your business purpose with the

help of the negotiable instruments. Negotiable instruments such as promissory note and

specially the bills of exchange are specially made for this purpose so business can happen on

credit bases which is usually the styles nowadays.

Cash Free Asset

Due to the negotiable instruments it is became so easy to make payments through

negotiable instruments such as Cheques so that the use of cash is not their because most of

the times when you are taking cash with you anywhere it is not felt secure that because the

cash may be stolen by any one. The law relating to negotiable instruments is the law of the

commercial world which was enacted 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.

Instant receipts and payments of the dealings and transactions

We don’t need to wait for days to get money from the bank and from the other places

but instead of it we just have to pay in the form of negotiable instrument such as cheques etc.

so that the people to whom we have to pay would receive that money.

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FEATURES OF NEGOTIABLE INSTRUMENTS

1) Free Transferability

The instrument are freely transferable, i.e. the title to the ownership of the instrument

could be transferred, from one person to any other person, without any restrictions. Such

transfer of the title could take place by way of mere delivery, in case of bearer instrument and

by endorsement with its delivery. Usually, when we transfer any property to somebody, we

are required to make a transfer deed, get it registered, pay stamp duty, etc. But, such

formalities are not required while transferring a negotiable instrument.

Example 2:

Aadya draws a bearer cheque in favour of Prachiti but, instead of delivering it to her,

keeps it in the drawer of her table. However, in the absence of Aadya, Prachiti picks up the

cheque from Aadya’s drawer. This will not amount to a valid transfer of the title to the

cheque, drawn in favour of Prachiti, even though it is made payable to the bearer.

2) Holder’s Title to be Free from Defects

It means that a person who receives a negotiable instrument has a clear and

undisputable title to the instrument. However, the title of the receiver will be absolute, only if

he has got the instrument in good faith and for a consideration. Also the receiver should have

no knowledge of the previous holder having any defect in his title. Such a person is known as

‘Holder in due Course’.

Example 3:

Tushar issued a bearer cheque payable to Riddhi. It was stolen from Riddhi by a

person, who passed it on to Vivek. If Vivek received it in good faith and for value and

without knowledge of cheque having been stolen, he will be entitled to receive the amount of

the cheque. Here, Vivek will be considered as ‘Holder in due Course’.

3) Holder in Due Course can Sue in his own name

The holder in due course is entitled to sue in his own name in regard to the

instrument, on the ground that he is holding it in consideration of some values, i.e. having his

own stake involved in the instrument.

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Example 4:

In the same above example, Vivek is Holder in Due Course so he can sue the drawer

who is Tushar in case he denies the payment for consideration. The most important point here

is the instrument should be bearer in nature.

4) Negotiable instrument must be in writing and must bear signature of its maker

All negotiable instruments must be in writing and signed in accordance with the rules

of instrument. Writing includes handwriting, typing, computer printout and engraving, etc.

Without the signature of the drawer or the maker, the instrument shall not be a valid one.

5) The payee must be a certain person

It means that the person in whose favor the instrument is made must be named or

described with reasonable certainty. The term ‘person’ includes individual, body corporate,

trade unions, even secretary, director or chairman of an institution. The payee can also be

more than one person.

6) Promise for payment for a certain sum of money only

In every negotiable instrument there must be an unconditional order or promise for

payment. The instrument must involve payment of a certain sum of money only and nothing

else. For example, one cannot make a promissory note on assets, securities, or goods.

7) The time of payment must be certain

It means that the instrument must be payable at a time which is certain to arrive. If the

time is mentioned as ‘when convenient’ it is not a negotiable instrument. However, if the

time of payment is linked to the death of a person, it is nevertheless a negotiable instrument

as death is certain, though the time thereof is not.

For instance, if Amit issues a cheque dated 1st April 2015 and the current date is 1st

December 2015, then that’s not a valid negotiable instrument.

8) Delivery of the instrument is essential

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Any negotiable instrument like a cheque or a promissory note is not complete till it is

delivered to its payee. For instance, you may issue a cheque in your brother’s name but it is

not a negotiable instrument till it is given to your brother.

EVOLUTION OF NEGOTIABLE INSTRUMENTS

HISTROY

Humans have paid for things throughout history from barters to bytes, financial exchanges have evolved with civilization. Just a few centuries ago, mankind paid and bartered goods with slabs of meat and baskets of berries. In the digital age, we now have the convenience of virtual payments which allow us the freedom to pay for goods almost anywhere. So let’s have a look at the timeline

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1) Pastoral stage

In primitive society man used things just as they were found in nature. With time, he

learned to domesticate animals and breed them for food and clothing. But in this stage his

work served mainly to support only him with his own needs and left very little surplus

available foe exchange on a business basis.

2) Barter Exchange (Earliest forms of civilization)

One of the earliest forms of trading was done by form of Barter Exchange. Early man

used resources and services for the benefit of each party

Post Great DepressionCoins and Paper Money (1921 onwards)

Industrial RevolutionGold Bullion (1900)

Factory stageGold (1816)

Domestic stagePaper Money (806)

Guild stagePrecious Metal Coins (700 BC)

Handicraft stageCrude Metal Coins (1000 - 600 BC)

Agricultural stageGrain Barter (9000 - 8000 BC) Livestock (8000 - 6000 BC)

Pastoral stageBarter Exchange (Earliest forms of civilization)

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3) Agricultural stage

In course of time, the nomadic tribes settled permanently at fixed places and growing

corns, grasses etc. became the main occupation. Agriculture emerged as the basic feature of

economic living of man. He gradually produced more and then started to exchange it with

other commodities. This was known as barter system.

4) Grain Barter (9000 - 8000 BC)

Grain was used as currency in Greece, using a shekel as a measurement of weight.

The shekel later evolved into an equivalent to silver, bronze, and copper.

5) Livestock (8000 - 6000 BC)

Animals are considered the oldest form of currency, with livestock such as camels,

sheep, and cows being the most commonly used.

6) Handicraft stage

In this stage manufacturing was limited to the human efforts to transform raw

materials into finished goods. It included candle and soap making, spinning, weaving, making

of clothes and shoes, blacksmithing, leather dressing, carpentry etc.

7) Crude Metal Coins (1000 - 600 BC)

Coins made from base metals first appeared in China. However, the base metals are

non-precious, making them difficult to use for more expensive purchases.

8) Guild stage

A guild is an association of persons following a similar occupation and it is formed to

protect and promote the interest of its members through cooperative endeavors.

9) Precious Metal Coins (700 BC)

Gold and silver coins were first used in ancient Lydia (modern-day Turkey) and

coastal Greek cities. The profiles of gods and emperors were stamped into the metal.

10) Domestic stage

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A new class entrepreneur emerged as a link between producer and consumer. Now

entrepreneur purchased the raw materials for the purpose of manufacture and sale but did not

do the processing himself. He took the risk of productions and sale. Out of the proceeds of his

undertaking, he paid for the materials and labor. The amount left was his profit

11) Paper Money (806)

Paper banknotes first appeared in China, though the first widely accepted paper

money did not appear in China until around 960. This was followed by centuries of figuring

out the balance of production and inflation, until paper money in China disappeared in 1455

for several hundred years.

12) Domestic stage

A new class entrepreneur emerged as a link between producer and consumer. Now

entrepreneur purchased the raw materials for the purpose of manufacture and sale but did not

do the processing himself. He took the risk of productions and sale. Out of the proceeds of his

undertaking, he paid for the materials and labor. The amount left was his profit

13) Gold (1816)

Though it is certainly not the first time the element is part of a payment system, gold

was officially the standard of value in England. After centuries of banknote use, Europe

moved forward with a non-inflationary production of banknotes on the gold standard.

World Economy & World Market with respect to

Economy & Growth of Commerce

Commerce reached into the stage of growth when money was evolved as medium of

exchange to remove the limitations of barter. Introduction of money began led to the

extension of division of labor and specialization. People began to produce goods for certain

local markets. Thus, division of labor was extended to a locality. Gradually a separate class of

artisans and traders came into existence. They settled down at fixed places which came to be

known as towns. Growth of these towns gave great stimulus to commerce. The size of the

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market and the number of commodities exchanged in the market, both increased. Traders

from other countries brought luxury articles, metals and ornaments for sale.

Commerce continued to grow both in volume and space. After the decline of Guild

system, a new class of people, ENTERPRENEUR class, came into existence. This class of

people became a real intermediary between the producers and consumers. Further, growth of

commercial enterprise took place. Trade began to assume fixed forms. Production began to

be undertaken for the markets extended for the whole country. Division of labour received

further impetus. Production was divided into several branches and each branch tended to be

localized.

