Negotiable Instrument Act Revision | CA Foundation 2024 | CA Deepika Rathi

Ultimate CA・2 minutes read

A live class for children teaches the Negotiable Instruments Act, including a revision and practice sessions, aiming to boost confidence. The session covers negotiable instruments like promissory notes, bills of exchange, and checks, detailing their characteristics and validity requirements.

Insights

  • Negotiable instruments include promissory notes, bills of exchange, and checks, each with specific requirements for validity and execution.
  • Understanding the distinction between a holder and a holder in due course is crucial, as the latter holds more power in recovering amounts and can fill in missing details on incomplete instruments.
  • The negotiation process, delivery, and endorsement play vital roles in handling negotiable instruments, with different rules and implications for order and bearer instruments, emphasizing the importance of clarity in instrument language.

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Recent questions

  • What is a negotiable instrument?

    A negotiable instrument is freely transferable and acquired in good faith and for value. It must have a title free from defects for ownership and can be in the form of promissory notes, bills of exchange, or checks.

  • How long is the session on the Negotiable Instruments Act?

    The session on the Negotiable Instruments Act will last around one and a half to two hours, including a revision for those who have already studied the topic.

  • What is the purpose of the 20-day free batch?

    The 20-day free batch aims to cover the Negotiable Instruments Act and related topics to boost confidence through extensive practice for the participants.

  • What are the three types of negotiable instruments?

    The three types of negotiable instruments are promissory notes, bills of exchange, and checks, each with specific characteristics and requirements for validity.

  • How can a promissory note be valid?

    A promissory note must involve two parties, the maker and the payee, with the maker's signature being essential for validity. It should contain an unconditional promise to pay a specific amount after a set period, with clear details of the payee and amount to be paid.

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Summary

00:00

"Children's Live Class on Negotiable Instruments"

  • The class is live for children to learn about the Negotiable Instruments Act.
  • The session will include a revision for those who have already studied the topic.
  • The class promises to make the complex topic understandable and easy to attempt.
  • The session will last around one and a half to two hours.
  • A 20-day free batch will cover the Negotiable Instruments Act and related topics.
  • The batch aims to boost confidence through extensive practice.
  • A negotiable instrument is defined as freely transferable and acquired in good faith and for value.
  • The title of the holder must be free from defects for ownership.
  • There are three types of negotiable instruments: promissory notes, bills of exchange, and checks.
  • A negotiable instrument must contain an unconditional promise and order to pay.

15:28

Essential Elements of a Promissory Note

  • A sold goods to B, who was unable to pay immediately.
  • B decided to create a promissory note promising to pay A a sum of Rupees 10000 after three months.
  • The promissory note signifies B's commitment to pay A a specific amount after a set period.
  • The promissory note involves two parties, the maker (B) and the payee (A).
  • The promissory note must be signed by the maker to be valid.
  • The promissory note ensures that the promised amount is certain and clearly stated.
  • The promissory note must have a stamp of the same value as the promised amount.
  • An unconditional promise in the promissory note is essential for its validity.
  • The promissory note should clearly state the payee and the amount to be paid.
  • Understanding the characteristics of a promissory note is crucial for its proper execution and validity.

29:45

"Bill of Exchange: Parties, Payment, Acceptance"

  • A sum of Rs. 10,000 is to be paid by A to B after a specified period of months.
  • The bill of exchange involves an unconditional order from the drawer to the payee.
  • The order in a bill of exchange is unconditional and involves a promise to pay a certain sum of money.
  • The bill of exchange includes three parties: the drawer, the drawee, and the payee.
  • The drawer is the one who issues the bill of exchange, while the drawee is the one who is directed to pay.
  • The payee is the one who receives the money specified in the bill of exchange.
  • The bill of exchange must be signed by the drawer and accepted by the drawee to be valid.
  • In the case of a promissory note, acceptance is not required, but in a bill of exchange, it is necessary.
  • A check is a form of bill of exchange that is payable on demand, allowing the payee to receive the money at any time.
  • The check involves three parties: the drawer (who issues the check), the drawee (the bank on which the check is drawn), and the payee (the recipient of the money).

