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Evolution and Revolution of Negotiable Instruments As Facilitators for Trade and Commerce & 10 Years Taking Forward

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Evolution and Revolution of Negotiable Instruments As Facilitators for Trade and Commerce & 10 Years Taking Forward Evolution and Revolution of Negotiable Instruments as Facilitators for Trade and Commerce & 10 Years taking forward MET LEAGUES OF COLLEGES MASTER IN MANAGEMENT STUDIES Semester II Division (B) A paper submitted under the partial fulfillment for the subject LEGAL ASPECTS OF BUSINESS Under the Guidance of Prof. Anant Amdekar Batch: 2014-2016 GROUP NO: 4 SR.N GROUP MEMBER ROLL NO O 1. Chintan Mhatre 82 2. Vinay Mhatre 84 3. Sumedh Munje 86 4. Abhiskek Nagdeve 88 5. Aadya Naik 90 6. Prachiti Niwate 92 7. Tushar Oswal 94 8. Riddhi Palkar 96 9. Vivek Pange 98 10. Amit Paratwar 100 1 PROJECT CONTENTS CHAPTER SCHEME. Sr.No. Topic Page No. A. CHAPTER I. Introduction to Negotiable Instruments 1. Meaning 2. Need and features for Negotiable Instruments. B. CHAPTER II. Evolution of Negotiable Instruments 1. History 2. World Economy & World Market with respect to Economy & Growth of Commerce C. CHAPTER III. The Negotiable Instrument Act, 1881 1. Meaning under SECTION 13 2. Reserve Bank of India Act, 1934 SECTIONS 31 and 32 3. Essentials under SECTIONS 118 and 119 4. History of the Act 5. Modern Era and Amendments D. CHAPTER IV. Types of Negotiable Instruments 1. Hundis Meaning and Parties involved Requisites of a Hundi Decoding a Hundi Types of Hundis Dishonor of Hundi 2. Promissory Note under SECTION 4 Meaning and Parties involved Requisites of a Promissory Note Decoding a Promissory Note Types of Promissory Notes Dishonor of Promissory Notes under SECTION 93 3. Bills of Exchange under SECTION 5 Meaning and Parties involved 2 Requisites of Bills of Exchange. Decoding a Bills of Exchange Types and Classification of Bills of Exchange Dishonor of Bill of Exchange 4. Cheques under SECTION 6 Meaning and Parties involved Requisites of Cheque Decoding a Cheque Types of Cheques & Cheque Crossing Dishonor of Cheques under SECTION 138 Cheque Forgery E. CHAPTER V. Revolution in Negotiable Instruments and Global Trade 1. Current trends in Payment Structure 2. Payment Systems in India 3. Comparison between India and Australia on bases of Negotiable Instruments 4. Changing face of Trade and Commerce F. CHAPTER VI. Primary Research On Scope Of Negotiable Instruments 1. Preliminary Research Analysis 2. Research Methodology and Interpretation Database 3. Interview with Allahabad Bank Manager 4. Statistical Data on Disposal and Pendency of Negotiable Instruments G. CHAPTER VII. 1. Conclusion: 10 Years Going Forward 2. Suggestions: Social networking & Negotiable Instruments 3. Recommendations: Future Prospects on Transactions H. CASE STUDIES INTRODUCTION TO NEGOTIABLE INSTRUMENTS MEANING 3 Exchange of goods and services has always been the basis of every business activity. Goods are bought and sold for cash as well as on credit. All these transactions require flow of cash either immediately or after a certain time. In modern business, large number of transactions involving huge sums of money takes place every day. It is quite inconvenient as well as risky for either party to make and receive payments in cash. Therefore, it is a common practice for businessmen to make use of certain documents as means of making payment. Some of these documents are called negotiable instruments. Today the world as a whole has been the CENTRE OF COMMERCE because this exchange is not only between individuals but also between people and nations. This naturally implies the existence of certain surplus of wealth and certain provision for communication. Both of which are essential for growth of commerce. Unless there is a surplus of wealth and provision for communication, commerce cannot grow. Increase in Globalization led to the EVOLUTION of negotiable instruments which further REVOLUTIONZED with the course of time, acting as a FACILITATOR to trade and commerce and with the advent of technology in transactions, it’s become a modernized concept Negotiable Instruments are moreover a document of title which clearly explains the rights towards the payment of money or a security for money which is transferable by delivery either by custom or by legislation. The use of Negotiable Instrument is mainly to facilitate payment for exports and imports of trade. Because money is promised to be paid, the instrument itself can be used by the holder in due course as a store of value. The instrument may be transferred to a third party; it is the holder of the instrument who will ultimately get paid by the payer on the instrument. The rapid growth of technology has revolutionized the world with computer, which is used in every field of profession. This has reduced the use of negotiable instrument and in future it may decline more. Even though the electronic revolution has got