Commerce entered into another stage of its growth when nations of the world were

brought into commercial relationships through the invisible thread of trade. As a result of the

geographical discoveries of the late 15th, 16th and 17th centuries new trade routes were

opened up and commerce grew between nations. Now, in addition to the local market and the

trade extending over the whole area of a single country, commodities came to be sold and

purchased between traders from different countries in the world. This gave rise to an

international world market and to the international trade. Thus the nations of the world were

linked together through the medium of the world market.

Evolution of commerce is a never ending process. Almost every day new

experiments in its mechanism are made.

New forms and methods are being evolved in both socialist and capitalist countries,

in both developed and developing nations.

THE NEGOTIABLE INSTRUMENTS ACT, 1881

Negotiable Instruments Act, 1881 is an act dating from the period of British colonial rule in

India that is still in force largely unchanged.

Meaning under SECTION 13

‘A negotiable instrument means a promissory note, bill of exchange or cheque, payable

either to order or to bearer’. It may, however, be clarified here that Section 13 does not

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exclude any other instrument from being treated as a negotiable instrument, provided, of

course, it does have the characteristics of being negotiable.

The above definition clearly stats that the act signifies any written document through

which a right is created in favour of some person, through which the rights, vested in one

person, could be transferred in favour of another person, in accordance with the provisions of

the Negotiable Instruments Act, 1881.

Reserve Bank of India Act, 1934

Sections 31 and 32

The Negotiable Instruments Act, 1881 is operative and enforceable within the

provisions of Section 31 and 32 of the Reserve Bank of India Act, 1934 and any violation of

such provisions will be punishable under the law with fine

Section 31 of the RBI Act says that ‘no person (other than the Reserve Bank of India

or the Central Government), can draw, accept, make or issue any bill of exchange or a

promissory note payable to bearer on demand’.

Section 32 of the RBI Act is a punitive clause which provides that if a person issues

any bill of exchange or a promissory note, payable to the bearer on demand, shall be

punishable with fine.

The rationale behind Sections 31 and 32 is reduce the risk of nonpayment for lack of

funds, transfer any number of times and have upper hand in issuing of negotiable instruments

to maintain the liquidity flow in Indian Economy as well as Global Economy.

Essentials under SECTIONS 118 and 119

1) Consideration: It is assumed that all negotiable instruments are drawn, made, accepted,

endorsed, negotiated, purchased, discounted or transferred for some consideration for value

received

2) Money: Negotiable instruments are payable by legal tender money of India. The liabilities of

the parties of Negotiable Instruments are fixed and determined in terms of legal tender

money.

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3) Regarding Date : Every negotiable instrument must bear the date of its execution or drawing

or acceptance for payment

4) Regarding Acceptance: It is presumed that every time any negotiable instrument is accepted

within a reasonable time after the date appearing thereon, and before the date of its maturity,

i.e. due date of payment.

5) Writing and Signature: Negotiable Instruments must be written and signed by the parties

according to the rules relating to Promissory Notes, Bills of Exchange and Cheques

6) Title: The transferee of a negotiable instrument, when he fulfills certain conditions, is called

the holder in due course. The holder in due course gets a good title to the instrument even in

cases where the title of the transferor is defective.

7) Notice: It is not necessary to give notice of transfer of a negotiable instrument to the party

liable to pay. The transferee can sue in his own name.

8) Evidence: A document which fails to qualify as a negotiable instrument may nevertheless be

used as evidence of the fact of indebtedness.

9) Regarding Dishonor of an Instrument: Where a suit has been filed, involving the dishonor

of an instrument, the Court will, on production of the proof of its having been duly protested,

presume that the negotiable instrument was dishonored, unless it is proved otherwise.

HISTROY

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

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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.

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 Travelers’ Cheques.

Modern Era

We prefer to carry a small piece of paper known as Cheque rather than carrying the

currency worth the value of the Cheque. Before 1988 there being no provision to restrain the

person issuing the Cheque without having sufficient funds in his account. Of course on

Dishonored cheque there is a civil liability accrued. In order to ensure promptitude and

remedy against the defaulters of the Negotiable Instrument a criminal remedy of penalty was

inserted in Negotiable Instruments Act, 1881 by amending it with Negotiable Instruments

Act, 1988.

With the insertion of these provisions in the Act the situation certainly improved and

the instances of dishonor have relatively come down but on account of application of

different interpretative techniques by different High Courts on different provisions of the Act

it further compounded and complicated the situation although on dishonor of cheques the

trends of the verdicts of the Supreme Court of India

THE NEGOTIABLE INSTRUMENTS ACT, 1881

PROMISSORY NOTE

SECTION 4

“There is no greater fraud than a promise not kept”

Dutch Proverb

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Meaning under SECTION 4

Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as ‘an

instrument in writing (not being a bank note or a currency note) containing an unconditional

undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a

certain person or to the bearer of the instrument’. Suppose you take a loan of Rupees Five

Thousand from your friend Ramesh. You can make a document stating that you will pay the

money to Ramesh or the bearer on demand. Or you can mention in the document that you

would like to pay the amount after three months. This document, once signed by you, duly

stamped and handed over to Ramesh, becomes a negotiable instrument. Now Ramesh can

personally present it before you for payment or give this document to some other person to

collect money on his behalf. He can endorse it in somebody else’s name who in turn can

endorse it further till the final payment is made by you to whosoever presents it before you.

This type of a document is called a Promissory Note.

Illustrations

Vivek signs an instrument in the following terms:

"I promise to pay Amit or order Rs. 500."

"I acknowledge myself to be indebted to Chintan in Rs. 1,000 to be paid on demand, for

value received."

“I promise to pay Sumedh Rs. 500 and all other sums which shall be due to him."

“I promise to pay Tushar Rs. 500, first deducting there out any money which he may owe

me."

Parties involved for Promissory Notes

The Maker or Drawer

The person who makes the note and promises to pay the amount stated therein.

The Payee

The person to whom the amount is payable.

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The Endorser

The person who endorses the note in favour of another person.

The Endorsee

The person in whose favour the note is negotiated by endorsement.

Requisites of a Promissory Note

A promissory note must be in writing, duly signed by its maker and properly stamped as per

Indian Stamp Act.

It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is

not enough.

For example, if someone writes ‘I owe Rs. 5000/- to Aadya’, it is not a promissory note.

The promise to pay must not be conditional.

For example, if it is written ‘I promise to pay Suresh Rs 5,000/- after my sister’s marriage’, is

not a promissory note.

It must contain a promise to pay money only.

For example, if someone writes ‘I promise to give Amit a Maruti car’ it is not a promissory

note.

The parties to a promissory note, i.e. the maker and the payee must be certain and a

promissory note may be payable on demand or after a certain date.

For example, if it is written ‘three months after date I promise to pay Chintan or order a sum

of rupees Five Thousand only’ it is a promissory note.

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Specimen of a Promissory Note

Dishonor of Promissory Notes

SECTION 93

When a promissory note, bill of exchange or cheque is dishonored by non-acceptance

or non-payment, the holder thereof, or some party thereto who remains liable thereon, must

give notice that the instrument has been so dishonored to all other parties whom the holder

seeks to make severally liable thereon, and to some one of several parties whom he seeks to

make jointly liable thereon. Nothing in this section renders it necessary to give notice to the

maker of the dishonored promissory note, or the drawee or acceptor of the dishonored bill of

exchange or cheque.

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BILLS OF EXCHANGE

SECTION 5

“It I only by not paying one’s bills that

one can hope to live in the memory of the commercial classes”

Oscar Wilde

Meaning under SECTION 5

An unconditional order in writing, addressed by one person to another, signed by the

person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed

or determinable future time, a sum certain in money to or to the order of a specified person,

or to bearer. It 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 document. More specifically, it is a

document contemplated by or consisting of a contract, which promises the payment of money

without condition, which may be paid either on demand or at a future date. The term can have

different meanings, depending on what law is being applied and what country it is used in

and what context it is used in.

Need for Bills of exchange

No business wants to sell goods on credit to his customers who may prove unable or

unwilling to pay their debts. Today, however, in every field of retail trade it appears that sales

and profits can be increased by selling goods on credit basis. The manufacturers and the

wholesalers sell goods mostly on credit. Credit is a very powerful instrument to promote

sales, so most of the business transactions, in most business concerns, are carried on credit

basis. A bill of exchange is a method of payment used between businessmen which has

certain advantages over other methods of payment

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Parties involved in Bills of Exchange

1) The Drawer:

The person who draws a bill of exchange is called the drawer.

