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Sale of Goods Act & Negotiable Instruments Act

Group 10
Shamik Mukherjee (129278007) Suvajyoti Bhattacharjee (129278078) Sachin Chavare (129278104) Sorabh Gambhir (129278108) Nikhil Bansal (129278110)

Introduction
• The law relating to sale of goods is contained in the Sale
of Goods Act, 1930 • It has to be read as part of the Indian Contract Act, 1872

• Came into force on 1st July, 1930
• Initially, this was part of Indian Contract Act • Later these sections in Contract Act were deleted, and separate Sale of Goods Act was passed in 1930 • It is complimentary to Contract Act

the contract is called a sale • Where the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled. all the conditions are fulfilled subject to which the property in the goods is to be transferred . the contract is called an agreement to sell • An agreement to sell becomes a sale when the time elapses.Section 4 – Sale and Agreement to Sale • Contract of sale of goods  the seller transfers or agrees to transfer the property in goods to the buyer for a price • A contract of sale may be absolute or conditional • Where under a contract of sale the property in the goods is transferred from the seller to the buyer.

Section 4 – Sale and Agreement to Sale Examples: • A agrees to buy a haystack from B on B‘s land with liberty to come on B‘s land to take it away ▫ This is a sale and B cannot revoke the licence given to A to woo on his land • Agreement for sale of a quantity of nitrate of soda to arrive at a certain ship ▫ This is an agreement to sell at a future date subject to the double condition of the arrival of the ship with the specified cargo on board • A customer who picks up goods in a self-service shop is merely offering to buy them and the sale is not complete until they are paid for .

Essentials of a contract of sale of goods • Bilateral contract • Transfer of property • Goods • Price or money consideration • All essential elements of a valid contract must be present in a contract of sale .

and belongs on his bankruptcy to his trusty in bankruptcy ▫ if they are destroyed the loss will. in the absence of excess agreement.Sale and Agreement to Sale • An agreement to sell. so that they may be taken in execution of his debts. . ▫ the property in the goods which forms subject matter of the contract remains in the seller. is a contract simply. have to be borne by him ▫ a breach by either party of the agreement will normally only give the other party a right to sue for damages • The term ‗contract of sale‘ includes both actual sales and agreement for sale. which is also called an executive contract of sale.

Basic requirements for contract of Sale • Offer and acceptance • Legally enforceable agreement • Mutual consent • Parties competent to contract • Free consent • Lawful object • Consideration .etc .

Earnest • The conclusion of a contract of sale is sometimes marked by the giving of earnest • Earnest whether given in money or not must be something of value really given by the buyer and kept by the seller … A mere symbolic ceremony such as one party drawing a coin across the other‘s hand will not do • When a deposit in the nature of earnest is paid for the same of immovable property in India. a vendor by whose default the sale goes off must return the sum so paid. but if the default is the purchasers the purchaser must loose it .

Later the buyer asked for further time which the seller refused to give. The Buyer was held entitled to recover in an action of trover.Section 11 Stipulation as to Time • Unless a different intention appears from the terms of the contract. stipulation as to time of payment are not deemed to be of the essence of a contract of sale • Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract Examples • Sale of some stacks of oak on the sellers ground. ( Martin Dale V/s. The seller on the expiration of 12 weeks demanded the price which the buyer failed to pay. The buyer later tendered the price. upon the terms that they might remain there for four months and the buyer should pay within 12 weeks of the contract. but the seller refused to accept it and subsequently resold the stacks. Smith 1841) . and said that as the buyer had not paid he should not have the stacks.

the failure by the buyer to pay on the appointed day does not as a rule. treat the contract as at an end and refuse to allow the buyer to have the goods. if before such resale the buyer tenders the price.Stipulation as to Time of Payment • As punctual payment does not go to the whole consideration of the sale. entitle the seller to treat the contract as repudiated. though he may be entitled to withhold delivery until the price is paid and to resell the goods if the buyer does not pay or tender the price within a reasonable time • Consequently. . and a subsequent resale by him will be tortious • The time cannot be taken to be the essence of the contract in case where the contract itself does not stipulate the time for payment of the price. even though it be on a date after the date name in the contract the seller cannot. in the absence of a stipulation to the contrary.

generally speaking. be of the essence of the contract. act or event is prima facie exclusive of the day. though it might be if he was ordering court dress for the purpose of attending a court on a particular day • But in the case of commercial contracts. act or event and inclusive of the day of performance. a promise by the tailor that he shall have it by a certain date would not. the computation of the time of performance from a particular date. although occasionally stipulations as to time may not be of the essence. the usual rule is that they are • In contracts of sales of goods.Stipulations as to time of performance of other terms • If a man orders a suit of clothes. although this presumption may be displaced by a contrary intention appearing from the contract and its surrounding circumstances .

