MET INSTITUTE OF MANAGEMENT

Evolution and Revolution of Negotiable Instruments

as Facilitators of Trade & Commerce & 10 years
taking Forward

Under the guidance of Prof. Anant Amdekar

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 EMBA

SEMESTER 1

GROUP NO - 4

SR NAME ROLL N0
No

1 Monika Pednekar 20

2 Rahul Pandya 22

3 Riddhi Vora 24

4 Sagar Zade 26

5 Shweta Pednekar 28

6 Sunny Darekar 30

7 Tanvi Sansare 32

8 Chanchal Mundhara 36

9 Dwayne McCarron 38

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 TABLE OF CONTENT

Sr. No. Topics Page

No.

1. INTRODUCTION TO NEGOTIABLE INSTRUMENTS 5

 MEANING 5

 NEED FOR NEGOTIABLE INSTRUMENTS 6

 OBJECTIVES 7

 FEATURES OF NEGOTIABLE INSTRUMENTS 12

 CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS 14

 PRESUMTIONS AS TO NEGOTIABLE NSTRUMENT

2. EVOLUTION OF NEGOTIABLE INSTRUMENT 22

 HISTORY 23

 WORLD ECONOMY AND WORLD MARKET WITH RESPECT TO 24

ECONOMY & GROWTH OF COMMERCE

3. 31

THE NEGOTIABLE INSTRUMENTS ACT, 1881

 MEANING 35

36

 ESSENTIALS UNDER SECTION 118 AND 119 37

38
4. TYPES AND FEATURES OF NEGOTIABLE INSTRUMENTS

38
1. PROMISSORY NOTES
39
 FEATURES OF PROMISSORY NOTES
40
 PARTIES TO A PROMISSORY NOTE
41
 DISHONOR OF PROMISSORY NOTE
42

43
2. BILLS OF EXCHANGE
44
 FEATURES OF BILLS OF EXCHANGE
45
 PARTIES TO BILLS OF EXCHANGE

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 46

 TYPES OF BILLS OF EXCHANGE 47

 CLASSIFICATON OF BILLS OF EXCHANGE 48

 DISCOUNTING AND ENDORSEMENT OF BILLS OF EXCHANGE 49

 DISHONOR OF BILLS OF EXCHANGE 50

 ACCOMODATION OF BILLS OF EXCHANGE 50

51

3. CHEQUE 52

 PARTIES INVOLVED IN CHEQUE 53

 REQUISITES OF CHEQUE 54

 FEATURES OF CHEQUE 56

 TYPES OF CHEQUE 56

 DECODING THE CHEQUE 57

 DISHONOR OF CHEQUE 57

 CHEQUE FORGERY 57

58

5. DIFFERENCES BETWEEN NEGOTIABLE INSTRUMENTS 60

60

6. REVOLUTION OF NEGOTIABLE INSTRUMENTS

7. STATISTICAL DATA

8. CASE STUDIES

9. CONCLUSION

 RECOMMENDATIONS

 BIBLIOGRAPHY

 REFERENCES

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 INTRODUCTION TO NEGOTIABLE INSTRUMENTS
Today the world 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.

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.

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.

MEANING OF NEGOTIABLE INSTRUMENTS

According to Section 13 (a) of the Act, “Negotiable instrument means a promissory note, bill of exchange or cheque
payable either to order or to bearer, whether the word “order” or “ bearer ” appear on the instrument or not.”

In the words of Justice, Willis, “A negotiable instrument is one, the property in which is acquired by anyone who takes it
bonafide and for value notwithstanding any defects of the title in the person from whom he took it”.

Thus, the term, negotiable instrument means a written document which creates a right in favour of some person and
which is freely transferable. Although the Act mentions only these three instruments (such as a promissory note, a bill of
exchange and cheque), it does not exclude the possibility of adding any other instrument which satisfies the following two
conditions of negotiability:

the instrument should be freely transferable (by delivery or by endorsement. and delivery) by the custom of the trade; and

the person who obtains it in good faith and for value should get it free from all defects and be entitled to recover the
money of the instrument in his own name.

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As such, documents like share warrants payable to bearer, debentures payable to bearer and dividend warrants are
negotiable instruments. But the money orders and postal orders, deposit receipts, share certificates, bill of lading, dock
warrant, etc. are not negotiable instruments. Although they are transferable by delivery and endorsements, yet they are not
able to give better title to the bonafide transferee for value than what the transferor has.

Example 1:

If Sneha issues a cheque worth Rs. 15,000/ - in favour of Vinay, then Vinay can claim Rs. 15,000/- from the bank, or he
can transfer it to Sumedh to meet any business obligation, 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 Abhishek, 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.

Need for negotiable instruments:

1. Negotiable instruments such as cheques, bills of exchange, promissory notes etc. are playing a vital role in today's
boosting trade and commerce. Negotiable such as promissory note and specially the bills of exchange are specially made
for this purpose. Bills of exchange help many people who do not have the money to spend money as capital in their
business.

2. There were the different stages of evolution of business. However, it was seen that the growth was very slow, and the
system was very complex. There were different instruments used to purchase different commodities in different stages.
The system of exchange was such that it led to confusion and various complexities. To avoid such confusion and to
operate the business activities smoothly negotiable instruments were introduced.

3. Due to the negotiable instruments it became very easy and secure to make payments through cheques.

Objectives:
I. To study the evolution and revolution of negotiable instruments act.
II. To study negotiable instruments act.
III. To study types of negotiable instruments.
IV. To study the differences between the different negotiable instruments.
V. To study the impact of negotiable instruments act 10 years in future.
VI. To get a better understanding of negotiable instruments act through case studies.

FEATURES OF NEGOTIABLE INSTRUMENTS

Free Transferability:

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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 7 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:

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.

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. Also, the
receiver should have no knowledge of the previous holder having any defect in his title. Such a person is known as
‘Holder in due Course’.

Example:

Tushar issued a bearer cheque payable to Riddhi. It was stolen from Riddhi by a person, who passed it on to Vivek. If
Vivek received it in good faith and for value and without knowledge of cheque having been stolen, he will be entitled to
receive the amount of the cheque. Here, Vivek will be considered as ‘Holder in due Course’.

Holder in Due Course can Sue in his own name:

The holder in due course is entitled to sue in his own name in regard to the instrument, on the ground that he is holding it
in consideration of some values, i.e. having his own stake involved in the instrument.

Example:

In the same above example, Vivek is Holder in Due Course so he can sue the drawer who is Tushar in case he denies the
payment for consideration. The most important point here is the instrument should be bearer in nature.

Negotiable instrument must be in writing and must bear signature of its maker:

All negotiable instruments must be in writing and signed in accordance with the rules of instrument. Writing includes
handwriting, typing, computer printout and engraving, etc. Without the signature of the drawer or the maker, the
instrument shall not be a valid one.

The payee must be a certain person:

It means that the person in whose favor the instrument is made must be named or described with reasonable certainty. The
term ‘person’ includes individual, body corporate, trade unions, even secretary, director or chairman of an institution. The
payee can also be more than one person.

I. Promise for payment for a certain sum of money only:

In every negotiable instrument there must be an unconditional order or promise for payment. The instrument must
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 involve payment of a certain sum of money only and nothing else. For example, one cannot make a promissory
note on assets, securities, or goods.
II. The time of payment must be certain:
It means that the instrument must be payable at a time which is certain to arrive. If the time is mentioned as
‘when convenient’ it is not a negotiable instrument. However, if the time of payment is linked to the death of a
person, it is nevertheless a negotiable instrument as death is certain, though the time thereof is not. For instance,
if Amit issues a cheque dated 1st April 2015 and the current date is 1st December 2015, then that’s not a valid
negotiable instrument.
III. Delivery of the instrument is essential:
Any negotiable instrument like a cheque or a promissory note is not complete till it is delivered to its payee. For
instance, you may issue a cheque in your brother’s name, but it is not a negotiable instrument till it is given to
your brother.

CLASSIFICATION OF NEGOTIABLE INSTRUMENTS

BEARER INSTRUMENT: Promissory note, a bill of exchange or a cheque is payable to bearer when it is expressed to
be so payable, or the last endorsement on the instrument is an endorsement in blank. A person who is a holder of a bearer
instrument can obtain the payment of the instrument

ORDER INSTRUMENTS: A promissory note, a bill of exchange or a cheque is payable to order in which it is
expressed to be so payable; or which is expressed to be payable to a particular person and it does not contain any words
prohibiting transfer or indicating any intention that it shall not be transferable

INLAND INSRTUMENTS: A promissory note, a bill of exchange or a cheque drawn or made in India, and made
payable for any person who is resident in India shall be deemed to be an inland instrument. Since a promissory note is not
drawn on any person, an inland promissory note is one which is made payable in India. Subject to this exception, an
inland instrument is one which is either:

 Drawn and made payable in India, or

 Drawn in India upon some persons resident therein, even though it is made payable in a foreign country.
FOREIGN INSTRUMENTS: An instrument which is not an inland instrument is defined as a foreign instrument. To
understand it in a broader way, we need to understand its essentials. The essentials of a foreign instrument include the
following:

(i) it must be drawn outside India and should be made payable outside or inside India or

(ii) it must be drawn in India and should be made payable outside India and drawn on a person resident outside India.

DEMAND INSTRUMENTS: A promissory note or a bill of exchange in which no time for payment is specified is an
instrument payable on demand.
TIME INSTRUMENTS: Time instruments are those instruments which are payable at some time in the near future.
Therefore, a promissory note or a bill of exchange payable after a fixed period, or after sight, or on a specified day, or on
the happening of an event which is certain to happen, is known as a time instrument.

PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENT

Sections 118 and 119 of the Negotiable Instrument Act lay down certain presumptions which the court presumes in
regard to negotiable instruments. In other words, these presumptions need not be proved as they are presumed to

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exist in every negotiable instrument. Until the contrary is proved the following presumptions shall be made in case
of all negotiable instruments:
1) Consideration:
It shall be presumed that every negotiable instrument was made drawn, accepted or endorsed for
consideration. It is presumed that, consideration is present in every negotiable instrument until the contrary
is presumed. The presumption of consideration, however may be rebutted by proof that the instrument had
been obtained from, its lawful owner by means of fraud or undue influence.
2) Date:
Where a negotiable instrument is dated, the presumption is that it has been made or drawn on such date,
unless the contrary is proved.
3) Time of acceptance:
Unless the contrary is proved, every accepted bill of exchange is presumed to have been accepted within a
reasonable time after its issue and before its maturity. This presumption only applies when the acceptance
is not dated; if the acceptance bears a date, it will prima facie be taken as evidence of the date on which it
was made.
4) Time of transfer:
Unless the contrary is presumed it shall be presumed that every transfer of a negotiable instrument was
made before its maturity.
5) Order of endorsement:
Until the contrary is proved it shall be presumed that the endorsements appearing upon a negotiable
instrument were made in the order in which they appear thereon.
6) Stamp:
Unless the contrary is proved, it shall be presumed that a lost promissory note, bill of exchange or cheque
was duly stamped.
7) Holder in due course:
Until the contrary is proved, it shall be presumed that the holder of a negotiable instrument is the holder in
due course. Every holder of a negotiable instrument is presumed to have paid consideration for it and to
have taken it in good faith. But if the instrument was obtained from its lawful owner by means of an
offence or fraud, the holder has to prove that he is a holder in due course.
8) Proof of protest:
Section 119 lays down that in a suit upon an instrument which has been dishonoured, the court shall on
proof of the protest, presume the fact of dishonour, unless and until such fact is disproved.

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[10]
 EVOLUTION OF PAYMENT SYSTEMS IN INDIA

1. The earliest payment instruments used in India were coins, which were either punch marked or cast in silver
and copper.
2. In ancient India, loan deed forms were also used. They were called rnapatraor rnalekhya. They contained
details such as the name of the debtor and the creditor, the amount of loan, the rate of interest, the condition
of repayment and the time of repayment. The deed was witnessed by a person of respectable means and
endorsed by the loan-deed writer.
3. In the Buddhist period loan deeds called inapannawere used. In this era merchants in large towns gave
letters of credit to one another. Promissory notes were also used widely.
4. In the Mauryan period, the bill of exchange was used. It was called adesha. It was an order that a banker
had to pay to a third person.
5. In the Mughal period, the deeds were called dastawezand were of two types: dastawez-e-indultalabwhich
was payable on demand and dastawez-e-miadiwhich was payable after a stipulated time. In the this period,
foreign travellers used the bills of exchange in the then great shopping centres. The Indian bankers also
issued bills of exchange on foreign countries, mainly for financing sea-borne trade. Another instrument used
was the Pay order. It was called Barattesand was similar to the present day drafts or cheques.
6. In the twelfth Century, the Hundis was introduced..
7. Hundis were used
· to transfer funds from one place to another
· to borrow money
· as bills of exchange
8. Hundis were of various kinds as follows:
 Darshani Hundi: This was a demand bill of exchange, payable on presentation according to the usage and
custom of the place. This was mainly of four types.
 Sah-jog– This was a hundi transferable by endorsement and delivery but payable only to a Sah or to his
order. A Sah was a respectable and responsible person, a man of worth and substance who was known in
the market.
 Dhanni-jog– This was a demand bill of exchange, payable only to the dhanni, i.e. the payee. This hundi
was not negotiable
 Firman-jog- Hundis came into existence during the Mughal period. Firman is a Persian word meaning
order anSd therefore, firman-jog hundis were payable to the order of the person named. These hundis could
be negotiated with a simple or conditional endorsement.
 Dekhavanhar- Hundi was a bearer demand bill of exchange, payable to the person presenting it to the
drawee. Thus it corresponded to a bearer cheque.
 MuddatiHundi : This is a bill that is payable after stipulated time or on a given date or on a determinable
future date or on the happening of a certain stipulated event. The most important type of muddatihundi was
the jokhamihundi, which was a documentary bill of exchange corresponding to the present day bill of

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 lading i.e. The bill of lading is a legal document serves as a receipt of shipment when the good is safely
delivered to the predetermined destination
9. The princely states of India had their own distinct coins. An example of this was the Arcot Rupee coin
struck by the Nawab of Arcot in the Madras Presidency.
10. By 1740, the Europeans coined this rupee, and the coins came to be known as English, French and Dutch
arcots.
11. In 1770, the first public bank-The bank of Hindustan introduced the cheque.
12. In the 18th century paper money, originated with the note issues of private banks as well as semi-
government banks. Amongst the earliest issues were those by the Bank of Hindustan, the General Bank in
Bengal and Behar, and the Bengal Bank. Later, three Presidency Banks were established and the job of
issuing notes was taken over by them.
13. In 1827 the British introduced the Post. These were Inland Promissory notes issued by the bank on a
distant place. They were mainly used by European businessmen for purpose of sending money to someone at a
distance.
14. In 1835, the East India Company introduced the Company's Rupee to bring about uniformity of coinage over
British India.
15. In 1833, the Bank of Bengal started granting loans against the security of Company's paper, plate, jewels or
goods of non-perishable goods.
16. From 1839 the Bank of Bengal began the buying and selling bills of exchange.
17. In 1861, The Paper Currency Act gave the Government of India the monopoly to Issue Notes, thus bringing
an end to note issues of private and Presidency Banks.
18. In 1881, the Negotiable Instruments Act (NI Act) was passed, formalizing the usage and characteristics of
instruments like the cheque, the bill of exchange and promissory note. The NI Act provided a legal
framework for non-cash paper payment instruments in India

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 EVOLUTION OF NEGOTIABLE INSTRUMENT
HISTORY

Humans have paid for things throughout history from barters to bytes, financial exchanges have evolved with
civilization. Just a few centuries ago, mankind paid and bartered goods with slabs of meat and baskets of berries. In
the digital age, we now have convenience of virtual payments which allow us the freedom to pay for goods almost
anywhere. So, let’s have a look at the timeline

Pasroral Stage
Barter Exchange(Earliest forms of civilization)

Agricultural Stage
Grain barter(9000-8000 BC) Livestock(8000-6000 BC)

Handicraft Stage
Crude Metal Coins (1000-600 BC)

Guild Stage

Domestic Stage

Factory Stage

Industrial Revolution

Post Great Depression

Pastoral stage:
In primitive society man used things just as they were found in nature. With time, he learned to domesticate
animals and breed them for food and clothing. Since he had to find pastures for his animals, he tended to lead a
wandering life. But in this stage his work served mainly to support only him with his own needs and left very little
surplus available for exchange on a business basis.
Agricultural stage:
In course of time, the nomadic tribes settled permanently at fixed places, built up the huts and shelters for their
residences and began cultivating the land in common. Growing corns, grasses etc. became the main occupation.
Agriculture emerged as the basic feature of economic living of man. He gradually produced more and then started
to exchange it with other commodities. This was known as barter system. Handicraft stage: In this stage
manufacturing was limited to the human efforts to transform raw materials into finished goods. It included candle
and soap making. spinning, weaving, making of clothes and shoes, blacksmithing, leather dressing, carpentry etc.
Guild stage:
A guild is an association of persons following a similar occupation and it is formed to protect and promote the
interest of its members through cooperative endeavours.
Domestic stage:

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A new class entrepreneur emerged as a link between producer and consumer. Now entrepreneur purchased the raw
materials for the purpose of manufacture and sale nut did not do the processing himself. He took the risk of
productions and sale. Out of the proceeds of his undertaking, he paid for the materials and labour. The amount left
was his profit
Factory stage:
In this stage an organized system of production under a single roof came to be identified as a factory. Large scale
operations with the use of mechanized production processes resulted in producing good quality products at cheaper
rates. However, it was greatly influenced not only by its own processes but also by government under which it
operates.
These were the different stages of evolution of business. However, it was noted that the growth was very slow, and
the system was very complex. There were different instruments used to purchase different commodities in different
stages. The system of exchange was such that it led to confusion and various complexities. To avoid such confusion
and to operate the business activities smoothly negotiable instruments were introduced.

World Economy And World Market With Respect To Economy & Growth of Commerce
Commerce reached into the stage of growth when money was evolved as medium of exchange to remove the
limitations of barter. Introduction of money began led to the extension of division of labour and specialization.
People began to produce goods for certain local markets. Thus, division of labour was extended to a locality.
Gradually a separate class of artisans and traders came into existence. They settled down at fixed places which
came to be known as towns. Growth of these towns gave great stimulus to commerce. The size of the market and
the number of commodities exchanged in the market, both increased. Traders from other countries brought luxury
articles, metals and ornaments for sale.
Commerce continued to grow both in volume and space. After the decline of Guild system, a new class of people,
ENTERPRENEUR class, came into existence. This class of people became a real intermediary between the
producers and consumers. Further, growth of commercial enterprise took place. Trade began to assume fixed forms.
Production began to be undertaken for the markets extended for the whole country. Division of labour received
further impetus. Production was divided into several branches and each branch tended to be localized.
Commerce entered another stage of its growth when nations of the world were brought into commercial
relationships through the invisible thread of trade. As a result of the geographical discoveries of the late 15th, 16th
and 17th centuries new trade routes were opened up and commerce grew between nations. Now, in addition to the
local market and the trade extending over the whole area of a single country, commodities came to be sold and
purchased between traders from different countries in the world. This gave rise to an international world market
and to the international trade. Thus, the nations of the world were linked together through the medium of the world
market.

