LEGAL ASPECTS OF BUSINESS.

SESSION-5

BILL OF EXCHANGE-SEC 5:ACC. TO SEC 5 OF THE NEGOTIABLE

INSTRUMENT ACT, 1881, “ 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.” THUS, A BILL IS AN ORDER BY A CREDITOR UPON HIS DEBTOR REQUIRING HIM TO PAY THE MONEY TO THE PERSON SPECIFIED.

ESSENTIAL CHARACTERISTICS OF A BILL OF EXCHANGE:1) IT SHOULD BE IN WRITING2) EXPRESS TO PAY3) DEFINITE AND UNCONDITIONAL

PROMISE4) SIGNED BY THE MAKER5) ORDER TO PAY CERTAIN SUM6) ORDERTO PAY MONEY ONLY7) CERTAIN THREE PARTIES.

PARTIES TO A BILL OF EXCHANGE:1) DRAWER: THE PERSON WHO DRAWS A

BILL OF EXCHANGE (ISSUER).2) DRAWEE: THE PERSON ON WHOM THE

BILL OF EXCHANGE IS DRAWN IS CALLED THE DRAWEE.

HE IS ALSO CALLED THE ACCEPTOR OF THE BILL.

3) PAYEE: THE PERSON NAMED IN THE INSTRUMENT TO WHOM OR TO WHOSE ORDER THE MONEY IS DIRECTED TO BE PAID BY THE INSTRUMENT, IS CALLED THE PAYEE(RECEIVER).

SPECIMEN OF A BILL OF EXCHANGE:BHARAT SELLS GOODS TO RAHUL FOR

RS.10,000 TO BE PAID 3 MONTHS AFTER DATE AND BUYS FROM RAJAT FOR RS.10,000 ON SIMILAR TERMS. IF BHARAT DIRECTS RAHUL TO PAY THE SUM OF RS.10,000 TO RAJAT , THIS ORDER WILL BE A BILL OF EXCHANGE.

SPECIMEN OF BILL OF EXCHANGE:RS.10,000/-ONLY. DATE:

THREE MONTHS AFTER DATE PAY TO RAJAT(PAYEE) OR ORDER THE SUM OF RUPEES TN THOUSAND, FOR VALUE RECEIVED.

ACCEPTEDRAHUL (DRAWEE)TO ,RAHUL,ADDRESS.

BHARAT(DRAWER)

CHEQUE – SEC 6:A CHEQUE IS A BILL OF EXCHANGE WHICH IS

DRAWN UPON A SPECIFIED BANKER, AND PAYABLE ON DEMAND.

ESSENTAIL CHARACTERISTICS OF A CHEQUE:1) IT SHOULD BE IN WRITING2) EXPRESS TO PAY3) DEFINITE AND UNCONDITIONAL PROMISE4) SIGNED BY THE DRAWER5) ORDER TO PAY CERTAIN SUM6) ORDER TO PAY MONEY ONLY7) CERTAIN THREE PARTIES.

8) DRAWN UPON A SPECIFIED BANKER9) PAYABLE ON DEMAND.PARTIES TO A CHEQUE:1)DRAWER2) BANKER3) PAYEE.

CROSSING OF A CHEQUE-SEC123 TO 131A.A CHEQUE IS SAID TO BE CROSSED WHEN

IT BEARS ACROSS ITS FACE TWO PARALLEL TRANSVERSE LINES WHICH ARE USUALLY DRAWN ON THE LEFTHAND TOP CORNER OF THE CHEQUE.

PURPOSE OF CROSSING: IS TO DIRECT THE DRAWEE(BANKER) TO PAY THE AMOUNT OF CHEQUE ONLY TO A BANKER SO THAT THE PARTY WHO RECEIVES THE PAYMENT OF THE CHEQUE CAN BE EASILY TRACED.

TYPES OF CROSSING:GENERAL CROSSING:A CHEQUE IS SAID TO BE CROSSED

GENERALLY WHERE IT BEARS ACROSS ITS FACE AN ADDITION OF

1) TWO PARALLEL TRANSVERSE LINES.2) THE WORDS ‘AND COMPANY’ BETWEEN

TWO PARALLEL LINES.3) THE WORDS ‘NOT NEGOTIABLE’

BETWEEN TWO PARALLEL TRANSVERSE LINES.

SPECIAL CROSSING: A CHEQUE IS SAID TO BE CROSSED SPECIALLY WHERE IT BEARS ACROSS ITS FACE IN ADDITION OF:

THE NAME OF THE BANKER IS WRITTEN .