2) The Drawee:

The party on whom such bill of exchange is drawn and who is directed to pay is

called the drawee.

3) The Acceptor:

The person who accepts the bill is known as the acceptor. Normally the drawee is the

acceptor. But a stranger can also accept a bill on behalf of the drawee.

4) The Payee:

The person to whom the amount of the bill is payable is called the payee.

5) The Endorser:

When the holder transfers or endorses the instrument to any other person the holder

becomes the Endorser.

6) The Endorsee:

The person to whom the bill is endorsed is called the endorsee.

Requisites of a Bills of Exchange.

There are 3 parties to a bill

The bill must be in writing

It must contain an unconditional order to pay

The bill must be duely signed by the drawer & accepted by the drawee.

The bill must order payment of a sum certain in money, not in goods or services

The bill must be payable on demand or at a fixed or determinable future time.

The bill must be payable to or to the order of a specified person.

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Types of Bills of Exchange:

Types of bill of exchange on the Basis of Period:

1) Demand Bills of Exchange:

There is no fixed date for the payment of such bill. They become payable at any time,

when they are presented before payee by the holder.

2) Term Bills of Exchange:

These bills are payable after specified period of time. The period after which these

bills become due for payment is called tenor.

Types of Bills of Exchange on the Basis of Object:

1) Trade Bills:

These bills are drawn and accepted against the sale and purchase of goods on credit.

These are drawn by the seller (creditor) and accepted by the buyer (debtor).

2) Accommodation Bills:

Such bills do not involve any sale and purchase of goods; rather they are drawn

without any consideration. The purpose of such bills is to help one party or both the parties

financially.

Classification of Bills of Exchange:

Inland Bill:

These bills are drawn in a country upon person living in the same country or made

payable in the same country. Both drawer and the drawee reside in the same country.

Foreign Bills:

These bills are drawn in one country and accepted and payable in another country, e.g. a

bill drawn in England and accepted and payable in India.

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Discounting and Endorsement of Bill of Exchange

Discounting of bill of exchange

If the drawer of the bill does not want to wait till the due date of the bill and is in

need of money, he may sell his bill to a bank at a certain rate of discount. The bill will be

endorsed by the drawer with a signed and dated order to pay the bank. The bank will become

the holder and the owner of the bill. After getting the bill, the bank will pay cash to the

drawer equal to the face value less interest or discount at an agreed rate for the number of

days it has to run. This process is known as discounting of a bill of exchange.

Endorsement of bill of exchange:

If the holder of the bill puts his signature on the back of the bill with a view to transfer

the property contained in it (right to receive money from the acceptor), then he becomes

endorser, and the person to whom the bill of exchange is transferred will become endorsee.

This procedure by which a bill is transferred from one person to another person for the

settlement of debts is called "endorsement".

Bill sent to Bank for collection:

If a business has numerous bills he got from various debtors he may send these bills to

his banker for collection purposes. It should be remembered that, this is not discounting of a

bill of exchange. The bill is sent for safety and collection purposes. The bank keeps the bill in

its custody till the due date and on the due date; the bank will present the bill to acceptor.

After collecting the amount, the bank transfers the amount to the account of its customer (by

24

giving credit to his account). The bank charges some nominal fee from the customer for

service he rendered. This is an expense for the customer and revenue for the bank.

DISHONOR OF BILL OF EXCHANGE:

A bill of exchange is said to be dishonored when its acceptor refuses to pay the

amount of the bill to the holder of the bill on its maturity. The bill then becomes useless and

the party from whom it has been received will be liable to pay for the amount. It is very

important to know that, when a bill is dishonored, in whose possession it was. Because when

a bill is dishonored, all the parties involved are affected and books of accounts of all the

parties have to be adjusted.

Accommodation bill of exchange:

Generally a bill of exchange is drawn by a creditor on his debtor to settle a trade debt.

A creditor is a person who has sold goods on credit basis and a debtor is a person who has

purchased goods on credit basis. Thus, a bill which is drawn by a creditor and accepted by a

debtor is known as a trade bill of exchange. On the other hand, a bill of exchange which is

drawn to oblige a friend or to give him a temporary assistance or to provide him a loan or to

accommodate one or more parties is called an "accommodation bill of exchange".

Such a bill is drawn and accepted without any sale and purchase of goods. As the bill

is drawn to fulfil the temporary need of money, there is no question of retaining this bill by

the drawer until the due date. The bill will be discounted and cash will be received

immediately. The drawer before maturity date is required to provide the acceptor with funds

so that he may need his acceptance on the due date.

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CHEQUE

SECTION 6

“Any general statement is like a cheque drawn on a bank.

Its value depends on what is there to meet it”

Ezra Pound

Meaning under SECTION 6

A Cheque is a bill of exchange drawn on a specified banker and not expressed to be

payable otherwise than on demand but it is invariably drawn as a demand bill of exchange

only, herein the drawee is always a specific branch of a specified bank and the drawer is the

account holder of the same branch of the bank. It also includes the electronic image of a

truncated cheque, as also a cheque in the electronic form.

Cheque in Electronic Form

It means a cheque which  contains  the  exact  mirror image of a paper cheque, and is

generated,  written  and  signed  in a secure system ensuring the minimum safety  standards 

with  the  use  of  digital  signature (with  or  without  biometrics  signature) and asymmetric

crypto system. Electronic checks can be used to make a payment for any transaction that a

paper check can cover and are governed by the same laws that apply to paper checks.

Cheque in Truncated Form

It means a cheque which is truncated during the  course  of  a clearing cycle, either by

the clearing house or  by  the  bank whether paying or receiving payment, immediately on

generation of  an  electronic  image  for  transmission,  substitute in  the  further physical

movement of the cheque in writing. In cheque truncation the physical movement of a paper

cheque issued stops and electronic flow begins while the electronic cheque is issued

electronically and no paper is involved. In cheque truncation, at some point in the flow of the

cheque, the physical cheque is replaced with an electronic image of the cheque and that

image moves further.

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Parties involved for Cheque

1) Drawer:

A drawer is a person who issues a cheque, fills the details on the cheque like the name

of the payee, date and amount and signs it thereby ordering the drawee to issue the said

amount for the payee

2) Payee:

The payee is a recipient of the given cheque which he will get from the drawee by the

order of drawer.

3) Drawee bank:

The drawee will invariably be a bank and bank alone. Alternatively speaking a cheque

will invariably be drawn on a bank and bank only.

Example 5

Chintan has a savings account in Vijaya Bank and issues a cheque of Rs. 10,000 to

Vinay. In this case Chintan is Drawer, Vinay is Payee, and Drawee is Vijaya Bank.

NOTE: Drawer and payee can be the same person if it is a self cheque

Example 6

CHINTAN

DRAWER

VIJAYA BANK

DRAWEE

VINAY

PAYEE

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Sumedh makes a bearer cheque in his name as mentioned, ‘PAY TO SELF’ for Rs,

25,000 from his own savings account in SBI, then Sumedh is the Drawer as well as the

Payee, whereas SBI is the Drawer.

Requisites of a Cheque.

1) Instrument in Writing:

A cheque must be writing. It can be written in ink, typed or even printed. The ink used

should not be easily erasable. Overwriting or alteration will make the cheque dishonor. Oral

orders are not considered as cheques.

2) Unconditional Order:

In cheque there must contain 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 dishonored by the bank.

3) 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 times then it will not be a cheque.

4) 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 dishonored.

5) Payee must be certain:

The payee of the cheque should be certain person i.e. either real person or artificial

person e.g. Joint Stock Company. The name of payee must be written on the cheque or it can

be made payable to bearer.

6) Avoidance of cancellations:

There shouldn’t be any cancellations on the negotiable instrument. Any cancellations

found must be rectified by the signature of the drawer. Failure to do so will cause the

instrument to be of no value as it will come under the case of forgery

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Different Kinds / Types of Cheques

1) Bearer Cheque

When the words "or bearer" appearing on the face of the cheque are not cancelled, the

cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein

or to any other else who presents it to the bank for payment. However, such cheques are

risky; this is because if such cheques are lost, the finder of the cheque can collect payment

from the bank.