THE NEGOTIABLE INSTRUMENTS ACT, 1881

Negotiable Instruments Act, 1881 is an act dating from the period of British colonial rule in India that is still in
force largely unchanged.

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 Meaning under SECTION 13

‘A negotiable instrument means a promissory note, bill of exchange or cheque, payable either to order or to bearer’.
It may, however, be clarified here that Section 13 does not exclude any other instrument from being treated as a
negotiable instrument, provided, of course, it does have the characteristics of being negotiable.
The above definition clearly states that the act signifies any written document through which a right is created in
favour of some person, through which the rights, vested in one person, could be transferred in favour of another
person, in accordance with the provisions of the Negotiable Instruments Act, 1881.
To understand the meaning of negotiable instruments let us take a few examples of day-today business transactions.
Example
Suppose Divakar, a book publisher has sold books to Navin for Rs 10,000/- on three months credit. To be sure that
Navin will pay the money after three months, Divakar may write an order address
Agreed to Navin that he is to pay after three months, for value of goods received by him, Rs.10,000/- to Divakar or
anyone holding the order and presenting it before him (Navin) for payment. This written document has to be signed
by Navin to show his acceptance of the order. Now, Divakar can hold the document with him for three months and
on the due date can collect the money from Navin. He can also use it for meeting different business transactions.
For instance, after a month, if required, he can borrow money from Sunil for a period of two months and pass on
this document to Sunil. He has to write on the back of the document an instruction to Navin to pay money to Sunil,
and sign it. Now Sunil becomes the owner of this document and he can claim money from Navin on the due date.
Sunil, if required, can further pass on the document to Amit after instructing and signing on the back of the
document. This passing on process may continue further till the final payment is made.

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In the above example, Navin who has bought books worth Rs. 10,000/- can also give an undertaking stating that
after three month he will pay the amount to Divakar. Now Divakar can retain that document with himself till the
end of three months or pass it on to others for meeting certain business obligation (like with Sunil, as discussed
above) before the expiry of that three months’ time period.

Essentials under SECTIONS 118 and 119

1) Consideration: It is assumed that all negotiable instruments are drawn, made, accepted, endorsed,
negotiated, purchased, discounted or transferred for some consideration for value received
2) Money: Negotiable instruments are payable by legal tender money of India. The liabilities of the parties of
Negotiable Instruments are fixed and determined in terms of legal tender money.
3) Regarding Date: Every negotiable instrument must bear the date of its execution or drawing or acceptance
for payment
4) Regarding Acceptance: It is presumed that every time any negotiable instrument is accepted within a
reasonable time after the date appearing thereon, and before the date of its maturity, i.e. due date of
payment.
5) Writing and Signature: Negotiable Instruments must be written and signed by the parties according to the
rules relating to Promissory Notes, Bills of Exchange and Cheques
6) Title: The transferee of a negotiable instrument, when he fulfills certain conditions, is called the holder in
due course. The holder in due course gets a good title to the instrument even in cases where the title of the
transferor is defective.
7) Notice: It is not necessary to give notice of transfer of a negotiable instrument to the party liable to pay.
The transferee can sue in his own name.
8) Evidence: A document which fails to qualify as a negotiable instrument may nevertheless be used as
evidence of the fact of indebtedness.
9) Regarding Dishonour of an Instrument: Where a suit has been filed, involving the dishonour of an
instrument, the Court will, on production of the proof of its having been duly protested, presume that the
negotiable instrument was dishonoured, unless it is proved otherwise.

TYPES AND FEATURES OF NEGOTIABLE INSTRUMENT

Section 13 of the Negotiable Instruments Act states that a negotiable instrument is a promissory note, bill of
exchange or a cheque payable either to order or to bearer. Negotiable instruments recognised by statute are:
1. Promissory notes
Bills of exchange
Cheques.
Negotiable instruments recognised by usage or custom are:
 Hundis
Share warrants
Dividend warrants
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 Bankers draft
Circular notes
Bearer debentures
Debentures of Bombay Port Trust
Railway receipts
Delivery orders.

This list of negotiable instruments is not a closed chapter. With the growth of commerce, new kinds of securities
may claim recognition as negotiable instruments. The courts in India usually follow the practice of English
courts in according the character of negotiability to other instruments.

1. PROMISSORY NOTE

(SECTION 4)

Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as ‘an instrument in writing (not
being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a
certain sum of money only to or to the order of a certain person or to the bearer of the instrument’.

Example:

Suppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make a document stating that
you will pay the money to Ramesh or the bearer on demand. Or you can mention in the document that you would
like to pay the amount after three months. This document, once signed by you, duly stamped and handed over to
Ramesh, becomes a negotiable instrument. Now Ramesh can personally present it before you for payment or give
this document to some other person to collect money on his behalf. He can endorse it in somebody else’s name who
in turn can endorse it further till the final payment is made by you to whosoever presents it before you. This type of
a document is called a Promissory Note

[17]
 FEATURES OF A PROMISSORY NOTE:

The features of a promissory note are:

1. A promissory note must be in writing, duly signed by its maker and properly stamped as per Indian Stamp
Act.

2. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is not enough. For
example, if someone writes ‘I owe Rs. 5000/- to Satya Prakash’, it is not a promissory note.

3. The promise to pay must not be conditional. For example, if it is written ‘I promise to pay Suresh Rs 5,000/-
after my sister’s marriage’, is not a promissory note.

4. It must contain a promise to pay money only. For example, if someone writes ‘I promise to give Suresh a
Maruti car’ it is not a promissory note.

5. The parties to a promissory note, i.e. the maker and the payee must be certain.

6. A promissory note may be payable on demand or after a certain date. For example, if it is written ‘three
months after date I promise to pay Satinder or order a sum of rupees Five Thousand only’ it is a promissory
note.

7. The sum payable mentioned must be certain or capable of being made certain. It means that the sum payable
may be in figures or may be such that it can be calculated.

PARTIES TO A PROMISSORY NOTE:

There are primarily two parties involved in a promissory note. They are

1) Maker or Drawer – the person who makes the note and promises to pay the amount stated therein is
a drawer.

2) The Payee – the person to whom the amount is payable is a payee. In course of transfer of a
promissory note by payee and others, the parties involved may be:

The Endorser – the person who endorses the note in favor of another person.

The Endorsee – the person in whose favor the note is negotiated by endorsement.

[18]
 (Endorsement means transfer of any document or instrument to another person by signing on its back or face
or on a slip of paper attached to it)

DISHONOR OF A PROMISSORY NOTE :

(SECTION 93)

When a promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment, the holder
thereof, or some party thereto who remains liable thereon, must give notice that the instrument has been so
dishonored to all other parties whom the holder seeks to make severally liable thereon, and to some one of several
parties whom he seeks to make jointly liable thereon. Nothing in this section renders it necessary to give notice to
the maker of the dishonored promissory note, or the drawee or acceptor of the dishonored bill of exchange or
cheque.

SPECIMEN OF A PROMISSORY NOTE

Rs. 200000/- Mumbai , 15th October, 2018

6 months after date we promise to pay Surya Electronics or order a sum of fifty thousand with interest at 8
STAMP
percent per annum, value received.

Mr Sunil Shah, Borrower

2. BILL OF EXCHANGE:

(SECTION 5)

[19]
Section 5 of the Negotiable Instruments Act, 1881defines a bill of exchange as ‘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’.

Example:

Suppose Rajiv has given a loan of Rs.10,000 to Sameer, which Sameer has to return. Now, Rajiv also has to give
some money to Tarun. In this case, Rajiv can make a document directing Sameer to make payment up to Rs.10,000
to Tarun on demand or after expiry of a specified period. This document is called a Bill of Exchange, which can be
transferred to some other person’s name by Tarun.

FEATURES OF BILLS OF EXCHANGE :

The various features of a bill of exchange are:

1) A bill must be in writing, duly signed by its drawer, accepted by its drawee and properly stamped as per
Indian Stamp Act.

2) It must contain an order to pay. Words like ‘please pay Rs 5,000/- on demand and oblige’ are not used

3) The order must be unconditional.

4) The order must be to pay money and money alone.

5) The sum payable mentioned must be certain or capable of being made certain.

6) The parties to a bill must be certain.

PARTIES TO A BILLS OF EXCHANGE:

There are three parties involved in a bill of exchange. They are:

1. The Drawer – The person who makes the order for making payment.

2. The Drawee – The person to whom the order to pay is made. He is generally a debtor of the drawer.

3. The Payee – The person to whom the payment is to be made.

The drawer can also draw a bill in his own name thereby he himself becomes the payee. Here the words in the bill
would be Pay to us or order. In a bill where a time period is mentioned, just like the above specimen, is called a
Time Bill. But a bill may be made payable on demand also. This is called a Demand Bill.

[20]
 TYPES OF BILLS OF EXCHANGE
(ON BASIS OF PERIOD)
1) Demand Bills of Exchange:
There is no fixed date for the payment of such bill. They become payable at any time, when they are presented
before payee by the holder.
2) Term Bills of Exchange:
These bills are payable after specified period of time. The period after which these bills become due for payment is
called tenor.
(ON BASIS OF OBJECT)
1) Trade Bills:
These bills are drawn and accepted against the sale and purchase of goods on credit.
These are drawn by the seller (creditor) and accepted by the buyer (debtor).
2) Accommodation Bills:
Such bills do not involve any sale and purchase of goods; rather they are drawn without any consideration. The
purpose of such bills is to help one party or both the parties financially.

CLASSIFICATION OF BILLS OF EXCHANGE:

1) Inland Bill:
These bills are drawn in a country upon person living in the same country or made payable in the same
country. Both drawer and the drawee reside in the same country.
2) Foreign Bills:
These bills are drawn in one country and accepted and payable in another country, e.g. A bill drawn in
England and accepted and payable in India..