45:23

Bank Checks: From Creation to Destruction

  • A bank check is always drawn on a bank.
  • Tejaswi is a party at the bank who will receive the money.
  • Deepika is the first party on the check.
  • The check is made on the bank.
  • The bank becomes dry when the money is withdrawn.
  • Tejasvi becomes the recipient of the money.
  • The check is always payable on demand at the bank.
  • Electronic images of trunk weighted checks are used for settlement.
  • Checks are sent electronically to RBI for processing.
  • Access Bank destroys physical checks and sends electronic images to RBI.

01:01:08

Understanding Order and Bearer Instruments in Finance

  • Order instrument explained to children, emphasizing the importance of understanding the concept.
  • Clarification on the meaning of order instrument, highlighting the significance of the name written on it.
  • Explanation of bearer instrument, detailing the implications of the name being blank or filled.
  • Differentiation between order and bearer instruments, focusing on the last endorsement and the recipient of payment.
  • Elaboration on the concept of endorsement, emphasizing the significance of the name written on the promissory note.
  • Detailed explanation of inland instruments, stressing the necessity of being made in India and drawn on an Indian resident.
  • Examples provided to illustrate the distinction between inland and foreign instruments based on their origin and drawee.
  • Introduction to ambiguous instruments, defining them as instruments with confusing language that can be interpreted as either a bill of exchange or a promissory note.
  • Explanation of how the holder of an ambiguous instrument can determine its nature and treat it accordingly.
  • Emphasis on the importance of clarity in instrument language and the holder's discretion in determining its classification.

01:15:17

"Negotiable Instruments: Holder vs. Holder in Due Course"

  • A bill of exchange is a negotiable instrument that can be confusing if not clearly written.
  • The holder of the bill must accept it for it to be considered valid.
  • An example is given to explain the concept of a bill of exchange to children.
  • The bill of exchange involves selling goods and transferring the instrument to different parties.
  • An incomplete bill of exchange lacks crucial details like the amount to be paid.
  • Becoming a holder in due course requires acquiring the instrument in good faith and before maturity.
  • The holder in due course has more power than a regular holder in recovering amounts.
  • The amount on an incomplete instrument can be filled in by the holder in due course.
  • The stamp on the instrument determines the amount that can be filled in by the holder.
  • Understanding the difference between a holder and a holder in due course is essential for handling negotiable instruments.

01:29:28

Understanding Negotiable Instruments: Holder vs. Holder

  • The difference between holder and Holder in due course is crucial in understanding liability in instruments.
  • If you are a holder, you will receive the same amount you intend to sign for.
  • The concept of bearer instruments and negotiation is explained in detail.
  • Actual delivery and constructive delivery are essential in negotiating instruments.
  • Endorsement and delivery are necessary for order instruments.
  • Legal representatives are crucial in case of the endorser's death before delivery.
  • Negotiation by delivery is applicable to promissory notes, bills of exchange, and checks payable to bearer.
  • Conditional endorsement and negotiation by endorsement require both endorsement and delivery.
  • Section 47 states that promissory notes, bills of exchange, and checks payable to bearer are negotiable by delivery.
  • Understanding the negotiation process and the importance of delivery is vital in handling negotiable instruments.

01:43:47

Check Bounce Law: Timelines and Consequences

  • Tejashwi must send a written notice to Deepika within 30 days of learning that a check has been dishonored.
  • Deepika, upon receiving the notice, has 15 days to make the payment to Tejashwi.
  • Failure to pay within the stipulated 15 days may lead to imprisonment for up to two years and a possible fine.
  • Section 138 is applicable when a check bounces, and the drawer must prove the reason for issuing the check.
  • The court presumes that a bounced check was issued to discharge a liability, placing the burden of proof on the drawer.
  • Section 139 of the law always assumes that a bounced check indicates the drawer's responsibility to pay, unless proven otherwise.
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