Negotiable Instruments Act Flashcards
Intro for NI
Sec 13- ni means any PN, BOE, cheque payable either to order or to bearer
Conditions for good title
- Good faith
- For consideration
- Before maturity
Difference between promissory note and boe
Pn sec 4
Boe sec 5
- Maker and payee
Drawer, drawee, payee - Promise vs order
- Maker is the debtor
Drawer is the creditor, drawee is debtor - Liability of maker - primary plus absolute
Liablity of drawer - secondary plus conditional
Drawee- primary and unconditional - Not payable to maker himself
Drawer and payee and can be same - No notice of dishonour
Notice needed for dishonour - Provisions like presentment etc, are not applicable to promissory note
Cheque vs bill of exchange . All cheques are bill of exchange but not vice versa
- c- drawee is bank
Boe- drawee could be any person - C- payable on demand
Boe- grace period of 8 days allowed if BOE is not payable on demand - System of crossing cheques
- In case of cheques drawer may revoke the authority by informing the bank. Bank can stop if it comes to know about customers death or insolvency
In BOE authority cannot be removed in any of these ways
- No system of noting and protesting dishonour of cheques
Conditions to become HDC
- Must have received the NI as a holder- payee ( order instrument), bearer (bearer instrument), endorsee
- Obtain it for consideration - if no or unlawful not HDC
- Received before maturity - if after maturity then he will have the same title as transferor
- He must act in good faith - honest belief in the title of the transferor, reasonable diligence
Rights and privileges of HDC
- Presumption- prima facie deemed to be HDC
- Privilege against incohate stamped instrument , wherein the holder exceeds his authority in filling in the blanks, provided that the amount filled is covered by stamp fixed there on
- Transfer of rights even when the Original delivery was conditonal or for specific purpose only (ex: servant to whom given for safe custody gives it to HDC
- Prior defect - sec 58- even if transferred by a person with defect title ( for ex via theft, fraud, unlawful consideration) the HDC will get get good title
- Estoppel- the maker or drawer of NI are not entitled to allege against a HDC that NI as originally drawn was not valid
- Acceptor of BOE, cannot as against Hdc say that other parties to the bill are fictitious ( sec 42)
Finder of a lost negotiable instrument
Sec 58 - finder of a lost NI has no rt to receive the amount of NI
Conditions to be a holder
Sec 8
- Entitled to posession in his own name
- Entitled to recoeve amount in his own name
Difference between Holder and HDC
Consideration Before maturity Good faith Privileges Right to sue - a holder cannot sue all the prior parties and a HDC can sue all the prior parties Doesn’t get a better title from the previous holder vs title gets cured when HDC posession
Milind shripad vs KALIM khan- suite for recovery of amount which is liable through negotiable instrument can only be filed by a person who is a HDC
Jurisprudence- humanely impossible to have full knowledge of history of HDC beyond due deligence
Endorsement sec 15
To negotiate an order type instrument along with delivery
Essentials
- On or allonge
- Signed
- Completed by delivery
Rules
- Liable to all subsequent parties
- Instrument amt plus expense amount
- Liable only if he receives notice of dishonour
- When endorser becomes endorsee all intermediate parties discharged
Types
- Blank
- Full- now only endorsee can negotiate
- Restrictive - stops further negotiate
- Sans recourse- without recourse to me
- Facultative - ex: pay A or order, notice of dishonour waived
- Sans frias- shouldn’t incur any expense
- Contingency - pay a or order on his marraige with B
S 138 of ni act
- Intro- new dimension, cheques with no intention to honour, untill 1988 civil offence. Amendment of 1988- promptitute and remedy and credibility- criminal offence for dishonour.
1.a - strict liability no mens rea - 5 ingredients
A. Drawing of check
B. Presentment
C. Return unpaid by drawee
D. Holder giving notice within 30 days
E. Failure of drawer to make payment within 15 days
The cause of action starts from 16th day. CONCATENATION OF ALL THE 5 - Mohd Shafi vs Noor mohd (2022) - court reiterated that sec138 should be interpreted in a liberal manner to achieve the objectives of cases of cheque dishonour. Cheques dishonoured due to stop payment, account closed, signature mismatch ,,all fall within the ambit of sec 138.
- Suni Todi vs state - sec 138 to cheque dishonour case when there was no debt at the time of drawing the cheque , but incurred after that but before the presentment
- Jurisdiction
- a - K BHASKARAN CASE- at any of the 5 places where any of 5 ingredients. This led to stalled proceedings- dishonest drawers challenging jurisdiction
- b- Dasrath rupsingh Rathode case - 2 principled
- Where cheque delivered for collection of acc- where the payee maintains his account
- Where checque delivered for OTC- Court where the drawer maintains his account
Both these principles were inserted by the way of sec 142 (2) in the 2015 amendment
- 2018 amendment
143A- can direct drawer to pay interim amount compensation
148 A- appellate court can order the drawer of cheque to deposit an amount
Re: expeditious trial
2 cases to write in intro part of 138 NI act
- Mohd shafi vs Noor mohd
- Suni Todi vs state
Which case led to the latest development of jurisdiction of 138
Dasrath rupsingh rathode case
Case for a cheque marked not negotiable is nevertheless negotiable
Wilson and meeson vs Pickering
Fraudulently completed by an agent and transferred to a person to whom the agent was indebted. Held that tranfaree was affected by the fraud
2 articles for a checque marked non negotiable
- A 123- NI act permits crossing as nn
- 130 - such crossing materially diminishes the negotiable value of the cheque. Transferee will get the same title as transferor. He cannot become holder in due course