2) Order Cheque

When the word "bearer" appearing on the face of a cheque is cancelled and when in

its place the word "or order" is written on the face of the cheque, the cheque is called an order

cheque. Such a cheque is payable to the person specified therein as the payee, or to any one

else to whom it is endorsed (transferred).

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3) Uncrossed / Open Cheque

When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed

Cheque". The payment of such a cheque can be obtained at the counter of the bank. An open

cheque may be a bearer cheque or an order one. The holder of an open cheque can receive

payment over the counter at the bank or deposit the cheque in his own account.

4) Crossed Cheque

Crossing of cheque means drawing two parallel lines on the face of the cheque with or

without additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed

cheque cannot be encased at the cash counter of a bank but it can only be credited to the

payee's account.

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5) Anti-Dated Cheque

If a cheque bears a date earlier than the date on which it is presented to the bank, it is

called as "anti-dated cheque". Such a cheque is valid up to six months from the date.

6)

Post-Dated Cheque

If a cheque bears a date which is yet to come (future date) then it is known as post-

dated cheque. A postdated cheque cannot be honored earlier than the date on the cheque.

7) Stale Cheque

If a cheque is presented for payment after six months from the date of the cheque it is

called stale cheque. A stale cheque is not honored by the bank.

8) Multilated cheque

If a cheque is torn into two or more pieces such cheque is Mutilated Cheque. If it  

presented for payment, such a cheque the bank will not make payment against such a cheque

without getting confirmation of the drawer.  In case, if a cheque is torn at the corners and no

material fact is erased or cancelled, the bank may make payment against such a cheque.

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9) E-Cheque

Electronic cheque (e-cheque) is the image of a normal paper cheque generated,

written and signed in a secure system using digital signature and asymmetric crypto system.

Simply said an electronic cheque is nothing more than an ordinary cheque produced on a

computer system and instead of signing it in ink, it is signed using the digital equivalent of

ink. After the coming into force of The Negotiable Instruments (Amendment and

Miscellaneous Provisions) Act, 2002, legal recognition has been accorded to e-cheques and

they have been brought at par with the normal cheques. Now, a ‘cheque’ includes an e-

cheque.

Types of Cheque Crossing

General Crossing under SECTION 123 & 126

Where a cheque bears across its face an addition of the words ‘and Company’ or ‘&

Co.”, between two parallel transverse lines, or simply two parallel transverse lines, either

with or without the words ‘not negotiable’, such crossing is referred to as a ‘General

Crossing’. The example of general crossing are where the following words are written simply

or between two parallel transverse lines

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Blank Crossing

The basic type of crossing which converts a bearer cheque to crossed cheque.

& Co.

Such crossing just means that this cheque can be paid not in cash but only through the

credit of any bank account, that is, to the account of the individual company.

A/C Payee

It

means that the

title to the

cheque cannot

be

transferred to anyone else by endorsement and that such cheque can be paid only by credit to

the account of the payee named.

Not Negotiable

Such crossing does not restrict its transferability in any manner. Such cheque can well

be transferred by endorsement and delivery in the case of an order cheque, and merely by

delivery in the case of a bearer cheque. Such crossing is just by way of a safeguard and any of

the endorsement happens to be unauthorized or illegal.

Special Crossing under SECTION 124& 126

A ‘Special Crossing’ bears across the face of the cheque the name of a banker.

Drawing of two parallel lines is not necessary in case of a specially crossed cheque. The

purpose of special crossing is to instruct the drawee i.e. the banker to make the payment of

the cheque only it is presented for payment through that particular bank, as mentioned

thereon, and not otherwise. This way the payment of the cheque is made even safer.

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State Bank of India

Such crossing restricts the payment of the cheque at any of the branch, but only of the

specified bank, viz of the State Bank of India, in the present case.

State Bank of India A/C Payee

It means the cheque will be credited to the specific account number of the specified

person at this specified bank. Such cheques are the safest mode of payment, ensuing that it

can be credited to the account of the specific person stated (specific) in the cheque

State Bank of India Not Negotiable

Such crossing does not restrict its transferability in any manner. Such cheque can well

be transferred by endorsement and delivery in the case of an order cheque, and merely by

delivery in the case of a bearer cheque. Such crossing is just by way of a safeguard and any of

the endorsement happens to be unauthorized or illegal for that articular bank only.

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Decoding the Cheque

1) Date line:

Here we enter the date in this space. It's best to enter the current date so that we know

when we really wrote the cheque.

2) Or Bearer / or Order:

The words "or bearer" appearing on the face of the cheque are not cancelled, the

cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein

or to any other else who presents it to the bank for payment. If the words “or bearer” are

cancelled then it becomes an Order Cheque.

3) Payee line:

In this section, we specify who will receive funds from our account. We write the

name of the person or organization that we wish to pay. Only the named payee is allowed to

negotiate the cheque.

4) Rupee box:

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Here we write the amount in numerical format. This box is sometimes called the

"courtesy box" because it appears on the cheque as a courtesy or convenience. When writing

a check, it's best to put the numbers in the amount box as far to the left as possible.

5) Amount in words:

On this line, we should write the amount of the cheque using words.

6) Account Number:

It is our account number which makes it easier for the drawee to perform transactions.

7) Signature line:

Here the cheque is signed at the line on the bottom right hand corner.

8) Drawee contact information and logo:

Our bank's name appears on every cheque so that recipients know who to contact. A

phone number and address may be included, or they might just see the bank's logo.

9) IFSC:

Indian Financial System Code is an alphanumeric code that uniquely identifies a

bank-branch participating in the two main Electronic Funds Settlement Systems in India: the

Real Time Gross Settlement (RTGS) and the National Electronic Funds Transfer (NEFT)

Systems.

Real time gross settlement systems (RTGS) are specialist funds transfer systems where

transfer of money or securities takes place from one bank to another on a "real time" and on

"gross" basis. Settlement in "real time" means payment transaction is not subjected to any

waiting period.

National Electronic Funds Transfer (NEFT) is to establish an electronic funds transfer

system to facilitate an efficient, secure, economical, reliable and expeditious system of funds

transfer and clearing in the banking sector throughout India, and to relieve the stress on the

existing paper based funds transfer and clearing system.

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10) Cheque Number:

The first set of number represents the cheque number. It is a six digit number.

11) MICR Code

It stands for Magnetic Ink Character Recognition. This number helps a bank to

recognize the bank and branch that issued the cheque. We might think that this can be done

just by looking at the cheque, but banks have to process hundreds of cheques daily. Going

through each and every cheque is a cumbersome process. Instead, the cheques are sorted

through a cheque reading machine which uses this number to identify the bank and branch a

cheque belongs to. This makes the process faster.

The MICR number is a nine digit number, which consists of three parts-

A. City Code:

The first three digits represent the city code and are same as the first three

digit of the PIN code of that city.

For e.g., a bank in Hyderabad will have first three digits of MICR code as 500 (since

PIN code for Hyderabad starts with 500)

B. Bank Code:

The next three digits represent the bank code. Every bank has a unique code

assigned to it. For e.g., ICICI bank’s code is 229, for HDFC it is 240 and so on.

C. Branch Code:

The last three digits represent the branch code.

12) Bank account Number

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The third set of six digit numbers represents your account number (It consists of a few

digits of your account number). But if you pick an old cheque book, issued probably before

CBS (Core Banking Solution) was introduced, you won’t find this set of number present.

13) Transaction ID

The last two digits tells whether a cheque is a local cheque our payable at par cheque.

29, 30 and 31 represents payable at par cheque, while 09, 10 and 11 represents local cheque.

Payable at par cheque is a cheque that can be cashed at any branch of the issuing bank, while

local cheque can be cashed only at the issuing branch. So, if you deposit a cheque in your

bank, with code 10 written at the bottom of the cheque, it’ll take a few days for the money to

come in your account. However since most of the branches these days are CBS (Core

Banking Solution) enabled, so the cheques are generally payable at par.

DISHONOR OF CHEQUES

SECTION 138

Sections 138 to 142 of the N.I. Act were brought into existence by way of amendment by the

Banking, Public Financial Institutions and

Negotiable Instruments Laws (Amendment) Act, 1988.

Dishonor of cheque for insufficiency, etc., of funds in the account:

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 honor 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 provision 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;

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1) 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

2) 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

3) 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.

Grounds for Dishonor of Cheque

1) Insufficient Funds:

The amount of money standing to the credit of the account of the drawer on which the

cheque is drawn is insufficient to honor the cheque, the cheque amount exceeds the amount

that can be paid by the bank under an arrangement entered into between the bank and the

drawer of the cheque.