A stipulation may be a condition. though called a warranty in the contract. 4. the breach of which gives rise to a right to treat the contract as repudiated.Section 12. Condition and Warranty 1. A warranty is a stipulation collateral to the main purpose of the contract. 3. 2. A stipulation in a contract of sale with reference to goods which are subject thereof may be a condition or a warranty. the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. . A condition is a stipulation essential to the main purpose of the contract.

failing which means a total failure of the performance Condition & Warranty Express Condition Express Warranty • Auxiliary promises or undertakings of which the breach is not intended to avoid the contract. and ‗warranty‘ and draws a distinction between the two • Essential condition. Condition and Warranty • An additional definition or interpretation • Uses the words ‗condition‘. but only to give a remedy in damages .Section 12.

but did not put it into expressed Implied words Condition & Warranty Puff • A vague and extravagant statement so preposterous in its nature that nobody could believe that anyone was misled by .Section 12. give rise to an action for damages. Condition and Warranty • An affirmation as regards the goods the untruth of which will not. that the parties intended to add such a stipulation to their contract. Represent though it may enable the other party to rescind the contract ation • Inferred from all the circumstances of the case. in the absence of fraud.

expressed or implied to that effect Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law. Where a contract of sale is not severable and the buyer has accepted a goods or part thereof. 1. or where the contract is for specific goods.Section 13 : When condition to be treated as warranty. 2. 3. there is a term of a contract. the breach of any condition to be fulfilled by the seller can only be treated as s breach of warranty and not as ground for rejecting the goods and treating the contract as repudiated unless. the property in which has passed to the buyer. Where a contract of sale is subject to any condition to be fulfilled by the seller. the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty an not as a ground for treating the contract as repudiate. . by reason of impossibility or otherwise.

. no property in the goods is transferred to the buyer unless and until the goods are ascertained Transfer of property Property cannot pass until the goods are identified Part of a specific whole Property and risk Identification of goods 1.Transfer of Property as Between Seller and Buyer Section 18 – Goods must be ascertained • Goods must be ascertained: where there is contract for the sale of unascertained goods. 2. 3. 5. 4.

Section 18 – Goods must be ascertained Transfer of property • When the transfer of the property in the goods to the buyer has been affected Identification of goods • ‗Individuality of the thing to be delivered‘ should be established Part of a specific whole • Ascertainment of the goods depends on being severed. sufficient to identify the goods . weighed or measured or some other process Property and risk • The risk usually passes with the property. but may pass independently of it Identification of goods • The property shall pass on the happening of some specified event.

Property passes when intended to pass Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Intention of the parties 3. 1.Section 19. the conduct of the parties and circumstances of the case. 3. the roles contained in section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 2. Principles for determining whether the property is transferred 2. Ascertained goods . Unless a different intention appears. For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract. 1.

Section 19. Property passes when intended to pass Whether the property is transferred • When it appears that the goods are specific or ascertained. so that it is possible for the property to pass to the buyer. it becomes necessary to determine whether it has actually passed Intention of the parties • The governing principle should be to find out what is the intention of the parties Ascertained goods • ‗Ascertained goods‘ means ‗goods identified in accordance with the agreement after the time a contract of sale is made‘ .

the hay to be allowed to remain on the seller‘s land until the 1st May: no hay to be cut until the price was paid. The property in the haystack passed on the making of the contract and on the stack being destroyed by fire. the property in the goods passes to the buyer when the contract is made.Section 20 Specific goods in a deliverable state • Where there is an unconditional contract for the sale of specific goods in a deliverable state. or both. Baxter (1827) . the buyer must bear the loss Tarling Vs. Examples • Sale on the 4th January of a haystack on the seller‘s land at the price of £145 to the paid on the 4th February. is postponed. and it is immaterial whether the time of payment of or the time of delivery of goods.