DISCOUNTING AND ENDORSEMENT OF BILLS OF EXCHANGE :

Discounting of bill of exchange
If the drawer of the bill does not want to wait till the due date of the bill and is in need of money, he may sell his
bill to a bank at a certain rate of discount. The bill will be endorsed by the drawer with a signed and dated order to
pay the bank. The bank will become the holder and the owner of the bill. After getting the bill, the bank will pay
cash to the drawer equal to the face value less interest or discount at an agreed rate for the number of days it has to
run. This process is known as discounting of a bill of exchange.
Endorsement of bill of exchange:
If the holder of the bill puts his signature on the back of the bill with a view to transfer the property contained in it
(right to receive money from the acceptor), then he becomes endorser, and the person to whom the bill of exchange

[21]
is transferred will become endorsee. This procedure by which a bill is transferred from one person to another
person for the settlement of debts is called "endorsement".
Bill sent to Bank for collection:
If a business has numerous bills he got from various debtors he may send these bills to his banker for collection
purposes. It should be remembered that, this is not discounting of a bill of exchange. The bill is sent for safety and
collection purposes. The bank keeps the bill in its custody till the due date and on the due date; the bank will
present the bill to acceptor. After collecting the amount, the bank transfers the amount to the account of its
customer (by giving credit to his account). The bank charges some nominal fee from the customer for service he
rendered. This is an expense for the customer and revenue for the bank.
DISHONOR OF BILL OF EXCHANGE:
A bill of exchange is said to be dishonoured when its acceptor refuses to pay the amount of the bill to the holder of
the bill on its maturity. The bill then becomes useless and the party from whom it has been received will be liable to
pay for the amount. It is very important to know that, when a bill is dishonoured, in whose possession it was.
Because when a bill is dishonoured, all the parties involved are affected and books of accounts of all the parties
have to be adjusted.
ACCOMODATION OF BILLS OF EXCHANGE:
Generally, a bill of exchange is drawn by a creditor on his debtor to settle a trade debt. A creditor is a person who
has sold goods on credit basis and a debtor is a person who has purchased goods on credit basis. Thus, a bill which
is drawn by a creditor and accepted by debtor is known as a trade bill of exchange. On the other hand, a bill of
exchange which is drawn to oblige a friend or to give him a temporary assistance or to provide him a loan or to
accommodate one or more parties is called an "accommodation bill of exchange". Such a bill is drawn and accepted
without any sale and purchase of goods.

SPECIMEN OF BILLS OF EXCHANGE:

Bill of Exchange

Mr. Sachin Mishra

52, Sun City Park, Universal Road,

Mumbai – 400005

October 15 , 2018

Rs. 150000/-

[22]
Six months after date, pay to Mr. Raj Thakur a sum of Rupees One Lakh and Fifty Thousand , for value received.

To

Mr. Rahul Gaitonde

786, Arena Colony , Mumbai – 400060

Mr. Sachin Mishra

DIFFERENCES BETWEEN NEGOTIABLE INSTRUMENTS

(A) Difference between Bill of Exchange & Promissory Notes

PROMISSORY NOTE BILL OF EXCHANGE

Parties: There are two parties- maker or promisor There are three parties- drawer, drawee, and payee
and payee or promise

Nature of payment: It contains an unconditional It contains an unconditional order to pay

promise to pay

Acceptance: It is payable by a person who makes it. It is payable by the other person directed. Therefore,
Therefore, no acceptance is necessary. it should be presented to the drawee for acceptance. It
may be accepted conditionally

Notice: In case the note is dishonoured, no notice of Notice of dishonor must be given to all parties liable
[23]
dishonour is necessary to the maker. on the bill.

Maker as payee: A note cannot be made payable to The drawer and the payee may be one and the same
the maker person.

Protest: No protest is required A foreign bill must be protested for dishonour when
such protest is required by the law of the place where
it is drawn.

Liability: The maker of the promissory note is Maker of bill of exchange is secondarily and
primarily and liable to payee. Promisor stands in the conditionally liable to payee.
immediate relation to the payee.

Payable to bearer: Cannot be made payable to Can be made payable to bearer, though it cannot be
bearer [SEC. 31(2) of the Reserve Bank of India, made payable to bearer on demand. [ SEC. 31(1) of
1934] the Reserve Bank of India]

Exemption: Provisions relating to presentment for This provision apply.

acceptance, acceptance for supra protest do not apply

(B) Difference between Cheque and Bill of Exchange

CHEQUE BILLS OF EXCHANGE

DRAWEE: Only a banker can be a drawee Anyone can be a drawee, including a banker

ACCEPTANCE: A cheque requires no acceptance It must be presented for acceptance. Drawee is liable only
after his acceptance

PAYMENT: Payable on demand without any days of A bill is normally entitled to three days of grace after
grace maturity, unless payable on demand

[24]
PRESENTMENT: If not presented to the banker for Drawer is discharged, if bill is not presented for payment
payment, it does not discharge the drawer unless he to the acceptor.
suffers injury or damages

NOTICE: In case of dishonour no notice of dishonour is Notice of dishonour is to be given to all the parties, liable
necessary. to pay

CROSSING: A cheque many be crossed Bill of exchange can never be crossed

STAMP: Cheque requires no stamp Bill of exchange must be properly stamped

COUNTERMANDING PAYMENT: Payment of cheque Payment of bill cannot be countermanded by the drawer.
may be countermanded by the drawer

NOTING AND PROTESTING: A cheque is not A bill may be noted or protested for dishonour
required to be noted and protested for dishonour

PAYABLE TO BEAR ON DEMAND: It can be drawn It cannot be drawn so

so

[25]
 CHEQUE
(SECTION 6)
“Any general statement is like a cheque drawn on a bank. Its value depends on what is there to meet it”-
Ezra Pound
Meaning under SECTION 6
A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on
demand, but it is invariably drawn as a demand bill of exchange only, herein the drawee is always a specific branch
of a specified bank and the drawer is the account holder of the same branch of the bank. It also includes the
electronic image of a truncated cheque, as also a cheque in the electronic form.
1) Cheque in Electronic Form
It means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and
signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or
without biometrics signature) and asymmetric crypto system. Electronic checks can be used to make a
payment for any transaction that a paper check can cover and are governed by the same laws that apply to
paper checks.
2) Cheque in Truncated Form
It means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by
the bank whether paying or receiving payment, immediately on generation of an electronic image for
transmission, substitute in the further physical movement of the cheque in writing. In cheque truncation the
physical movement of a paper cheque issued stops and electronic flow begins while the electronic cheque is
issued electronically, and no paper is involved. In cheque truncation, at some point in the flow of the cheque,
the physical cheque is replaced with an electronic image of the cheque and that image moves further.
Parties involved in Cheque
1) Drawer:
A drawer is a person who issues a cheque, fills the details on the cheque like the name of the payee, date and
amount and signs it thereby ordering the drawee to issue the said amount for the payee
2) Payee:
The payee is a recipient of the given cheque which he will get from the drawee by the order of drawer.
3) Drawee bank:
The drawee will invariably be a bank and bank alone. Alternatively speaking a cheque will invariably be
drawn on a bank and bank only.

EXAMPLE:
Chintan has a savings account in Vijaya Bank and issues a cheque of Rs. 10,000 to Vinay. In this case
Chintan is Drawer, Vinay is Payee, and Drawee is Vijaya Bank.
Requisites of a Cheque.

[26]
 1. Instrument in Writing: A cheque must be writing. It can be written in ink, typed or even printed.
The ink used should not be easily erasable. Overwriting or alteration will make the cheque dishonor.
Oral orders are not considered as cheques.
2. Unconditional Order: In cheque there must contain an order by a depositor (drawer) on its bank
(drawee) for paying money to the holder (payees) and order should be unconditional. A cheque
containing conditional order is dishonored by the bank.
3. Payable on Demand: A cheque when presented for payment must be paid on demand. If cheque is
made payable after the expiry of certain period of times then it will not be a cheque.
4. Certain Sum of Money: Cheque must be for money only and it must be written in words and
figures. If the amount in words and figured will differ from each other or if there will be insufficient
balance in the account then the cheque will be dishonored.
5. Payee must be certain: The payee of the cheque should be certain person i.e. either real person or
artificial person e.g. Joint Stock Company. The name of payee must be written on the cheque or it
can be made payable to bearer.
6. Avoidance of cancellations: There shouldn’t be any cancellations on the negotiable instrument.
Any cancellations found must be rectified by the signature of the drawer. Failure to do so will cause
the instrument to be of no value as it will come under the case of forgery
FEATURES OF A CHEQUE
1) Instrument in Writing:
A cheque must be writing. It can be written in ink, typed or even printed. The ink used should not be easily
erasable. Overwriting or alteration will make the cheque dishonour. Oral orders are not considered as
cheques.
2) Unconditional Order:
In cheque there must contain an order by a depositor (drawer) on its bank (drawee) for paying money to the
holder (payees) and order should be unconditional. A cheque containing conditional order is dishonoured by
the bank.
3) Payable on Demand:
A cheque when presented for payment must be paid on demand. If cheque is made payable after the expiry of
certain period of times, then it will not be a cheque.
4) Certain Sum of Money:
Cheque must be for money only and it must be written in words and figures. If the amount in words and
figured will differ from each other or if there will be insufficient balance in the account then the cheque will
be dishonoured.
5) Payee must be certain:
The payee of the cheque should be certain person i.e. either real person or artificial person e.g. Joint Stock
Company. The name of payee must be written on the cheque or it can be made payable to bearer.
6) Avoidance of cancellations:

[27]
There shouldn’t be any cancellations on the negotiable instrument. Any cancellations found must be rectified
by the signature of the drawer. Failure to do so will cause the instrument to be of no value as it will come
under the case of forgery.