BOUNCING OR DISHONOUR OF CHEQUES:A CHEQUE IS SAID TO BE BOUNCED OR

DISHONOURED BY NON-PAYMENT WHEN THE DRAWEE OF THE CHEQUE MAKES DEFAULT IN PAYMENT UPON BEING REQUIRED TO PAY THE SAME.

LIABILITY OF DRAWEE ON DISHONOUR OF A CHEQUE SEC-31: THE DRAWEE MUST COMPENSATE THE DRAWER FOR ANY LOSS OR DAMAGE CAUSED BY NON-PAYMENT IF THE FOLLOWING THREE CONDITIONS ARE FULFILLED:

1) IF THE DRAWEE HAS SUFFICIENT FUNDS OF THE DRAWER IN HIS FUNDS

2) IF THE FUNDS ARE PROPERLY APPLICABLE TO SUCH PAYMENT

3) IF THE DRAWEE IS DULY REQUIRED TO PAY THE CHEQUE.

LIABILITY OF A DRAWER ON DISHONOUR OF A CHEQUE –SEC-138.ON DISHONOUR OF A CHEQUE, THE

DRAWER IS PUNISHABLE WITH IMPRISONMENT FOR A TERM NOT EXCEEDING ONE YEAR OR WITH FINE NOT EXCEEDING TWICE THE AMOUNT OF A CHEQUE OR WITH BOTH .

REASONS COULD BE INSUFFICIENT CHEQUES, INVALIDITY OF CHEQUE TC.

A BANKER MUST REFUSE TO HONOUR A CUSTOMERS CHEQUE IN THE FOLLOWING CASES:

STOP PAYMENTGARNISHEE ORDERDEATHINSOLVENCYINSANITYDEFECT IN TITLE

LOSS OF CHEQUEMATERIAL ALTERATIOMDIFFERENT SIGNATURENOTICE OF CLOSURE.

‘HOLDER ‘ SEC-8:A PERSON IS CALLED HOLDER OF A

NEGOTIABLE INSTRUMENT IF HE SATISFIES THE FOLLOWING TWO CONDITIONS:

1) HE MUST BE ENTITLED TO THE POSSESSION OF THE INSTRUMENT ON HIS OWN NAME AND

2) HE MUST BE ENTITLED TO RECEIVE /RECOVER THE AMOUNT DUE ON THE INSTRUMENTS.

HOLDER IN DUE COURSE-SEC-9A PERSON IS SAID TO BE A HOLDER IN

DUE COURSE IF HE SATISFIES THE FOLLOWING CONDITIONS:

HE MUST BE A HOLDERIT SHOULD BE FOR A VALID

CONSIDERATION.HE MUST HAVE OBTAINED IT BEFORE ITS

MATURITY.HE MUST HAVE OBTAINED IT IN GOOD

FAITH.

MATURITY OF A PROMISSORY NOTE OR A BILL OF EXCHANGE IS THE DATE ON WHICH IT FALLS DUE (SEC-22).

DAYS OF GRACE (SEC-22) EVERY INSTRUMENT OTHER THAN A CHEQUE IS ENTITLED TO THREE DAYS OF GRACE.

COMPANIES ACT-1956.MEANING AND NATURE OF A COMPANY:A COMPANY IMPLIES AN ASSOCIATION OF

PERSONS FOR SOME COMMON OBJECTS.A COMPANY UNDER THE ACTIS DEFINED

TO MEAN A “ COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT,1956 OR UNDER ANY OF THE PREVIOUS COMPANY LAW”.

CHARACTERISTICS OF A COMPANY:1) INCORPORATE ASSOCIATION: THE

COMPANY MUST BE INCORPORATED OR REGISTERED UNDER THE ACT.

2) ARTIFICIAL LEGAL ENTITY/PERSON:THE COMPANY BEING A JURISTIC PERSON,

DOES NOT POSSESS THE BODY OF A NATURAL BEING.IT EXISTS ONLY IN CONTEMPLATION OF LAW.

3) A SEPARATE LEGAL ENTITY:SOLOMAN VS SOLOMANCO.LTD.

4) PERPUTUAL SUCCESSION:5) LIMITED LIABILITY6) TRANSFERABLE SHARES7) COMMON SEAL8)SEPARATE PROPERTY9) CAPACITY TO SUE AND BEING SUED.