The buyer must bear the loss of the oil which had been put into the casks. or the remainder are filled. Some of the casks are filled in the presence of the buyer. but before any are removed. Minett (1089) . the property does not pass until such thing is done and the buyer has notice thereof.Section 21 Specific goods to be put into a deliverable state • Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state. • Example Sale of the whole contents of a cistern of oil. the seller that of the remainder . the oil to be put into casks by the seller and then taken away by the buyer.Rugg Vs. fire destroys the whole of the oil.

but the seller is bound to weigh.Section 22 : Specific goods in a deliverable state . . the property does not pass until such act or thing is done and the buyer has notice thereof. when the seller has to do anything thereto in order to ascertain price : • Where there is a contract for the sale of specific goods in a deliverable state. test or do some other act or thing with reference to the goods for the purpose of ascertaining the price. measure.

containing 5 dozen in each bale. but before anything more was done a flood carried away the remainder. Before the seller had done this the bales were destroyed by fire. Sale of a stack of bark at a certain price per ton. the bark to be weighed by the seller‘s and buyer‘s agents. Zagury vs Furnell(1809) . Sale of 289 specified bales of goatskin. The loss of this fell on the seller. it was the sellers duty to see whether the bales contain the number specified in the contract. The loss fell on the seller. Part was weighed and taken away.Section 22 Examples 1. at a certain price per dozen. By the usage of the trade. Simmons Vs Swift (1826) 2.

Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract assent of the buyer or by the buyer with the assent of the seller. he is deemed to have unconditionally appropriated the goods to the contract.Section 23 : Sale of unascertained goods and appropriation. and does not reserve the right of disposal. and may be given either before or after the appropriation made. Delivery to the carrier . the property in the goods there upon passed to the buyer.Where in pursuance of the contract the seller delivers the goods to the buyer or to the carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer. . 1. Such assent may be expressed or implied. 2.

The seller fills four hogsheads which the buyer takes away. Sale of 20 hogsheads of sugar out of a larger quantity. The property in the liquor does not pass to the purchaser. The property has passed to the buyer. Subsequently the seller fills sixteen more hogsheads. 2. Mr A contracts to sell to Mr B a certain quantity of liquor out of a big cask containing a much larger quantity. and informs the buyer of this asking him to come and take them away. The buyer promises to do so.Section 23 : Sale of unascertained goods and appropriation Example 1. . The required quantity is not separated or bottled.

the property therein passes to the buyer • (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction: • (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection. . on the expiration of such time.Section 24 Goods sent on approval or ‘on sale or return’ • When goods are delivered to the buyer on approval or ‗on sale or return‘ or other similar terms. on the expiration of a reasonable time. if no time has been fixed. if a time has been fixed for the return of the goods. and. then.

who loses them. being unable to return the goods.Section 24 Goods sent on approval or ‘on sale or return’ • Examples • The section may be illustrated by the following examples: 1.Goods delivered on sale or return are pledged by the deliveree. Goods delivered on sale or return to the defendant are delivered by him on similar terms to another. The defendant. and the original owner cannot recover the goods from the pledgee. He thereby becomes the buyer of the goods. 2. The latter in turn hands them to a fourth person. must pay for them as if he had actually agreed to become the buyer. .

the goods remain at the seller‘s risk until the property therein is transferred to the buyer. the goods are at the buyer‘s risk whether delivery has been made or not. • Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. . but when the property therein is transferred to the buyer.Section 26 Risk prima facie passes with property • Unless otherwise agreed.

. would amount to a non-acceptance of the goods. Duties of the seller and buyer It shall be the duty of the seller to deliver the goods and of the buyer to accept and pay for them. • There would be breach of the ‗duty to accept‘ when the buyer unjustifiably rejects the goods. from the seller to the buyer in return for the price. in accordance with the terms of the contract of sale. Taking of delivery of the goods is an important aspect of the ‗duty to accept‘ and refusal to do so will constitute rejection of the goods and therefore . • The general rule enunciated in this section follows from the nature of the contract of sale. by which the property in the goods is transferred. or agreed to be transferred.PERFORMANCE OF THE CONTRACT • Section 31.