2) Account Closed:

It is an offence under section 138 of the Act – Closure of account would be an

eventuality after the entire amount in the account is withdrawn. It means that there was no

amount in the credit of ‘that account’ on the relevant date when the cheque was presented for

honoring the same”

3) Stop Payment’ instructions:

“Once the cheque has been drawn and issued to the payee and the payee has presented

the cheque, ‘stop payment’ instructions will amount to dishonor of cheque.

4) Not a clearing member:

“Cheque returned with endorsement ‘not a clearing member’. To attract the provisions

of section 138 NI Act, the cheque should be presented with the bank on which it I drawn- If

the cheque is not presented to the bank on which it is drawn, then provisions of sec 138

39

would not be attracted. If bank on which the cheque is drawn is not a clearing member of the

Reserve Bank of India – unpaid return of the cheque would not attract section 138.”

5) Post Dated Cheque:

Postdated cheque is not a “cheque” on the date it is drawn – It becomes a “cheque”

only on the date written on it – Till that date post-dated cheque remains a bill of exchange.

The post-dated cheque becomes a cheque within the meaning of section 139 on the date

which is written thereon and not the 6 months period is to be reckoned for the purposes of

proviso (a) to sec 138 from the date. Thus in case of a pot-dated cheque, six months period is

to be reckoned from the date mentioned on the face of the cheque and not any earlier date on

which the cheque was made over by the drawer to the drawee.

6) Blank Cheque:

Respondent issued a blank cheque without mentioning the date and amount and sent it

with a letter requesting complainant to present it after a month – Question whether blank

cheque will come within the definition of cheque? – If the cheque is not drawn for a specified

amount it would not fall within a definition of bill of exchange - Act of complainant in filling

up amount portion and date was a material change and it could not be enforced even though it

was issued for a legal liability.

7) Admission of signature on the cheque is not equivalent with admission of execution

Right of the accused to contend that a blank signed cheque was mis-utilised by the

payee cannot be taken away by such mere admission of signature.

Cheque Forgery

Forgery is the process of making, adapting, or imitating objects, statistics, or

documents with the intent to deceive or earn profit by selling the forged item. Copies, studio

replicas, and reproductions are not considered forgeries, though they may later become

forgeries through knowing and willful misrepresentations.

Types of Forgery seen:

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To write (copy and forge) the signature of a real (existing) person on the instrument so

cleverly with the fraudulent intention that it may pass as a genuine signature of a real person.

To write (copy and forge) the signature even of a fictitious (non-existing) person on the

instrument, with such fraudulent intention.

Even if a person has signed his own name on the instrument, it may as well be deemed as a

forgery.

CHAPTER VRevolution in Negotiable Instruments

PAYMENT SYSTEMS IN INDIA

1) Digital Cash

A ‘digital coin’ or digital cash consists of a message issued by a bank or other entity

and encrypted by its Private Key. The message contains the serial number of the cash, the

identity of the issuer and its Internet address, the amount of the cash and an expiry date. This

serial number is unique to bank and can be decrypted by bank only this serial cannot be

altered unless message is tweaked i.e. it is permanent in nature and once set cannot be

changed

Example

When Ganesh has bought a book from online retailer and wants to make payment in

digital cash then for the given price, digital-cash code that is associated with the requested

digital-cash value i.e. book price generated from Ganesh, bank who provides him digital cash

service this code Is then communicated to online retailer ,the retailer will confirm the code

from bank whether it is correct value and there is no multiple transaction and then enter the

encrypted code with retailers bank account code to transfer money into retailer’s account.

2) Smart Card

A smart card is like an "electronic wallet". It is a standard credit card-sized plastic

intelligent token within which a microchip has been embedded within its body and which

makes it smart. Amongst other things, the card can be used to store money, or a value of

money, including digital coins

Example

Rajesh had gone out of station at his cousin marriage for 5 days to Delhi. He had gone

out for shopping in a mall. He purchases clothes, shoes and perfume for his cousin marriage.

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He saw that cash he was carrying in his wallet was not enough to pay the bill. So he thought

rather of withdrawing cash from A.T.M he would pay directly by using his credit card. This

will save his time and easy to do the transaction.

3) Electronic Fund Transfer

Electronic Funds Transfer (EFT) is the electronic exchange or transfer of money from

one account to another, either within a single financial institution or across multiple

institutions, through computer-based systems. The primary modes of funds transfer at present

are demand draft, mail transfer and telegraphic transfer. The time taken by these modes of

transfer for transferring the money from sender to beneficiary is around 8 to 10 days. In the

case of Electronic fund transfer, fund reaches the beneficiary either on the same day or the

next day.

Example

Suppose there are two parties party A and party B entered into to a contract. If party A

wants to make payment to party B through Electronic Funds Transfer then party A will

approach his bank to make the payment to party B. Party A will give all the details of party A

and party B required for making an Electronic Fund Transfer to his bank and then the bank of

party A will make the payment to the bank of party B. The bank of party B then will make

the payment to party B.

4) Digital Cheque

Digital cheque is a form of payment used in Ecommerce. A digital cheque functions

in the same way as a paper cheque. It acts as a message to a bank to transfer funds to a third

party; however, it has a number of security advantages over conventional cheques since the

account number can be encrypted, a digital signature can be employed, and digital certificates

can be used to validate the payer, the payer's bank, and the account.

Example

A company that is depending on the received cheque clearing in time to use the funds

to manage an employee payroll will appreciate the speed that the electronic cheque deposit

method provides in comparison to waiting several days for paper cheque to clear.

5) Biometrics

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It consists of methods for uniquely recognizing humans based upon one or more

intrinsic physical or behavioral traits. The traits that are considered include fingerprints,

retina and iris patterns, facial characteristics and many more. Biometrics is used as a form of

identity access management and access control”. The meaning of Biometrics is “life

measurement" which measure a particular set of a person's vital statistics in order to

determine identity.

Example:

Identify individuals in groups are means of identity access management & A PIN on

an ATM system at a bank is means of access control.

Biometric characteristics can be divided in two main classes

Behavioral Biometrics: It basically measures the characteristics which are acquired naturally

over a time. It is generally used for verification.

Examples:

Speaker Recognition - analyzing vocal behavior

Signature - analyzing signature dynamics

Keystroke - measuring the time spacing of typed words

Physical Biometric: It measures the inherent physical characteristics on an individual. It can

be used for either identification or verification.

Examples:

Fingerprint - analyzing fingertip patterns

Facial Recognition - measuring facial characteristics

Hand Geometry - measuring the shape of the hand

Iris Scan - analyzing features of colored ring of the eye

Retinal Scan - analyzing blood vessels in the eye

DNA - analyzing genetic makeup

Advantages of Biometrics in Negotiable Instruments:

Increase security - Provide a convenient and low-cost additional tier of security.

Reduce fraud by employing hard-to-forge technologies and materials. For example,

minimize the opportunity for ID fraud, buddy punching.

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Eliminate problems caused by lost IDs or forgotten passwords by using physiological

attributes. For example, prevent unauthorized use of lost, stolen or "borrowed" ID

cards.

Reduce password administration costs.

Replace hard-to-remember passwords which may be shared or observed.

Comparison between India and Australia on bases of

Negotiable Instruments

Sr. No Points India Australia

1Governing

act

Negotiable Instruments Act, 1881.

Controlled by Indian Govt.

Bills of Exchange Act 1909 Promissory notes

Cheques before 7th July 1987. Cheques Act 1986.

Controlled by ‘Australian Securities and Investments Commission (ASIC)’

2 Contents

Bills of Exchange

Promissory Notes

Cheques

Bills of exchange Promissory notes Cheques Treasury notes Certificate of Deposits

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3Objectives of governing act

Understand meaning, essential characteristics and types of negotiable instruments

Describe the meaning and marketing of cheques, crossing of cheques and cancellation of crossing of a cheque

Explain capacity and liability parties to a negotiable instruments

Understand various provisions of negotiable instrument Act, 1881 regarding negotiation, assignment, endorsement,

acceptance, etc. of negotiable instruments

Provide uniformity of law in Australia in relation to bills of exchange and promissory notes.

Provide legal certainty by confirming the nature of bills of exchange and promissory notes as negotiable instruments.

