Tag: commerce

As per section 13 of the Negotiable Instruments Act, 1881, a “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. Also, the explanation (ii) of the section provides for that a promissory note, bill of exchange or cheque is payble to bearer which is expressed to be so payable or on which the only or last indorsement is an indorsement in blank.

A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. 

Maturity means the date on which a bill of exchange falls due for payment. The date of maturity is to be calculated in respect of bills which are payable after a specified time. In arriving at the maturity date three days, known as days of grace, must be added to the date on which the period of credit expires instrument is payable. Here, the cheque is payable after three mgonths and addin the three days grace which makes the maturity date to be 31st August 2019 + 3 months + 3 days i.e. 3rd December, 2019.

If the day of maturity falls on a public holiday, the instrument is payable on the next preceding business day. he expression “Public Holiday” includes Sundays and any other day declared by the Central Government, by notification in the Official Gazette, to be a public holiday. 

In a promissory note or bill of exchange the expressions "at sight" and "on presentment" means on demand. The expression "after sight" means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.In both the situations the payment cannot be demanded unless it is presented before the banker.

The types of Negotiable instruments are largely determined based upon the scope of definition given to negotiable instruments and specification of the instruments legally recognized as negotiable in that country’s law. A time instrument is payable at a definite future time and the event is certain to happen. For instance, an instrument payable 3 months after date is payable 3 months after the date written on its face. 

Ambiguous Instruments is defined in Section 17 of Negotiable instruments Act, 1881. Ambiguous Instrument is an instrument, which in form is such that it may either be treated by holder as a note or as a bill.

Quasi Negotiable Instruments are those Instruments which can be transferred by endorsement and delivery but the transferee does not get a better title that of the transferor. Therefore they cannot be classified as negotiable Instruments and hence the negotiable Instruments act is not applicable to them. It includes government promissory notes, railway receipts, bills of lading, dividend warrants and share warrants.