and the buyer shall be ready and willing to pay the price in exchange for the possession of the goods. the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price. as the buyer owes to the seller the duty to accept and pay for them. . • The seller owes to the buyer as onerous a duty to deliver the goods. delivery of the goods and payment of the price are concurrent conditions.Section 32 Payment and delivery are concurrent conditions : • Unless otherwise agreed. that is to say.

to enable the goods to be procured by the seller. it is not a ‗special promise‘. the seller is guilty of a breach of contract.Section 35 Buyer to apply for delivery • Apart from any express contract. . the seller of the goods is not bound to deliver them until the buyer applies for the delivery • Even if there is an obligation on the part of the seller to inform the buyer when the goods are in a deliverable state. and the buyer gave the notice early in November. was guilty of breach of contract. and the seller having failed to deliver as required by the notice. • When the buyer applies for delivery and the seller then fails to deliver. and after the lapse of a reasonable time. though it may postpone the obligation of the buyer to apply for delivery. the buyer would be entitled and bound to apply for delivery. it was held that by the terms of the contract the buyer had the right to fix the date in November on which the delivery should be made. Illustration: The contract provided for delivery in November on seven day‘s notice from the buyer.

The seller of goods is deemed to be an ‗unpaid seller‘ within the meaning of this Act • (a) when the whole of the price has not been paid or tendered . • (b) when a bill of exchange or other negotiable instrument has been received as conditional payment.Rights of Unpaid Seller against goods • Section 45. ‘Unpaid seller defined • 1. . and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.

Section 46. Unpaid Seller’s rights
• 1. Subject to the provisions of this Act and of and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law— • (a) a lien on the goods for the price while he is in possession of them; • (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them ; • (c) a right of resale as limited by this Act. • 2. Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

Section 46. Unpaid Seller’s rights
• Example • The section may be illustrated by the following example : • Sale of goods to be delivered by instalments, each instalment to be paid for in cash fourteen days after delivery. During the currency of the contract, the buyer becomes insolvent and the price of one instalment is unpaid. The seller need not make further deliveries unless the price of that instalment is paid and cash is paid against delivery of subsequent instalments.

Section 47. Seller’s lien
• 1. Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely : • (a) Where the goods have been sold without any stipulation as to credit ; • (b) where the goods have been sold on credit, but the term of credit has expired ; • (c) where the buyer becomes insolvent. • 2. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.

does not lose his lien by reason only that he has obtained a decree for the price of the goods. The unpaid seller of goods loses his lien thereon— • (a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of goods.Section 49. • (b) when the buyer or his agent lawfully obtains possession of the goods. Termination of lien • 1. having a lien thereon. • (c) by waiver thereof. . • 2. The unpaid seller of goods.

Valpy Vs. Held. that the sellers had lost their lien by delivering the goods to the shipping agents. and were put on board a ship by those agents. While they were still in the possession of the sellers for that purpose. they were re-landed and sent back to the sellers for the purpose of re-packing. Thereupon the sellers refused to deliver them to the buyer‘s trustee in bankruptcy except upon payment of the price. Termination of lien • Examples • Goods were sold and sent by the sellers at the request of the buyer to shipping agents of the buyer. and their refusal to deliver the goods to the trustee was wrongful.Section 49. the buyer became insolvent. Subsequently. Gibson 1847 .

Section 50 Right of stoppage in transit • buyer become insolvent • unpaid seller already sent goods has the right of stopping them in transit • he may resume possession of the goods until payment recieved • can only be exercised by a seller or a person in a position analogous to that of a seller .

.Section 52. How stoppage to transit is effected • Taking actual possession • Notice given to person in possession of goods • Notice given to principle by the exercise of reasonable diligence so as he can in time to prevent a deliver to the buyer. • Possessor of goods shall redeliver the goods • The expenses of such re-delivery shall be borne by the seller.

Section 52. . How stoppage to transit is effected • Unpaid seller stops goods at a port short of their destination • He is liable for the freight ▫ port where the goods were actually landed ▫ also to the port of their ultimate destination.

if buyer disagrees sale is voidable . Auction sale • each lot is subject of a separate contract of sale • Announcement of completion by the fall of the hammer or in other customary manner • Until such announcement bidder may retract his bid • If sale is not notified to be subject to a right to bid on behalf of the seller • It shall not be lawful for the seller to bid himself or to employ any person to bid at such sale • If the auctioneer knowingly take any bid from the seller or any such person sale may be treated as fraudulent by the buyer • Sale may by notified to be subject to a reserved or upset price • If seller makes use of pretended bidding to raise the price.Section 64.

got made from carpenter for a one-time unclassified payment  On court‘s discretion . carpenter gave separate bill for material and services  Work contract and Sale of goods ▫ X wanted a particular type of table.Work contracts or sale of goods • Illustrations ▫ X went to a carpenter shop and purchased the table  Sale ▫ X brought raw material and paid carpenter to make table  Work and service ▫ X got table made from carpenter.