Promote efficiency in the marketplace that utilizes bills of exchange and promissory notes through the concept of negotiability

Changing face of Trade and Commerce

International trade finance deals with money lent to sellers, i.e., exporters, and buyers,

i.e., importers. In international trade transactions, when it comes to negotiable instruments

there is always the “chicken and egg” question of payment to the seller versus shipping and

delivery of the goods to the purchaser. If a seller requires payment in advance, then their sales

may suffer since purchasers would rightfully fear that they might pay in advance and the

seller not ship the goods. Likewise, if the seller ships the goods and trusts the buyer to pay,

then the seller runs the risk that the purchaser may not pay.

In order to address this recurring situation, banks step in as an intermediary and

provide various types of negotiable instrument financing that attempt to address the concerns

of both the buyer and the seller. For example, the buyer's bank may provide a letter of credit

to the seller, or the seller’s bank, providing for payment upon presentation and approval of

certain specified documents, such as a bill of lading. The Seller's bank may make a loan by

advancing funds to the seller on the basis of the sales contract. These are some of the latest

45

styles of payment acting as negotiable instruments though they are not included in the act by

the Central Government.

There are four basic methods of trade finance by way of negotiable instruments:

1. Advance Payment: The buyer pays up front and trusts that the seller will forward the

goods. This method is the most secure for the seller and the least secure for the buyer.

2. Direct Payment: The Seller ships the goods and the Buyer pays the Seller directly. This

offers the most security for the Buyer and the least security for the Seller.

3. Documentary Collection: An international trade financing procedure in which a bank in

the buyer’s country acts as a fiduciary on behalf of the seller in collecting and remitting

payment for a shipment of goods.

4. Documentary Credit: This covers letter of credit transactions wherein the buyer has his

bank provide a letter of credit that effects the payment for the goods purchased. In effect, the

seller is comforted by substituting the credit worthiness of the bank for the creditworthiness

of the buyer. These transactions are subject to UCP 600 and are more fully explained in the

following section.

Letters of Credit as a Negotiable Instrument

The first thing to understand about Letters of Credit is that there are many different

variations that have been crafted over the years to meet the requirements of Buyers and

Sellers. However, there is a generally accepted format that permeates all Letter of Credit

transactions, and that framework will be explained here. The basic purpose of a Letter of

Credit is to comfort buyers and sellers in an international trade transaction by essentially

replacing the credit of the buyer with the financial backing of the bank that issues the letter of

credit.

Two basic types of letter of credit are used:

Commercial Letter of Credit:

This is the basic payment document guaranteeing the payment for the goods that are

being sold and shipped. Also called a Documentary Letter of Credit. An issuing bank issues

(or opens) a commercial letter of credit at the request of one of its customers, authorizing the

46

advising or confirming bank, to make a specified payment to the seller or shipper, known as

the beneficiary. The letter of credit is the bank’s commitment to fund draws covered by the

credit. In effect, the credit of the issuing bank replaces the credit of the bank's customer as the

party obligated to make the payments under the letter of credit.

Standby Letter of Credit

Whereas a commercial letter of credit is a payment mechanism for a particular

international trade transaction, a standby letter of credit serves as a secondary or back-up

means of payment. Issuing banks issue standby letters of credit in order to provide comfort to

other parties that the bank’s customer can perform some financial obligation to the

beneficiary. Usually, it is not expected that the issuing bank will ever be called upon to fund

the standby letter of credit.

CHAPTER VI.

PRIMARY RESEARCH ON SCOPE OF NEGOTIABLE INSTRUMENTS

Preliminary Research on Knowledge of Negotiable Instruments

Sample Questionnaire

Survey on Knowledge of Negotiable Instruments.

(Please tick wherever applicable and fill in the required information)

1. Please fill the following details:

Name:

Age:

Gender:

Occupation:

2. Do you think you are fully aware of all Negotiable Instruments and their use?

47

Strongly Agree: Agree: Not Sure: Disagree: Strongly Disagree:

3. Which of the following negotiable instruments you use often?

Hundi:

Bills of Exchange:

Promissory Notes:

Cheques:

4. Are you aware of what the digits at the bottom of the cheque indicate?

Yes:

No:

5. Are you aware of the consequences of dishonoring a negotiable instrument?

Yes:

No:

6. Do you prefer Internet Banking on Physical Banking Transactions?

Yes:

No:

7. Are you aware of the different kinds of frauds that take place with respect to

negotiable instruments?

Yes:

No:

8. Have there been cases where multiple payments have happen from your account due

to internet connectivity issues while dealing in Internet Banking?

Yes:

No:

9. Are you aware of the kind of negotiable instruments like smart dcards, digital

Cheques, biometrics, etc ?

Yes:

48

No:

10. Would you like to be made awarefor the new types of negotiable instruments?

Yes:

No:

11. What are your suggestions and inputs in safeguarding and improvements on the

Negotiable Instruments in India?

Research Methodology and Interpretation Database

Objectives of this Research.

To find the degree of knowledge,of customers with regards to Negotiable Instruments.

To know the majority used Negotiable Instrument.

To find out cybercrimes arising out of Internet Banking.

To know about the customer satisfaction and their viewpoints.

To understand the future needs of customer in terms of Negotiable Instruments.

Research Design.

Survey design:

The study is a cross sectional study because the data was collected at a single point of

time. This type of study utilizes different groups of people who differ in the variable of

interest, but share other characteristics. For the purpose of present study a related sample of

population was selected on the basis of convenience.

Sample Size and Design:

49

A sample of 30 people was taken on the basis of our convenience. The actual people

were interviewed on the basis of random sampling. Convenient Random Sample was used in

this research.

Research Period:

The Research work was carried for a week.

Research Instrument:

This work was carried out through self-administered questionnaires. The questions

included were closed ended and some also offered multiple choices.

Primary Data Collection:

The data, which was collected for the purpose of study, was majorly primary in nature

which comprises of information collected through college students. The data has been

collected directly from respondents with the help of structured questionnaires.

Analysis of Questionnaire

50

Interview with Allahabad Bank Manager

Interview with Allahabad bank manager (Reclamation Branch) with respect to

Q1:- Can you please brief us on negotiable instruments?

Ans- According to NI act basically there are three types of negotiable instruments,

promissory notes, bills of exchange and cheques. But now days we are mainly dealing with

cheques only. Bills of exchange and promissory notes have become obsolete. Due to

evolution of many types of cheques and easy accessibility made it more popular.

Q2:- Are bills of exchange and promissory notes still in use?

Ans- Yes, they are in use but in very limited manner.

Q3:- What are ‘HUNDIS’?

Ans- In earlier time hundis were the only type of negotiable instrument. There were so many

types of hundis. But now none of them exist, even though features of hundis are now covered

51

under Travellers cheque. Information on various types of hundis and there uses, you can

easily find on Google.

Q4:- What are various types of cheques?

Ans:-Bearer Cheque, Order Cheque, Uncrossed / Open Cheque, Crossed Cheque, Anti-Dated

Cheque, Post-Dated Cheque, Stale Cheque, Mutilated cheque, E-Cheque etc.

Q5:- Why we cross cheques?

Ans:-This is done to prevent it from being directly encashed. The crossed cheque must be

deposited into a bank account. If the cheque has been stolen, it is easily traced by locating the

account it was deposited into. Type of crosses on cheque you can get on Google.

Q6:-How many cheque frauds you’ll come across?

Ans:-Few years before there were many cases of cheque frauds, but now the number have

reduced drastically.

Q7:-What has led to reduction of cheque frauds?

Ans: - Main reason for reduction in frauds was awareness, strict rules implemented on 1988

and banking going digital.

Q8:- What procedure do you follow when cheque is dishonored?

Ans: - Now whole procedure of clearing the cheque is centralized. We don’t have to do it

manually since the cheques in truncated form evolved. We have to put all cheque details in

bank software and then it goes for clearance. If cheque dishonors then we get an

acknowledgement from clearing house then according RBI both the parties are penalized for

the same. But the call to go for legal actions is completely on payee.

Q9:- What do you think will be the future of negotiable instruments?

Ans: - I think it would be completely digitalized. Instead of cheques you may have some

electronic tokens which would be coded. You don’t even need to carry your cheque books.

You may create future dated transaction on NEFT in advance so that on particular future date

amount will automatically transferred to payee’s account. And if the due amount is not

52

present in drawer’s account then there will be similar laws applicable as dishonor of

negotiable instruments.

