Q. 1 Write a note on the following:
1. Negotiable Instruments
2. Holder in Due Course
3. Payment in the Due Course
4. Noting and Protesting
5. Acceptor for Honour
6. Drawee in Case of Need
Ans: 1. NEGOTIABLE INSTRUMENTS
The word “negotiable” means “transferable from one person to another in return for consideration” and the word “instrument” means “a written document” by which a right is created in favour of some person. So the term “negotiable Instrument” literally means “a written document transferable by delivery”.
According to Section 13 of the Negotiable Instrument Act
“A Negotiable instrument means a promissory note, bill of exchange or cheque either to order or bearer”.
In simple words negotiable instruments are related to transfer of money from one person to another person and the holder of these Instruments has a right to receive the money.
TYPES OF NEGOTIABLE INSTRUMENTS
The negotiable instrument can be divided into two types:
(a) Negotiable by statue
(b) Negotiable by custom or usage of trade
(a) NEGOTIABLE BY STATUS
According to Section 13 of negotiable Instrument Act there ate three kinds of negotiable instruments e.g. promissory note, bill of exchange and cheque. These are called negotiable by statue.
(b) INSTRUMENT NEGOTIABLE BY CUSTOM OR USAGE
Following are the instruments, which are negotiable by usage or customs of trade. The functions of these instruments are slightly changed from country to Country:
Bearer debentures, share warrantee, divided warrantee Railway bond, Railway receipt Bank note, Govt. circular note, Bank draft.
Following document can be transferable and endorsed but they are not considering negotiable instrument.
Bill of lading, Money order share certificate, deposit receipt, Carrier receipt, Dock warrant print, Postal order.
ESSENTIALS OR CHRACTERISTICS OF NEGOTIABLE INSTRUMENTS IN BRIEF
1. It is in writing.
2. It is transferable.
3. It is an unconditional.
4. The amount written on it is payable to the bearer to the specified person.
5. It is payable on demand or at a pre-determinable future time.
6. It is always payable in money.
7. The amount written on it must be definite in terms of money.
8. It can be easily used for the payment of debt.
Holder has three characteristics.
1. Document is in his hand.
2. He is entitled to receive the amount written on the document.
3. He is entitled to sue against the refusal.
2. HOLDER IN DUE COURSE
Holder in due course should possess the following features:
1. A holder in due course must have become a holder of the instrument before the data of its maturity. He must be entitled to transfer it.
2. He must be a holder for a valuable consideration.
3. He must be a valid holder of the instrument.
4. He must be a holder of the instrument in good faith.
5. Amount of document will be payable on that data when it will be presented.
6. He should be entitled to sue to in case of refusal of payment.
7. He must have taken instrument complete and regular on the face of it.
3. PAYMENT IN DUE COURSE
It means the payment according to the apparent tenure of the instrument in goods faith and with out negligence to any person in possession. Those circumstance which do not afford a reasonable ground for believe payment amount mentioned in it.
4. NOTING AND PROTESTING
According to Section 99, A promissory note or bill of exchange is dishonour by non payment, the holder usually and it’s to Notary public. The notary public notes the particulars of the bill. In this notes he will write the cause of non-acceptance with data ad fee.
A protesting is a formal record of dishonour signed by the notary public and copy of the bill is also included in it. It is necessary to maintain the holders right against the drawer and the endorser.
CONTENTS OF PROTEST
1. Same copy of the document.
2. Holder name and address.
3. Place and date where it was presented.
4. Name and address that dishonored.
All the above proceeding should be when the document is dishonored.
5. ACCEPTOR FOR HONOUR
According to the Section 7 it is defined in the following words:
“When a bill of exchange has not been noted or protested for non acceptance or for better security and any person accepts it for the honour of drawer or any one of the endorsers such person is called an acceptor for honour.”
Acceptor for honour is liable for the payment if the bill is not paid.
6. DRAWEE IN CASE OF NEED
Holders of a bill of exchange his right to take the legal action against the drawer if the drawee refuses to accept it. In some cases the drawer mentions an alternative drawee. The holder can present the bill to the alternative drawee if actual drawee refuses to accept it. Such alternative drawee is known as drawee in case of need.