Legal Aspects of Business

1. LEGAL ASPECTS OF
BUSINESS
Presentation on different types of Negotiable
Instrument & Effect of Dishonor of cheque
SUBMITED TO: Urvee Buch MAM
PREPARED BY:-
HARIN A SAGAR
HIREN A SAGAR

2. NEGOTIABLE INSTRUMENT
According to section 13(1) of the
Negotiable Instrument Act, 1881,
“A Negotiable Instrument means
a Promissory note, bill of
exchange or cheque payable
either to order or to bearer”

3. PROMISSORY NOTE
A “Promissory Note” is an instrument in
writing containing an unconditional
undertaking signed by the marker, to pay a
certain sum of money only to, or to the
order of, a certain person, or to the bearer
of the instrument.

4. BILL OF EXCHANGE
A “Bill of Exchange" is an instrument in
writing containing an unconditional order,
signed by the maker, directing a certain
person to pay a certain sum of money only
to, or to the order of, a certain person or to
the bearer of the instrument.

5. CHEQUE
A “Cheque" is a bill of exchange drawn on
a specified banker and not expressed to be
payable otherwise than on demand.

6. Examples of Negotiable Instruments
Hundis
Government
Promissory Notes
Bearer Debentures
Draft

7. Examples of Non Negotiable Instruments

8. Effect of dishonor of Cheque
A direction by drawer to drawee not to pay
the cheque otherwise than to a financial
institution (s54).
Where a cheque that bears a crossing and is
transferred by negotiation to a person, the
person does not receive a better title to the
cheque than the title of the person from
whom he took the cheque (s55).

9. Effect of dishonor of Cheque
If bank pays out cash on a not negotiable
cheque then bank then bank has converted
the cheque and must account to true owner
of cheque for his loss.
If person wrongfully obtains not negotiable
cheque and then transfers it, then
transferee has converted the cheque and
must account to true owner of cheque for
his loss.

10. Effect of dishonor of Cheque
 Section 138 creates an offence for which the mental
elements are not necessary. It is enough if a cheque is
drawn by the accused 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 discharge in
whole or in part, of any debt or other liability due.
Therefore, whenever the cheques are on account of
insufficiency of funds or reasons referable to the drawer’s
liability to provide for funds, the provisions of Section 138
of the Act would be attracted, and for this offence, he shall,
be punished with imprisonment for a term which may
extend to two years, or with a fine which may extend to
twice the amount of the cheque.

11. Effect of dishonor of Cheque
Presentation of the cheque within six months or within the period
of its validity.
Return of the cheque unpaid for reason of insufficiency of funds.
Issue of the notice of dishonor demanding payment within thirty
days of receipt of information as to dishonor of the cheque.
Failure of the drawer to make the payment within fifteen days of
the receipt of the payment.

12. THANK YOU