Statistical Data on Disposal and Pendency ofNegotiable Instruments

Year Institution Disposal Pendency

2013 8096 8202 19831

2012 7700 7072 18972

2011 7761 7750 16943

Institution, Disposal and Pendency of Negotiable Instrument Cases Act in

53

The Supreme Court

Institution, Disposal and Pendency of Negotiable Instrument Act Cases in

Four High Courts

HIGH COURT Institution Disposal Pendency

MUMBAI 10670 12139 34616

DELHI 1988 2372 6415

MADRAS 20819 17724 54126

CALCUTTA 7189 6514 30591

2011 2012 20130

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

7761 7700 8096

7750 7072 8202

16943

1897219831

Institution Disposal Pendency

54

Institution19%

Disposal21%Pending

60%

MUMBAI

CHAPTER VII

CONCLUSION

10 YEARS GOING FORWARD

New technologies are opening up new

opportunities for businesses to offer new kinds of payment and new forms of currency. Some

of these will fail in the market and some will stay. By 2030, we will all be used to paying for

things in a variety of new ways, and authenticating payments in new ways too. This paper

Institution18%

Disposal22%

Pendency60%

DELHI

Institution22%

Disposal19%

Pendency58%

MADRASInstitu-tion16%

Disposal15%

Pendency69%

CALCUTTA

55

looks at some of the changes. Many believe could be coming along and the key factors that

will determine which ones will have a lasting impact.

Technology generally succeeds or fails depending how well it meets our everyday

social needs, so it is a good idea to look at these. Then, expanding on one important area of

these, security, we will address some other key factors that will affect adoption. We will

consider how all this could play out in the 5 and 15 years periods, leading up to an overview

of how payments will look in 2030. 2030 has been chosen for this report because it is far

enough away for technology to have time to develop and mature, and for society to adopt or

reject the various types of contenders, but not so far in the future that predictions are just

guesswork or science fiction.

A Negotiable Instrument is nothing but written documents, signed by the maker or the

drawer containing an unconditional promise to pay or an order to pay a certain sum of money

at a definite time to the bearer or to the order. Negotiable Instruments can either be negotiable

or non-negotiable. But, they must come under one of the two categories. An instrument

becomes negotiable either by statute or by mercantile usage. Among all other negotiable

instruments, bills of exchange, cheque and promissory notes are the three important

negotiable instruments which are widely used in international trade.

As these Instruments started becoming an integral part of business, there also felt a

need to unify them. These Instruments, so as to be used for trade and commerce, were needed

to be well defined. It became imperative that a set of rules were to be established to set a

common ground for the usage of these instruments, thereby accepted by all those affected by

them. Negotiable Instruments like Cheque and Promissory note, also aided non traders with

their money transactions. For instance, people could lend money to others without having to

worry about the risk of non-payment by the lending party. On the grounds of negotiable

instruments, it became easy to collect money from debtors.

As trade and commerce evolved through ages, so did negotiable instruments.

Advancement of technology brought advancement in the usage of these instruments. CTS i.e.

cheque truncation is one of such examples. This system prevents the actual physical

movement of cheque between banks and sending the required information via electronic

medium thus saving time, efforts and money. Similarly, the concept of digital money, where

56

money is electronically transferred from one account to another, acts as a replacement for

instrument like cheque. Digital cheque also works on similar grounds thus giving the same

set of advantages. Also, with respect to promissory notes and bill of exchange, e-promissory

note and e-bill of exchange may act as probable advancement for these instruments as we saw

in the document. Also with the use biometric system the use of Negotiable Instruments

promises to be more safe and clean. Use of such advance technologies, has indeed brought a

revolution in the realm of Negotiable Instruments, this revolution is rightly called as the

‘Electronic Revolution’, changing the face of these instruments.

Even though electronic revolution has brought about many changes in the present

world, but negotiable instruments are still in use. The electronic revolution is considered as

the next major step which replaces the negotiable instruments. For this the future could

improve and develop the problems which prevail in e-revolution. In the present world, people

in all fields of profession are getting used to e-revolution. The present world, need to be train

to get used to this system of working with e-revolution. It still takes time for the next

generation to be ready to use the e-revolution with no difficulties.

Globally, there are many options to dematerialize these financial instruments, but a very few

can provide guaranteed security to the user’s information and money. In order to maintain

the security level & to save the time;

Government needs to use more resources, do research about the latest facilities, test them,

regularize it & spread awareness about these facilities.

SUGGESTIONS

Social networking and Negotiable Instruments

Twitter:

There are 121 million social network users in India and some of the leading banks of

India have planned to take full advantage of this situation. The investment in such kind of

program is really less as you don’t need to build a new website and promote your

website/product on different platforms. Plus operating internet banking is not that user

friendly, hence using social networking for the purpose of transaction can prove a game

57

changer for banking sector. For example if you need to recharge your mobile then you need

not download the banking app or use internet banking, you only need to have a twitter

account and type #Mobile Recharge <mobile no> <operator> <amount>

Email:

You can simply type in the email id and mobile number of the recipient. You need not

know the account number of the recipient. The other party will receive email with OTP and a

link. There he can mention his account number followed by the OTP and the money will be

transferred to his account.

Facebook:

The feature mentioned above for “Email Transaction” is also used on Facebook but

for that you need to have the other party in your friends list

Mobile wallets:

The entire banking sector is worried with the emergence of the Mobile wallets. Airtel

became the first company to bring mobile wallets in India, Vodafone followed by their “M-

pesa”. Paytm has also come up with their mobile wallet system. The money which is

available in Paytm wallet can be used for transaction on many other websites such as

BookMyShow. So far there has not been any such facility where you can transfer money to

an individual through wallet but soon the same will come to reality as the years go by and

more and more people will start to use digital wallet system.

Biometrics:

NFC for mobile payments has struggled with adoption. Not least because the user

needs to have an NFC-enabled phone in order to be able to make these contactless payments

in addition to the retailer itself being set up to accept NFC payments. Hence what can be

better way than using your own fingerprint as the way of transaction. Fingerprint will store all

the data such as your credit card number, account number, it will work as OTP, and password

as it can be the safest way of transaction.

Interesting fact is consumers want to use their mobile device for payments. According

to Pew Research, 90% of U.S. adults have a mobile phone, 58% have smartphones and 42%

58

have tablets. An Accenture survey revealed that 71% of in-store shoppers are interested in

paying by mobile phone but only 9% of retailers have mobile wallet capabilities. Even

though users must access and log in to the Starbucks payment app, the coffee titan reports

that 15% of its in-store transactions in the U.S. are mobile payments. Until making a mobile

payment becomes faster than using a credit card, mobile payments will be stuck in low gear.

And the key to making mobile payments fast is to use biometrics to solve the authentication

problem and eliminate the need for consumers to enter a password.

We often think of biometrics as being leading technology, but in fact, biometrics has

been around since 1858 when Sir William Herschel used handprints to identify Civil Service

of India employees from others who might claim to be employees on payday. And consumers

are becoming more comfortable with biometrics in the form of voice and fingerprints.

Research firm Frost and Sullivan estimates that the number of global biometrics smartphone

users will reach 471.11 million in 2017. The banking industry is experimenting with

biometrics and payments. In February, U.S. Bank announced that employees are piloting

software that allows them to use their voice to login and access a credit card account on a

mobile device.

Barclays recently announced the Barclay’s Biometric Reader for its corporate banking

customers in the U.K. beginning in 2015. The reader uses Finger Vein Authentication

Technology (VeinID) from Hitachi to allow users to scan their finger to authorize payments

and access online accounts. Apparently, vein patterns are more difficult to spoof than even

fingerprints. Along with the launch of iPhone 6, Apple announced Apple Pay which uses

near-field communication (NFC) and Touch ID.

RECOMMENDATIONS

Future Prospects on Transactions

Governments and some companies are moving away from strictly financial

assessments of wealth and incorporating more quality of life measures, and social strengths

are big components. Far future companies will become much more integrated into the fabric

of communities. This makes community cash forms and direct peer-to-peer payment systems

more viable, but also means social networks will keep companies in check and punish those

that misbehave.

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As social entrepreneurs continue to make clever use of the web and phones, some

social network based payment systems could be developed that are free of commission and

fees, and if so, they will provide strong competition for today’s payment systems, which

charge retailers a percentage of each transaction. Governments would encourage this since

removing fees and commission will be an economic stimulus equivalent to reducing VAT.

Tribal social networks will therefore be a key driver of change for banks, credit card

companies and phone based cash providers. This will also make it hard for walled gardens to

survive, where companies try to take a slice of each transaction on their systems. People will

demand the ability to spend their own cash on any platform without having to pay

commissions and social entrepreneurs will deliver the means to do so. Companies that try to

resist will suffer and likely see people simply boycott their platforms.