more advantages it may be considered as the next step because the world needs time to get used to it. Example 1: If Chintan issues a cheque worth Rs. 15,000/ - in favor of Vinay, then Vinay can claim Rs. 15,000/- from the bank, or he can transfer it to Sumedh to meet any business obligation, 4 like paying back a loan that he might have taken from Sumedh. Once he does it, Sumedh gets a right to Rs. 15,000/- and he can transfer it to Abhiskek, if required. Such transfers may continue till the payment is finally made to somebody. In the above examples, we find that there are certain documents used for payment in business transactions and are transferred freely from one person to another. Such documents are called Negotiable Instruments. Thus, we can say negotiable instrument is a transferable document, where negotiable means transferable and instrument means document. To elaborate it further, an instrument, as mentioned here, is a document used as a means for making some payment and it is negotiable i.e., its ownership can be easily transferred. The term ‘Negotiable Instrument’ is made up of two parts, ‘Negotiable’ and ‘Instrument’. The word, ‘negotiable’ means being transferable (from one person to another), and the word ‘instrument’ signifies ‘any written document’ through which a right is created in favor of some person. Thus, the term ‘Negotiable Instrument’ signifies any ‘document, necessarily in writing’, through which the rights, vested in one person, could be transferred in favor of another person, of course, in accordance with the provisions of the Negotiable Instruments Act, 1881 NEED FOR NEGOTIABLE INSTRUMENTS Negotiable instruments such as Hundi, Promissory Notes, Bills of Exchange and Cheques are playing a vital role in today's boosting trade and commerce. One of the reasons behind the expansion of trade and commerce so rapidly are because of the negotiable instruments. In trade the transactions are now becoming much depending on the negotiable 5 instruments. Wherein commerce also the negotiable instruments are helping us in the following ways. Helpful in Dealing Business on Credit bases Imagine how it is possible to get the business products for resale purpose without the use of money. This is happening just because of the negotiable instruments. Further suppose that, you want to do a business of computers but you do not have the money to purchase the computers for resale purpose. And also if you do not have any other resource to get the money for purchase you can still purchase the products for your business purpose with the help of the negotiable instruments. Negotiable instruments such as promissory note and specially the bills of exchange are specially made for this purpose so business can happen on credit bases which is usually the styles nowadays. Cash Free Asset Due to the negotiable instruments it is became so easy to make payments through negotiable instruments such as Cheques so that the use of cash is not their because most of the times when you are taking cash with you anywhere it is not felt secure that because the cash may be stolen by any one. The law relating to negotiable instruments is the law of the commercial world which was enacted to facilitate the activities in trade and commerce making provision of giving sanctity to the instruments of credit which could be deemed to be convertible into money and easily passable from one person to another. Instant receipts and payments of the dealings and transactions We don’t need to wait for days to get money from the bank and from the other places but instead of it we just have to pay in the form of negotiable instrument such as cheques etc. so that the people to whom we have to pay would receive that money. FEATURES OF NEGOTIABLE INSTRUMENTS 1) Free Transferability The instrument are freely transferable, i.e. the title to the ownership of the instrument could be transferred, from one person to any other person, without any restrictions. Such transfer of the title could take place by way of mere delivery, in case of bearer instrument and 6 by endorsement with its delivery. Usually, when we transfer any property to somebody, we are required to make a transfer deed, get it registered, pay stamp duty, etc. But, such formalities are not required while transferring a negotiable instrument. Example 2: Aadya draws a bearer cheque in favour of Prachiti but, instead of delivering it to her, keeps it in the drawer of her table. However, in the absence of Aadya, Prachiti picks up the cheque from Aadya’s drawer. This will not amount to a valid transfer of the title to the cheque, drawn in favour of Prachiti, even though it is made payable to the bearer. 2) Holder’s Title to be Free from Defects It means that a person who receives a negotiable instrument has a clear and undisputable title to the instrument. However, the title of the receiver will be absolute, only if he has got the instrument in good faith and for a consideration.
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