Contract of sale • The seller divests himself of all the proprietary right in the thing sold • Main objective is the transfer of the property • The work and labour end in anything that can properly become the subject of sale • If contract is primarily for supply of materials at a price and the work or service rendered is incidental to the execution of the contract .

Contract of work and labour • If the main object is not mere transfer of property the contract is of work and labour • If the materials have no separate identity as a commercial article and it is only by bestowing work and labour upon them • Example making of windows or wooden doors that provides them the commercial identity .

Ltd. • For manufacturing wagons • The sales tax authorities taxed the transaction. taking it as sale of wagons • The company contended that it was a contract of work and labour . • Indian Railways commissioned the central India machinery manufacturing Co. Ltd. Central India Machinery Manufacturing Co.Union of India v.

nor the value of the skill and labour as compared with the value of material is conclusive. • But.Judgement: Contract for sale of goods • Neither the ownership of material. the bulk of the material used in the construction belongs to the manufacturer which is sold at a price .

Masonry work to be done by party according to our instructions • No responsibility of non-delivery of goods or late despatch for reasons beyond our control .Vanguard Rolling Shutters v. Commissioner of sales tax • Business: fabricating and installing of customized iron shutter • Sales tax authorities took transaction as sale of iron shutters. Responsibility ceases when same leaves our premises. • Material will be carried to the site of work at cost of the party. • No responsibility of structural damage. • Contract brief • Full payment against delivery prior to despatch.

Judgement: Contract of work • The Process involves fabrication of a rolling shutter and its actual fixing with masonry work • What was created at the end was a firmly fixed immovable property. without reference to material and work. • The price charged was a lump-sum amount. .

• Y orders the Tropicana juice from his room ▫ Only first case is of sale of goods . He informs waiter about his room number and goes away. When he finishes the drink. • Y is a person staying in the hotel.Does hotel sell food? • A person walks up to the counter of a restaurant. waiter brings the bill with the entry ‗Tropicana juice 200ml‘. He comes to restaurant and orders the listed Tropicana juice. requests for a 200 ml of Tropicana juice in a tetra pack. pays money and goes out. Waiter brings him a glass and tetra pack. • A person goes to a restaurant and orders from price list for ‗Tropicana juice 200ml‘. The person pays bill and goes out.

State of H.P. Associated Hotels of India Ltd. • The hotel provides the services for stay and also runs a restaurant. • So should the sales tax be applied on food sold? . • Separate bill for stay and for restaurant was generated on the basis of price menu. v. M/s.

• The intention or primary objective of the contract is accounted for to determine • A number of amenities are provided during stay but are not sale • The transaction essentially is one of service and meals is one of them .Judgement: Contract not for sale of goods • Mere transfer of tangible things does not mean sale proceeds.

Governor of Delhi • Northern India caterers provide food and drinks to its customers by its restaurant business • The case is regarding the sale of food and beverages from a restaurant should be considered as a sale of goods. .Northern India Caterers v. or as a service. Lt.

Judgement: Contract not for sale of goods • Hotelier is similar to a inn keeper • Innkeeper does not lease his rooms • Does not sell the food he supplies to the guest and it is his duty to supply such food as the guest need • Guest has no right to take the food from the table • The title to food never passes as a result of an ordinary transaction of supplying food to a guest. .

4.United Breweries Ltd. State of Andhra Pradesh • Dispute with regards the crates and bottles in which the beer was supplied • UB: beer was sold bottles and creates were not sold • The supplies were made to selling agents who deposited security of Rs. V. 5.80 for the bottles and Rs.00 for the crates • Deposits were returned to the selling agents • High Court: bottle and crates were sold along with beer and had to be included in the sale price .