TYPES OF CHEQUES
1) Bearer Cheque
When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a
bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents
it to the bank for payment. However, such cheques are Risky; this is because if such cheques are lost, the
finder of the cheque can collect payment from the bank.

2) Order Cheque
When the word "bearer" appearing on the face of a cheque is cancelled and when in its place the word "or
order" is written on the face of the cheque, the cheque is called an order cheque. Such a cheque is payable to
the person specified therein as the payee, or to any one else to whom it is endorsed (transferred).

3) Uncrossed / Open Cheque

When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". The payment of
such a cheque can be obtained at the counter of the bank. An open cheque may be a bearer cheque or an
order one. The holder of an open cheque can receive payment over the counter at the bank or deposit the
cheque in his own account.

[28]
4) Crossed Cheque
Crossing of cheque means drawing two parallel lines on the face of the cheque with or without additional
words like "& CO." or "Account Payee" or "Not Negotiable". A crossed cheque cannot be encased at the
cash counter of a bank but it can only be credited to the payee's account.

5) Anti-Dated Cheque
If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as "anti-dated
cheque". Such a cheque is valid up to six months from the date.
[29]
6) Post-Dated Cheque
If a cheque bears a date which is yet to come (future date) then it is known as post- dated cheque. A post-
dated cheque cannot be honoured earlier than the date on the cheque.

7) Stale Cheque
If a cheque is presented for payment after six months from the date of the cheque it is called stale cheque. A
stale cheque is not honoured by the bank.

[30]
8) Mutilated cheque
If a cheque is torn into two or more pieces such cheque is Mutilated Cheque. If it presented for payment,
such a cheque the bank will not make payment against such a cheque without getting confirmation of the
drawer. In case, if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may
make payment against such a cheque.

9) E-Cheque
Electronic cheque (e-cheque) is the image of a normal paper cheque generated, written and signed in a secure
system using digital signature and asymmetric crypto system. Simply said an electronic cheque is nothing
more than an ordinary cheque produced on a computer system and instead of signing it in ink, it is signed
using the digital equivalent of ink. After the coming into force of The Negotiable Instruments (Amendment
and Miscellaneous Provisions) Act, 2002, legal recognition has been accorded to e-cheques and they have
been brought at par with the normal cheques. Now, a ‘cheque’ includes an e- cheque.

TYPES OF CHEQUE CROSSING

General Crossing under SECTION 123 & 126

[31]
 Where a cheque bears across its face an addition of the words ‘and Company’ or ‘& Co.”, between two
parallel transverse lines, or simply two parallel transverse lines, either with or without the words ‘not
negotiable’, such crossing is referred to as a ‘General Crossing’.

The example of general crossing are where the following words are written simply or between two parallel
transverse lines
 Blank
 Crossing

The basic type of crossing which converts a bearer cheque to crossed cheque.
 & Co.
Such crossing just means that this cheque can be paid not in cash but only through the credit of any bank account,
that is, to the account of the individual company.
 A/C Payee
It means that the title to the cheque cannot be transferred to anyone else by endorsement and that such cheque can
be paid only by credit to the account of the payee named.
 Not Negotiable
Such crossing does not restrict its transferability in any manner. Such cheque can well be transferred by
endorsement and delivery in the case of an order cheque, and merely by delivery in the case of a bearer cheque.
Such crossing is just by way of a safeguard and any of the endorsement happens to be unauthorized or illegal.

Special Crossing under SECTION 124& 126

A ‘Special Crossing’ bears across the face of the cheque the name of a banker. Drawing of two parallel lines is not
necessary in case of a specially crossed cheque. The purpose of special crossing is to instruct the drawee i.e. the
banker to make the payment of the cheque only it is presented for payment through that particular bank, as
mentioned thereon, and not otherwise. This way the payment of the cheque is made even safer.

[32]
  State Bank of India
Such crossing restricts the payment of the cheque at any of the branch, but only of the specified bank, viz of the
State Bank of India, in the present case.
 State Bank of India A/C Payee
It means the cheque will be credited to the specific account number of the specified person at this specified bank.
Such cheques are the safest mode of payment, ensuing that it can be credited to the account of the specific person
stated (specific) in the cheque

 State Bank of India Not Negotiable

Such crossing does not restrict its transferability in any manner. Such cheque can well be transferred by
endorsement and delivery in the case of an order cheque, and merely by delivery in the case of a bearer cheque.
Such crossing is just by way of a safeguard and any of the endorsement happens to be unauthorized or illegal for
that Particular bank only.
Decoding the Cheque
1) Date line:
Here we enter the date in this space. It's best to enter the current date so that we know when we really wrote
the cheque.
2) Or Bearer / or Order:
The words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a bearer
cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to
the bank for payment. If the words “or bearer” are cancelled, then it becomes an Order Cheque.
3) Payee line:
In this section, we specify who will receive funds from our account. We write the name of the person or
organization that we wish to pay. Only the named payee is allowed to negotiate the cheque.
4) Rupee box:
Here we write the amount in numerical format. This box is sometimes called the "courtesy box" because it
appears on the cheque as a courtesy or convenience. When writing a check, it's best to put the numbers in the
amount box as far to the left as possible.
5) Amount in words:
On this line, we should write the amount of the cheque using words.

[33]
6) Account Number:
It is our account number which makes it easier for the drawee to perform transactions.
7) Signature line:
Here the cheque is signed at the line on the bottom right hand corner.
8) Drawee contact information and logo:
Our bank's name appears on every cheque so that recipients know who to contact. A phone number and
address may be included, or they might just see the bank's logo.
9) IFSC
Indian Financial System Code is an alphanumeric code that uniquely identifies a bank-branch participating
in the two main Electronic Funds Settlement Systems in India: the Real Time Gross Settlement (RTGS) and
the National Electronic Funds Transfer (NEFT) Systems.
10) Real time gross settlement systems (RTGS) are specialist funds transfer systems where transfer of
money or securities takes place from one bank to another on a "real time" and on "gross" basis. Settlement
in "real time" means payment transaction is not subjected to any waiting period.
11) National Electronic Funds Transfer (NEFT) is to establish an electronic funds transfer system to
facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in
the banking sector throughout India, and to relieve the stress on the existing paper based funds transfer and
clearing system.
12) Cheque Number:
The first set of number represents the cheque number. It is a six-digit number.
13) MICR Code
It stands for Magnetic Ink Character Recognition. This number helps a bank to recognize the bank and
branch that issued the cheque. We might think that this can be done just by looking at the cheque, but banks
have to process hundreds of cheques daily. Going through each and every cheque is a cumbersome process.
Instead, the cheques are sorted through a cheque reading machine which uses this number to identify the
bank and branch a cheque belongs to. This makes the process faster.
The MICR number is a nine digit number, which consists of three parts-
A. City Code:
The first three digits represent the city code and are same as the first three digit of the PIN code of that city.
For e.g., a bank in Hyderabad will have first three digits of MICR code as 500 (since PIN code for
Hyderabad starts with 500)
B. Bank Code:
The next three digits represent the bank code. Every bank has a unique code assigned to it.
For e.g., ICICI bank’s code is 229, for HDFC it is 240 and so on.
C. Branch Code:
The last three digits represent the branch code.
14) Bank account Number

[34]
 The third set of six digit numbers represents your account number (It consists of a few digits of your account
number). But if you pick an old cheque book, issued probably before CBS (Core Banking Solution) was
introduced, you won’t find this set of number present.
15) Transaction ID
The last two digits tells whether a cheque is a local cheque our payable at par cheque. 29, 30 and 31
represents payable at par cheque, while 09, 10 and 11 represents local cheque. Payable at par cheque is a
cheque that can be cashed at any branch of the issuing bank, while local cheque can be cashed only at the
issuing branch. So, if you deposit a cheque in your bank, with code 10 written at the bottom of the cheque,
it’ll take a few days for the money to come in your account. However, since most of the branches these days
are CBS (Core Banking Solution) enabled, so the cheques are generally payable at par.

DISHONOR OF CHEQUES
(SECTION 138)
Sections 138 to 142 of the N.I. Act were brought into existence by way of amendment by the Banking, Public
Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988.
Dishonour of cheque for insufficiency, etc., of funds in the account:
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount
of money to another person from out of that account for the discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that
account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by
an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without
prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two
years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless;
1) The cheque has been, presented to the bank within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is earlier
2) The payee or the holder in due course. of the cheque as the case may be, makes a demand for the payment
of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of
the receipt of information by him from the bank regarding the return of the cheque as unpaid
3) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the
case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

[35]
 Grounds for Dishonour of Cheque

1) Insufficient Funds:
The amount of money standing to the credit of the account of the drawer on which the cheque is drawn is
insufficient to honour the cheque, the cheque amount exceeds the amount that can be paid by the bank under
an arrangement entered between the bank and the drawer of the cheque.
2) Account Closed:
It is an offence under section 138 of the Act – Closure of account would be an eventuality after the entire
amount in the account is withdrawn. It means that there was no amount in the credit of ‘that account’ on the
relevant date when the cheque was presented for honouring the same”
3) Stop Payment’ instructions:
“Once the cheque has been drawn and issued to the payee and the payee has presented the cheque, ‘stop
payment’ instructions will amount to dishonour of cheque.
4) Not a clearing member:
“Cheque returned with endorsement ‘not a clearing member’. To attract the provisions of section 138 NI Act,
the cheque should be presented with the bank on which it I drawn- If the cheque is not presented to the bank
on which it is drawn, then provisions of sec 138 would not be attracted. If bank on which the cheque is
drawn is not a clearing member of the Reserve Bank of India – unpaid return of the cheque would not attract
section 138.”
5) Post Dated Cheque:
Post dated cheque is not a “cheque” on the date it is drawn – It becomes a “cheque” only on the date written
on it – Till that date post-dated cheque remains a bill of exchange. The post-dated cheque becomes a cheque
within the meaning of section 139 on the date which is written thereon and not the 6 months period is to be
reckoned for the purposes of provision (a) to sec 138 from the date. Thus, in case of a pot-dated cheque, six
months period is to be reckoned from the date mentioned on the face of the cheque and not any earlier date
on which the cheque was made over by the drawer to the drawee.
6) Blank Cheque:
Respondent issued a blank cheque without mentioning the date and amount and sent it with a letter
requesting complainant to present it after a month – Question whether blank cheque will come within the
definition of cheque? – If the cheque is not drawn for a specified amount it would not fall within a definition
of bill of exchange - Act of complainant in filling up amount portion and date was a material change and it
could not be enforced even though it was issued for a legal liability.
7) Admission of signature on the cheque is not equivalent with admission of execution:
Right of the accused to contend that a blank signed cheque was mis-utilised by the payee cannot be taken away
by such mere admission of signature.
CHEQUE FORGERY
Forgery is the process of making, adapting, or imitating objects, statistics, or documents with the intent to
deceive or earn profit by selling the forged item. Copies, studio replicas, and reproductions are not

[36]
considered forgeries, though they may later become forgeries through knowing and willful
misrepresentations.