5 YEARS FORWARD

The next five years are critical for the success of electronic payments, particularly Near Field

Communication (NFC), the technology used on contactless cards or NFC-enabled mobile

phones.

Rival Smartphone operating systems will battle for supremacy with supposedly safer ‘walled

garden’ versions such as Apple’s

iPhone iOS where the company that created the software can restrict access to non-approved

applications or content, competing with open but supposedly risky ones such as Google’s

Android.

Many new payment systems are emerging, hoping to grab market share, often using the

phone as both proof of presence and to run the app that processes transactions.

Some of these payment systems will be cross platform, while others won’t, echoing the battle

over Smartphone operating systems.

Security will be critical for all of these emerging payment systems – the next five years will

thoroughly test them with imaginative and sophisticated attacks.

Low battery life and signal coverage problems will combine with security issues to guarantee

the continuation of physical cash.

Particularly at stake are biometric based systems such as face, voice, fingerprint and iris

recognition – security fears will either be confirmed or proven misplaced, and that will

determine the longer term future.

Battery drain on phones will remain a problem, particularly when people have to use many

applications that rely on continuous access to wireless common positioning systems.

60

CASE STUDIES

CASE STUDY 1

VIJAY MALLYA CHEQUE BOUNCE

Vijay Mallya vs. Delhi International Airport

PETITIONER: Delhi International Airport

RESPONDENT: Vijay Mallya

DATE OF JUDGMENT: 29/01/2015

CHEQUE AMOUNT: Rs 7.5 crore

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Delhi High Court did not hear liquor baron Vijay Mallya's plea challenging summons

issued to him by a trial court in several cheque-bouncing cases in which he had to appear on

February 20, 2012. Justice Sunil Gaur fixed May 8 for hearing of the matter after the counsel

for the parties requested adjournment. The trial court had summoned Mallya as an accused

after GMR-led Delhi International Airport (DIAL), which operates the capital's Indira Gandhi

International Airport, had moved the trial court after a cheque amounting to Rs one crore

issued by Kingfisher Airlines Ltd on February 22, 2012 was returned to them a month later

containing the remarks "fund insufficient".

Delhi International Airport filed four cases against Mallya for dishonor of cheques for

a total amount of Rs 7.5 crore. The airline had issued the cheques towards payment for

services availed by them at the IGI airport here. Mallya, who was denied permission by the

government to be re-elected as managing director of the now-grounded Kingfisher Airlines,

has approached the court seeking direction to quash the September 2, 2014 and January 13,

2014 orders of the trial court by which he was summoned as an accused in the case.

He also sought direction for quashing of the complaint of 2012 pending before the

Metropolitan Magistrate here. Metropolitan Magistrate in January last had asked Mallya to

appear before him as an accused and defend himself in trial. In September last year, the

sessions judge had dismissed a revision application against the previous order.

CASE STUDY 2

P.N. KHANNA CHEQUE FORGERY

P.N. Khanna vs. Bank of India

PETITIONER: Bank of India

RESPONDENT: P.N. Khanna

DATE OF JUDGMENT: 15/01/2015

Brief facts of the case are that complainant/ appellant had one account with opposite

party/ respondent and one account with Allahabad Bank. He filled cheque No. 839595 of

Allahabad Bank in his name for Rs. 8,16,000/- and handed over the cheque to Officer of the

62

opposite party for clearance, who in turn called his peon Rajiv Kumar and got the cheque

dropped in the drop box and counter slip was given to the complainant. Amount of this

cheque was not credited in his account and on enquiry from Allahabad Bank, he came to

know that the cheque has been cleared for Rs. 28,16,000/- and has been credited in the name

of one Satnam Singh in State Bank of India.

Alleging deficiency on the part of opposite party, complainant filed complaint before

the State Commission. Opposite party resisted complaint and submitted that cheque dropped

in the drop box was not found and report was lodged to the Police and investigation is

pending. It was further, submitted that cheque was forged by Satnam Singh and got it

collected through State Bank of India against KYC norms. Complainant has not impleaded

Allahabad Bank, State Bank of India and Satnam Singh as party, hence, complaint was not

maintainable and prayed for dismissal of complaint. Learned State Commission after hearing

both the parties dismissed complaint as referred above, against which this appeal has been

filed. Admittedly, complainant has not impleaded Allahabad Bank, State Bank of India and

Satnam Singh as opposite parties in the complaint and criminal investigation is also pending

in the matter. As there are allegations of theft, forgery and clearance of forged cheque by the

Bank, Learned State Commission rightly dismissed complaint and directed complainant to

approach Civil Court for redressal of his grievances.

CASE STUDY 3

BRITANNIA INDUSTRIES LTD BILLS OF EXCHANGE FORGERY

Britannia Industries Ltd vs Punjab National Bank

PETITIONER: Punjab National Bank

RESPONDENT: Britannia Industries Ltd

DATE OF JUDGMENT: 17/04/2013

Claim of the appellant-plaintiff:

It is based on a purported bill of exchange for a sum of Rs. 1 crore only.

63

Bill of exchange was accepted by M/s Lgee Enterprise (not made a party to the suit)

further shown to be accepted by Punjab National Bank. Then shown to be endorsed by

respondent no. 2 (Metropolitan Construction ) in favour of the appellant-plaintiff and was

delivered to it, who, thus, claims to have become the endorsee (Britannia Industries Ltd.) and

the holder of the bill of exchange in question.

The bill of exchange was presented for payment, but respondent no. 1 (PNB) refused

to make payment, thereby dishonoring the bill. The appellant-plaintiff filed the suit – for

recovery of the amount of the bill of exchange along with statutory interest. The suit

summons were not served on defendant nos. 2, 3 & 4 and they never contested the suit at any

stage. Lgee Enterprise (Mumbai) - beyond the jurisdiction of the Calcutta High Court. So, the

contest was directly with PNB which was described in the plaint as the acceptor of the bill.

PNB (respondent no.1) completely denied the case of the appellant- plaintiff as, the bill of

exchange was never accepted by it; that A.B. Das, who was the Branch Manager of PNB

Zakaria Street Branch, Calcutta and who was shown to have accepted the bill of exchange

was not authorized to accept any bill of exchange on behalf of the Bank. The co-acceptance

of the bill of exchange by A.B. Das in Bombay was not in discharge of his official duty as

Branch Manager of a branch in Calcutta. The co-acceptance of the bill of exchange shown to

have been made by A.B. Das was fraudulent and not binding on the Bank.

CASE STUDY 4

AZHARRUDIN CHEQUE BOUNCE

Mohd Azharuddin vs. Sanjay Solanki

PETITIONER: Sanjay Solanki

RESPONDENT: Mohd Azharuddin

DATE OF JUDGMENT: 01/03/2012

CHEQUE AMOUNT: Rs 4.5 crore

The Delhi court issued a fresh non-bailable warrant (NBW) against cricketer-turned

Congress MP Mohd Azharuddin after he failed to appear before it in connection with a

cheque bounce case. Metropolitan magistrate Vikrant Vaid issued the warrant against the

64

former captain of the Indian cricket team for March 7 after he failed to appear before it in

pursuance of the earlier NBW issued against him on February 18.

The court issued the NBW, dismissing an application for exemption from personal

appearance to Azharuddin. The application was filed by Azharuddin's counsel, who said his

client was busy with election campaigning in the ongoing Uttar Pradesh assembly polls. On

the earlier date of hearing, the magisterial court had issued a NBW against Azharuddin for

March 1, after he repeatedly failed to appear before it and also rejected his plea for

exemption.

According to the complaint against Azharuddin, he wanted to sell his Mumbai-based

property worth around Rs 4.5 crore, jointly owned by him and his estranged wife Sangeeta

Bijlani. The complainant Sanjay Solanki, a Delhi-based businessman, approached

Azharuddin to purchase the property and the deal was finalized after which Solanki paid Rs

1.5 crore in advance to Azharuddin

But after some time, due to some marital dispute, Azharuddin refused to sell the

property and agreed to pay the money back to Solanki as per the agreement. The former

captain issued a cheque of Rs 1.5 crore to Solanki in 2008 but it was dishonored by the bank,

the complainant said. After Azharuddin's cheques were dishonored again twice, once in 2009

and later in 2010, Solanki approached a court with a complaint against Azharuddin.

BIBLIOGRAPHY

Business Law by Satish B Mathur

Business Law by Bulchandani

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65

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