Supreme Court Judgement • The intention was to get back the bottles from the consumers through the customers • UB would get back the empties and these will be filled up again for further supplies • This recycling of bottles will keep down the costs thus increase the sales • Deposits merely ensured the return of the bottles and the crates • The intention of UB or the retailer does not appear to have been to sell the beer bottles .

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Introduction • It is a commercial law • Common law developed and further written down • Negotiable Instrument (Section 13) ▫ Promissory Notes ▫ Bills of Exchange ▫ Cheques .

Concept of “payable” • Payable to order • Payable to bearer • Payable on demand .

or to the order of.Promissory Note • • • • • • • Section 4 Instrument in writing Not a bank-note or a currency-note Unconditional undertaking Signed by the maker To pay a certain sum of money To. issued by RBI . or to the bearer • ―I promise to pay B Rs 500 on demand‖ A (signed) • Currency-note: Promissory note payable to bearer. a certain person.

Identify the Promissory Note(s) • ―I owe B an amount of Rs 1000‖ • ―I promise to pay B Rs 1000 and all the other sums which shall be due to him‖ • ―I promise to pay B Rs 1000 after my wedding‖ • ―I promise to pay the bearer the sum of one thousand rupees‖ .

payable to bearer. on demand ▫ Exception: Cheque drawn on a banker .Bill of Exchange • • • • • • • • Section 5 Instrument in writing Unconditional undertaking Signed by the maker Directing a person to pay Certain sum of money To a person or the bearer Only RBI or the Central Government can draw or accept a bill of exchange.

B (signed) • To: A Pay to C a sum of Rs one thousand. on demand.Identify the bill(s) of exchange • To: A I owe C a sum of Rs one thousand. B (signed) • To: A Pay to bearer a sum of Rs one thousand. B (signed) .

Cheque • Section 6 • Bill of exchange drawn on a specified banker • Not expressed to be payable otherwise than on demand .

Nuances • Section 18 ▫ Amount different in words and figures ▫ Amount in words • Section 43 ▫ No obligation of payment without consideration .

Drawee – bank (Section 7) Holder (Section 8) Holder in due course – consideration (Section 9) Negotiation – transfer (Section 14) .maker.Terminology • • • • Drawer .

drawer. acceptor.Indorsement • Maker or holder signs on a negotiable instrument for the purpose of negotiation (Section 15) • Types of indorsement (Section 16) ▫ Indorsement in blank – to bearer ▫ Indorsement in full – to order – payee • Indorser becomes the drawer for all the subsequent holders • Maker. until the instrument is paid up . and indorser are all liable to a holder in due course.

Crossing of cheques • Sections 123-131 • Open cheque – payable at counter – cash • Crossed cheque – payable through collecting banker ▫ ▫ ▫ ▫ Parallel lines A/c Payee Not Negotiable Pay Cash .

Dishonoured Cheque • • • • • Sections 91-98 Banks refusal to pay Instructions by drawer – countermand Insufficient funds Signature .

Noting • Section 99 • Dishonour of promissory note or bill of exchange by non-acceptance or non-payment • Holder gets a note on it from a notary public • Certificate – Protest (Section 100) .

fine up to twice the amount.Bouncing of cheques • Section 138 • Dishonour of cheque due to insufficient funds • Offence ▫ Issue of cheque to settle certain liabilities ▫ Cheque presented to the bank within 6 months and cheque dishonoured due to lack of sufficient funds • Notice to drawer within 30 days • 15 days to make the payment • Failure to pay – 2 years of punishment. or both .

Case: Kingfisher Airlines Ltd. • Cheques issued by Kingfisher to the following have bounced ▫ GMR Hyderabad International Airport Limited (GHIAL) ▫ Chatrapati Shivaji International Airport (CSIA) ▫ Indira Gandhi International Airport • All these cases have been filed under Section 138 • Local Hyderabad court has issued non-bailable warrants against the airline chairman Vijay Mallya and three executives (Oct 13. 2012) .

Securnderabad v. Secunderabad for realisation • Accused had insufficient funds and had directed stoppage of payment • The accused‘s contest that the stoppage of payment was instructed was not upheld • Judgement in favour of complainant . Hyderabad Bank.Case: M/s. M/s. Indian Technologists & Engineers • Supreme Court of India • Cheque presented by complainant on Nov 28. 1990. Sarojini Devi Road. Electronics Trade and Technology Development Corporation Limited. through their Bankers M/s.

Thank You .