Types of Forgery seen:

1.To write (copy and forge) the signature of a real (existing) person on the instrument so cleverly with the
fraudulent intention that it may pass as a genuine signature of a real person.

2. To write (copy and forge) the signature even of a fictitious (non-existing) person on the instrument, with
such fraudulent intention.

3. Even if a person has signed his own name on the instrument, it may as well be deemed as forgery.

HUNDIS

A Hundi is a financial instrument that developed in Medieval India for use in trade and credit transactions.
Hundis are used as a form of remittance instrument to transfer money from place to place, as a form of credit
instrument or IOU to borrow money and as a bill of exchange in trade transactions. The Reserve Bank of
India describes the Hundi as "an unconditional order in writing made by a person directing another to pay a
certain sum of money to a person named in the order."

SHARE WARRANTS

A share warrant is a negotiable instrument, issued by the public limited company only against fully paid up
shares. It is also termed as a document of title because the holder of the share warrant is entitled to the
number of shares mentioned in it.

DIVIDEND WARRANTS

an order of payment (such as a check payable to a shareholder) in which a dividend is paid. bill of exchange,
draft, order of payment - a document ordering the payment of money; drawn by one person or bank on
another.

BANKERS DRAFT

A banker's draft (also called a bank cheque, bank draft in Canada or, in the US, a teller's check) is a
cheque provided to a customer of a bank or acquired from a bank for remittance purposes, that is drawn by
the bank, and drawn on another bank or payable through or at a bank.

CIRCULLAR NOTES
In banking, a circular note is a document request by a bank to its foreign correspondents to pay a specified
sum of money to a named person. The person in whose favour a circular note is issued is furnished with a
letter (containing the signature of an official of the bank and the person named) called a letter of indication,
which is usually referred to in the circular note, and must be produced on presentation of the note. Circular
notes are generally issued against a payment of cash to the amount of the notes, but the notes need not

[37]
 necessarily be cashed, but may be returned to the banker in exchange for the amount for which they were
originally issued

BEARER NOTES
A bearer debenture is an unregistered unsecured bond. The issuing corporation does not keep a record of the
purchaser’s name, nor is the owner’s name listed on the debenture. The owner cannot get a replacement
debenture if the original one is lost or stole
REVOLUTION OF NEGOTIABLE INTRUMENTS
1. Electronic Clearing Service (ECS Credit):
Known as "Credit-push" facility or one-to-many facility this method is used mainly for large-value or bulk
payments where the receiver’s account is credited with the payment from the institution making the payment.
Such payments are made on a timely-basis like a year, half a year, etc. and used to pay salaries, dividends or
commissions. Over time it has become one of the most convenient methods of making large payments.
2. Electronic Clearing Services (ECS Debit):
Known as many-to-one or "debit-pull" facility this method is used mainly for small value payments from
consumers/ individuals to big organizations or companies. It eliminates the need for paper and instead makes
the payment through banks/corporates or government departments. It facilitates individual payments like
telephone bills, electricity bills, online and card payments and insurance payments. Though easy this method
lacks popularity because of lack of consumer awareness.
3. Credit cards and Debit cards:
As mentioned above India is one of the fastest growing countries in the plastic money segment. Already
there are 130 million cards in circulation, which is likely to increase at a very fast pace due to rampant
consumerism. India’s card market has been recording a growth rate of 30% in the last 5 years. Card
payments form an integral part of e-payments in India because customers make many payments on their
card-paying their bills, transferring funds and shopping.
Ever since Debit cards entered India, in 1998 they have been growing in number and today they consist of
nearly 3/4th of the total number of cards in circulation.
Credit cards have shown a relatively slower growth even though they entered the market one decade before
debit cards. Only in the last 5 years has there been an impressive growth in the number of credit cards- by
74.3% between 2004 and 2008. It is expected to grow at a rate of about 60% considering levels of
employment and disposable income. Majority of credit card purchases come from expenses on jewellery,
dining and shopping.
Another recent innovation in the field of plastic money is co branded credit cards, which combine many
services into one card-where banks and other retail stores, airlines, telecom companies enter into business
partnerships. This increases the utility of these cards and hence they are used not only in ATM’s but also at
Point of sale (POS) terminals and while making payments on the net.[2]
4. Real-time gross settlement (RTGS):
The acronym 'RTGS' stands for real time gross settlement. The Reserve Bank of India (India's Central Bank)
maintains this payment network. Real Time Gross Settlement is a funds transfer mechanism where transfer
[38]
 of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest
possible money transfer system through the banking channel. Settlement in 'real time' means payment
transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed.
'Gross settlement' means the transaction is settled on one to one basis without bunching with any other
transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the
payment is taken as final and irrevocable.
Fees for RTGS vary from bank to bank. RBI has prescribed upper limit for the fees which can be charged by
all banks both for NEFT and RTGS. Both the remitting and receiving must have core banking in place to
enter into RTGS transactions. Core Banking enabled banks and branches are assigned an Indian Financial
System Code (IFSC) for RTGS and NEFT purposes. This is an eleven digit alphanumeric code and unique to
each branch of bank. The first four letters indicate the identity of the bank and remaining seven numerals
indicate a single branch. This code is provided on the cheque books, which are required for transactions
along with recipient's account number.
RTGS is a large value (minimum value of transaction should be ₹2,00,000) funds transfer system whereby
financial intermediaries can settle interbank transfers for their own account as well as for their customers.
The system effects final settlement of interbank funds transfers on a continuous, transaction-by-transaction
basis throughout the processing day. Customers can access the RTGS facility between 9 am to 4:30 pm
(Interbank up to 6:30 pm) on weekdays and 9 am to 2:00 pm (Interbank up to 3:00 pm) on Saturdays.
However, the timings that the banks follow may vary depending on the bank branch. Time Varying Charges
has been introduced w.e.f. 1 October 2011 by RBI. The basic purpose of RTGS is to facilitate the
transactions which need immediate access for the completion of the transaction.
Banks could use balances maintained under the cash reserve ratio (CRR) and the intra-day liquidity (IDL) to
be supplied by the central bank, for meeting any eventuality arising out of the real time gross settlement
(RTGS). The RBI fixed the IDL limit for banks to three times their net owned fund (NOF).
The IDL will be charged at ₹25 per transaction entered into by the bank on the RTGS platform. The
marketable securities and treasury bills will have to be placed as collateral with a margin of five per cent.
However, the apex bank will also impose severe penalties if the IDL is not paid back at the end of the day.
The RTGS service window for customer's transactions is available from 8:00 hours to 19:00 hours on week
days and from 8:00 hours to 13:00 hours on Saturdays.No Transaction on weekly holidays and public
holidays.
5. National Electronic Funds Transfer (NEFT):
Started in Nov.-2005,[1] the National Electronic Fund Transfer (NEFT) system is a nationwide system that
facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to any
individual, firm or corporate having an account with any other bank branch in the country. It is done via
electronic messages. Even though it is not on real time basis like RTGS (Real Time Gross Settlement),
hourly batches are run in order to speed up the transactions.[3][4]
For being part of the NEFT funds transfer network, a bank branch has to be NEFT-enabled. NEFT has gained
popularity due to it saving on time and the ease with which the transactions can be

