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Negotiable Instruments
Negotiable Instruments
• The word negotiable means ‘transferable by delivery,’ and the word instrument means ‘a
written document by which a right is created in favor of some person.’
• Thus, the term “negotiable instrument” literally means ‘a written document transferable by
delivery.’
• Section 13 of Negotiable Instrument Act defines- “a negotiable instrument means a
promissory note, bill of exchange or cheque payable either to order or to bearer.”
• Section 13(2)- “A negotiable instrument may be made payable to two or more payees jointly,
or it may be made payable in the alternative to one of two, or one or some of several
payees.”
Negotiable Instruments to be
payable as:
M/S Meters & Instruments Private Limited & Anr. V. Kanchan mehta (2017)
• Kanchan Mehta files complaint under section 138 against the plaintiff on grounds that the
latter who was supposed to pay an amount to the former on monthly basis according to an
existing agreement between the two of them had failed to do so.
• The company provided cheque to discharge the legal liabilities. The cheque returned back
for the presence of insufficient funds.
• Later when director of company issued demand draft, it bounced.
• Supreme court gave verdict to compensate the complainant with consent from both parties.
CASE STUDY 2
M/S Dalmia Cement (Bharat) Limited v. M/S Galaxy Traders and Agencies Limited
• Dishonouring of cheque because of which the notice was issued.
• By the timed of complaint, the period of filing complaint was expired. And this happened
twice.
• Supreme court, with facts of violation of section 138, gave verdict that it is legal right of the
person whose payment has not been issued should get the payment.
CASE STUDY 3
• Canara Bank v. Canara Sales Corporation (1987)
• The respondent had a current account in the plaintiff’s bank which was eventually found to
be linked with fraudulent activities for the cheques which were encashed and didn’t bear the
initials of managing director, the respondents.
• A suit was filed by the respondents to compensate with the amount that has been lost.
• Court highlighted that negligence was from both the parties, creditors as well as debtor. But
the negligence weighted more for bankers.
• The court ruled that the company is eligible for compensation and dismissed the case.
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