[39]
 concluded. As at end-January 2011, 74,680 branches / offices of 101 banks in the country (out of around
82,400 bank branches) are NEFT-enabled. Steps are being taken to further widen the coverage both in terms
of banks and branches offices. As on 30.12.2017 total no of NEFT enabled branches are increased to 139682
of 188 Banks.
6. Immediate Payment Service (IMPS)
Immediate Payment Service (IMPS) is an initiative of National Payments Corporation of India (NPCI). It is a
service through which money can be transferred immediately from one account to the other account, within
the same bank or accounts across other banks. Upon registration, both the individuals are issued an
MMID(Mobile Money Identifier) Code from their respective banks. This is a 7 digit numeric code. To
initiate the transaction, the sender in his mobile banking application need to enter the registered mobile
number of the receiver, MMID of the receiver and amount to be transferred. Upon successful transaction, the
money gets credited in the account of the receiver instantly. This facility is available 24X7 and can be used
through mobile banking application. Some banks have also started providing this service through internet
banking profile of their customers. Though most banks offer this facility free of cost to encourage paperless
payment system, ICICI bank and Axis bank charge for it as per their respective NEFT charges.
Nowadays, money through this service can be transferred directly also by using the receiver's bank account
number and IFS code. In such case, neither the receiver of the money need to be registered for mobile
banking service of his bank, nor does he need MMID code. IMPS facility differs from NEFT and RTGS as
there is no time limit to carry out the transaction. This facility can be availed 24X7 and on all public and
bank holidays including RBI holidays.
7. Channels of e-payments
In their effort to enable customers to make payments the electronic way banks have developed many
channels of payments viz. the internet, mobiles, ATM’s (Automated Teller Machines) and drop boxes.
The internet as a channel of payment is one of the most popular especially among the youth. Debit and credit
payments are made by customers on various bank’s websites for small purchases,(retail payments) and retail
transfers( ATM transfers).
ATM’s serve many other purposes, apart from functioning as terminals for withdrawals and balance
inquiries, such as payment of bills through ATM’s, applications for cheques books and loans can also be
made via ATM’s.
Banks also provide telephone and mobile banking facilities. Through call agents payments can be made and
as the number of telephone and mobile subscribers are expected to rise, so is this channel of payment
expected to gain popularity. Drop boxes provide a solution to those who have no access to the internet or to a
telephone or mobile. These drop-boxes are kept in the premises of banks and the customers can drop their
bills along with the bill payment slips in these boxes to be collected by third party agents.
8. MOBILE WALLETS:
A mobile wallet is a way to carry cash in digital format. You can link your credit card or debit card
information in mobile device to mobile wallet application or you can transfer money online to mobile wallet.
Instead of using your physical plastic card to make purchases, you can pay with your smartphone, tablet, or
smart watch. An individual's account is required to be linked to the digital wallet to load money in it. Most

[40]
 banks have their e-wallets and some private companies. e.g. Paytm, Freecharge, Mobikwik, Oxigen,
mRuppee, Airtel Money, Jio Money, SBI Buddy, itz Cash, Citrus Pay, Vodafone M-Pesa, Axis Bank Lime,
ICICI Pockets, SpeedPay etc. http://cashlessindia.gov.in
9. UNIFIED PAYMENTS INTERFACE (UPI):
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile
application (of any participating bank), merging several banking features, seamless fund routing & merchant
payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid
as per requirement and convenience. Each Bank provides its own UPI App for Android, Windows and iOS
mobile platform(s).
10. UNSTRUCTURED SUPPLEMENTARY SERVICE DATA (USSD):
he innovative payment service *99# works on Unstructured Supplementary Service Data (USSD) channel.
This service allows mobile banking transactions using basic feature mobile phone, there is no need to have
mobile internet data facility for using USSD based mobile banking. It is envisioned to provide financial
deepening and inclusion of underbanked society in the mainstream banking services.
*99# service has been launched to take the banking services to every common man across the country.
Banking customers can avail this service by dialling *99#, a “Common number across all Telecom Service
Providers (TSPs)” on their mobile phone and transact through an interactive menu displayed on the mobile
screen. Key services offered under *99# service include, interbank account
to account fund transfer, balance enquiry, mini statement besides host of other services. *99# service is
currently offered by 51 leading banks & all GSM service providers and can be accessed in 12 different
languages including Hindi & English as on 30.11.2016 (Source: NPCI). service is a unique interoperable
direct to consumer service that brings together the diverse ecosystem partners such as Banks & TSPs
(Telecom Service Providers).
11. AADHAAR ENABLED PAYMENT SYSTEM (AEPS):
AEPS is a bank led model which allows online interoperable financial transaction at PoS (Point of Sale /
Micro ATM) through the Business Correspondent (BC)/Bank Mitra of any bank using the Aadhaar
authentication.
12. DIGITAL CHEQUE
Digital cheque is a form of payment used in Ecommerce. A digital cheque functions in the same way as a
paper cheque. It acts as a message to a bank to transfer funds to a third party; however, it has a number of
security advantages over conventional cheques since the account number can be encrypted, a digital
signature can be employed, and digital certificates can be used to validate the payer, the payer's bank, and the
account.

DEMONETIZATION AND DIGITALISATION OF INDIAN ECONOMY

The government’s decision to ban Rs. 500 and Rs. 1,000 notes on November 8, 2016, to curb black money and terrorism
financing through counterfeit notes has evoked mixed reactions. Demonetization has affected the daily lives of millions,

[41]
especially those in what is called the informal sector—domestic workers, small traders, and farmers—but what its impact
will be in the long term remains to be seen.

In the short term, demonetization has led to the rapid adoption of e-wallets, and credit and debit cards as a means of
payment. Such digital payments have in a large way replaced cash transactions at least in urban areas.

Many economists and socio-political researchers also believe that the country’s path to digitization was smoothened and
the time to achieve a cashless society has been compressed.

India and a cashless economy

The path toward digitization in India started with the e-commerce start-ups, such as FlipKart, Jabong, SnapDeal etc.
These e-tailers helped begin the process of weaning customers to online channels in the country. Most of these e-tailers
conduct the major proportion of their business through cash, but what they did do and is continuing to do is familiarize
people with the convenience of online channels and cash less transactions.

While there is no evidence of e-tailers benefiting after about 86 percent of the currency in circulation by value in India
was withdrawn, business at large fintech companies, popularly called e-wallet firms, have grown. According to media
reports, including in the Economic Times, transactions in e-wallet companies had increased by more than 700% in the
first few days after demonetization.

Slowly, but surely, digital transaction are becoming popular. Not just in India, but in other countries as well; although, the
rate of adoption varies. In countries, such as the US and Netherlands, a large proportion of the transactions are through
digital modes of payment, while in others, such as Italy, cash retains its paramount position. In India, many people in rural
areas and the informal sector do not have bank accounts. About 40% lack access, according to different reports, despite
the government’s efforts to improve financial inclusion. Even those who have bank accounts may not have easy access to
a physical branch or may hesitate before using a bank account because of a lack of familiarity and apprehension about
usage.

However, the internet and the sharing economy cannot be wished away in our country or overseas. As internet penetration
and connectivity increase, the digitization of the economy is a natural progression.

According to a Google and The Boston Consulting Group report, Digital Payments 2020, the total payments made
through digital payment instruments in India are likely to be about US$500 billion by 2020, which is 10 times the current
level. The report also estimates that non-cash transactions, which currently constitute about 22% of all consumer
payments, will overtake cash transactions by 2023.

Also, as the number of 3G and 4G internet connections rises and the price of mobile devices decreases, the number of
internet users will increase at a fast rate. A Deloitte and Associated Chambers of Commerce & Industry of India
(ASSOCHAM) study forecasts that India will have 600 million internet users by 2020.

Although, spectrum availability in metro cities in India is a small proportion of what is available in cities in other
developed markets, internet penetration is likely to increase in the future.

In India, the government is committed to a digital transformation of the economy and government. This push has led to
the rise of a new category of fintech service providers, payment wallet companies, and more recently payment banks.

[42]
 Digitization and the Indian insurance industry

The insurance industry in India is on the brink of a digitally enabled transformation. As the use of smart, digital products
and services increases, customers’ demand for fast, efficient, seamless, and intuitive products and services are increasing.

To enable and provide such services and products, all the stakeholders—insurance companies, distribution channels,
customers, technology providers, etc.—will need to collaborate and network. In other words, an ecosystem of multiple
stakeholders will power the next spurt of growth in the insurance industry, and the role of digital payments in facilitating
the growth of such ecosystems is vital.

At the same time, digitization and the development of an ecosystem will make all stakeholders more vulnerable to data
loss and theft. The increase in the use of virtual networks and intranets, and “aggregation” of cyber risk due to
concentration of virtual supply chains will make cyber risk and security important enterprise-level risks that will need to
be addressed.

There is also the risk of business interruption loss due to interconnected digital data supply chains.

Also, mobile wallet companies’ and payment banks’ reliance on technology, online connectivity, and requirement for high
volume of remittance transactions to offset the low margin per transaction will make them vulnerable. From our
observations, these companies are becoming increasingly concerned about such cyber frauds.

The complex supply chains, operational risk inherent in interconnected supply chains, and cross border partnerships will
likely drive stringent insurance coverage requirements for participating companies.

In 2016, the vulnerability of different organization was exposed by a slew of cyberattacks and hacking incidents in India.
These enterprise-wide risks are important, given that the 154-crore Indian e-wallet market is likely to grow to Rs. 30,000
crore by the end of 2022, according to a report by ASSOCHAM.

Immediate Impact of Demonetization

Almost all the e-commerce websites suffered major losses in the event of demonetization. People wanted to save
whatever money they had. Much of the payment for ecommerce sites is done through cash on delivery, which had now
come to suffer a huge blow. People wanted to pay without giving away cash. Also, due to the cash crunch, buying even
essential items like grocery had become increasingly difficult. A quick, easy and efficient way of payment was needed. As
a result, several new online payment wallets had come up, and existing ones like Paytm began to gain momentum at a
tremendous pace.

These wallets are easy to use. Money is first to be put into the app via online transaction (credit/debit card, net banking).
The balance amount in the wallet can be used by the customer. When the balance amount is over, money is to be filled
again. These wallets have been added as a payment option in all the ecommerce websites. The usage of these apps is not
only limited to transactions done over websites. It can also be used for paying money to shopkeepers. On these types of
apps, every merchant has a specific QR Code, and when the customer scans this code through the app, the money is
transferred. Instead of the QR Code, the customers can also enter the phone or other such identification details of the
retailers, and the money will be credited to their digital wallets.

The transactions on such e-wallets have reportedly increased from 17 lakhs per day to 63 lakhs per day Another feature
that become popular in the light of IJCSNS International Journal of Computer Science and Network Security, November
2017 demonetization is the Immediate Payment Service (IMPS). It is available on all days of the week 24*7, including
Bank Holidays, unlike the traditional NEFT and RTGS. In this case money can be transferred directly through an SMS or
through NET banking. Credit cards are debit cards were already on the rise before demonetization, which was now
subjected to an accelerated growth. These plastic cards are handy as they help us to store our money and then use it
whenever we want, without there being no liquid cash involved.
[43]
 BHIM (Bharat Interface for Money)

The government’s BHIM (Bharat Interface for Money) application announced by Prime Minister Narendra Modi on
December 31, 2016, has seen remarkable growth over the past few months. Named after Dalit icon Bhimrao Ambedkar,
the digital payment application was also launched for non-smartphone users on his birth anniversary in April this year.
During the first nine months of operation, BHIM has reported transactions worth more than Rs 11,000 crore and now
accounts for almost half of all United Payment Interface (UPI) transactions in the country.

National Payments Corporation of India figures show that in September this year, more than Rs 2,400 crore worth of
transactions were done on the BHIM platform. On an average, every transaction on BHIM was worth almost Rs 3,000.
These figures show the government’s resolve to transform India into a less-cash economy by introducing multiple digital
platforms, with BHIM being one of them. With a transaction limit of Rs 20,000 a day, the application was largely targeted
at small and medium merchant establishments.

BHIM seems to have outdone most other non-cash based financial instruments that have gained traction among India’s
newly banked population since demonetization. For instance, RuPay debit cards, which have been in use since 2012,
clocked transactions amounting to Rs 18,300 crore in the first half of 2017-18 at point-of-sale machines. In contrast,
BHIM has recorded transactions worth Rs 7,300 crore during the same period. That’s impressive for a new mobile-based
payments system that isn't even a year old.

The huge traction gained by BHIM during the few months since its launch can be explained by various factors. The
adoption of BHIM can be gauged from the fact that on December 31, 2016, a day after the application was announced for
smartphone users, almost 43,000 transactions worth Rs 1.8 crore were recorded on the platform. In January 2017, a month
after the launch, as many as 1.7 million transactions worth more than Rs 350 crore.

While the government’s hardsell did give initial momentum to BHIM, its speedy adoption by Indians can also be
explained by NITI Aayog’s incentive-driven and deadline-oriented strategy. The interim report of the committee of chief
ministers released by NITI Aayog this January mentioned cash-back rewards to customers who transact digitally and tax
incentives for merchants who adopted these platforms. But the National Payments Corporation of India seems to have
wooed even merchants with cash backs.

In a circular dated August 18, the National Payments Corporation of India asked all 55 banks on the BHIM platform to
introduce two schemes for customers and merchants. Merchants were given a maximum cash back of Rs 1,000 a month if
more than 50 unique customers transacted at their establishments using BHIM. To ensure that smaller merchants
benefitted from this scheme, banks were asked to reject rewards to large merchants at the time of disbursements.
Merchants who could muster a minimum of 20 unique transactions on BHIM were promised smaller sums as rewards.
Customers who referred other people to use the BHIM application had Rs 25 credited into their bank accounts. A similar
sum was also promised to the person who started using BHIM after a successful referral.

[44]
As a force multiplier to BHIM’s brand placement, National Payments Corporation of India also asked all 55 banks
offering UPI services to pre-fix BHIM with their respective applications. Banks could avail these cash incentives only if
the BHIM symbol was prefixed to their applications’ name.

NITI Aayog had also recommended that National Payments Corporation of India stick to deadlines in expanding and
popularizing the BHIM ecosystem. By February, the BHIM platform was to be linked to the Aadhaar ecosystem in order
to enable even those without smartphones to transact. This eventually set the stage for the formal BHIM-Aadhaar
payment system launched by the Prime Minister on April 14. The maximum limit for every transaction on the BHIM-
Aadhaar platform was fixed at Rs 2,000 and banks were given the option of integrating BHIM and Aadhaar symbols on
their applications.

Challenges ahead

While BHIM has an early mover advantage, it could face stiff competition from newer
entrants. A major challenge to BHIM’s prospects would be Google’s entry into
the UPI payments market with its application named Tez . Tez was launched by Google and
works on both Android and Apple devices. There are other smaller players in the market,
but given Google’s technological prowess and dominance of the smartphone software
ecosystem, BHIM’s toughest competition could well be from the Silicon Valley giant. By
the look of it, Google’s payments application has 5 million downloads since its launch.
How many of these downloads are actually translating into transactions remains unclear.
Although its early days for Google in India’s financial technology sector, it has been
operating a similar business called Google Wallet for American and British customers.

Cash continues to be an attractive means of payment because the payer and the payee do not have to pay any additional
charges and is anonymous. The reason why digital payment has not become popular with small merchants in India is cost
and poor infrastructure. At the least, merchants have to pay for a POS machine.

Nonetheless, the World Payments Report, prepared by Capgemini and BNP Paribas, estimates that global non-cash
volumes will increase 10.1% to 426.3 billion in 2015. The highest growth is likely to be in Emerging Asia (31.9%),
Central Europe, the Middle East and Africa (15.7%) and mature Asia-Pacific (11.6%).

For digitization to grow and to include all sections of the people in all areas of the country, there is a need for more value
added services, better internet connectivity, regulatory support, and market education.

However, as the popularity of the internet and social media forums continue to rise, and people, especially Gen Y, become
more and more attuned to digital interaction, digital means of payment is likely to become an integral part of the daily
lives of people and organizations.

[45]
 STATISTICAL DATA

E- payment Options
1800
1659.84
1595.21
1600

1400

1200 1150.66

1000

800

600

400 367.95 369.41

257.97
200

0
Q2 2017-18 Q3 2017-18 Q4 2017-18
NEFT/RTGS OTHER MODES #REF!

 During 2017-18, both RTGS and NEFT hosted at the Data Centres functioned without any
disruptions with record per-day processing volumes.
 The RTGS recorded an all-time high of 0.91 million transactions on March 31, 2018 as against 0.74
million in the previous year.
 The NEFT registered 15.4 million transactions on March 31, 2018 as against 12.5 million
transactions last year, followed by the highest volume of 18.8 million so far on April 3, 2018.
 These systems have proven to be scalable and shown the ability to handle increasing volumes.

[46]
 CHEQUE CLEARANCES
95

347
276

432

CHENNAI MUMBAI
NEW DELHI TOTAL NON-MICR CENTRES

CHEQUE CLEARANCE (IN AMOUNT)

6923

24136

19959

29509

CHENNAI MUMBAI NEW DELHI TOTAL NON MICR CENTRES

2017-18

In 2017-18, after Demonetization it was observed that the value and amount of cheque clearances were
more as there was a limited amount of money available in the market. People started shifting towards
cashless transactions and Payments through Cheques had become an important method.

[47]
 Comparison between India and Australia on bases of Negotiable Instruments
SR NO. POINTS INDIA
1. Governing act 1.Negotiable Instruments Act,
1881.
2.Controlled by Indian Govt
2. Contents 1. Bills of Exchange
2. Promissory Notes
3. Cheques
1. Understand meaning,
3. Objectives of governing act essential characteristics and
types of negotiable instruments
2. Describe the meaning and
marketing of cheques, crossing
of cheques and cancellation of
crossing of a cheque
3. Explain capacity and liability
parties to a negotiable
instruments
4.Understand various provisions
of negotiable instrument Act,
1881 regarding negotiation,
assignment, endorsement,
5. acceptance, etc. of negotiable
instruments
CASE STUDY
CASE 1
Moratorium: Not Applicable to action under Section 138 of Negotiable Instruments Act, 1881
[48]
AUSTRALIA
1. Bills of Exchange Act 1909
2. Promissory notes
3. Cheques before 7th July 1987.
4. Cheques Act 1986.
5. Controlled by ‘Australian
Securities and Investments
Commission (ASIC)’
1. Bills of exchange
2. Promissory notes
3. Cheques
4. Treasury notes
5. Certificate of Deposits
1. Provide uniformity of law in
Australia in relation to bills of
exchange and promissory notes.
2. Provide legal certainty by
confirming the nature of bills of
exchange and promissory notes
as negotiable instruments.
3. Promote efficiency in the
marketplace that utilizes bills of
exchange and promissory notes
through the concept of
negotiability
 The present case discusses the applicability of moratorium to action taken under section 138 of the Negotiable
Instruments Act, 1881. The issue of applicability of moratorium has finally been settled by NCLAT in the matter of Shah
Brothers Ispat Pvt. Ltd. Vs. P. Mohanraj & Ors.-Company Appeal (AT) (Insolvency) No. 61 of 2018 delivered on
31st July, 2018. However, it is subject to challenge as there are certain observations been made considering the recent
judgments of Hon’ble Supreme Court and High Courts. Apart from critically examining the judgment, an attempt has also
been made to understand the possible implications of it.

Purview of Moratorium-Limited:

The issue of applicability of moratorium to action taken under section 138 of Negotiable Instruments Act, 1881 i.e.,
dishonour of Cheque has finally been settled in the recent judgment of NCLAT in the matter of Shah Brothers Ispat Pvt.
Ltd. Vs. P. Mohanraj & Ors.-Company Appeal (AT) (Insolvency) No. 61 of 2018 wherein NCLAT by reversing the
order of NCLT, Chennai Bench, held that moratorium will not extend to proceedings under section 138 of
Negotiable Instruments Act, 1881.

Observations of NCLAT:

 All proceedings which are criminal in nature are outside the purview of Moratorium.
 The proceedings under section 138 are criminal in nature (penal provision). Further, it has taken a view that action
taken under section 138 of the NI Act, 1881 is not a proceeding or judgment or decree of money claim. Therefore, it is not
covered within the purview of section 14 (Moratorium) of the Insolvency & Bankruptcy Code, 2016.

Nature of proceedings under Section 138 of the Negotiable Instruments Act, 1881

The observation of NCLAT is that, the proceedings under section 138 of the Negotiable Instruments Act, 1881 are
criminal in nature and therefore, moratorium cannot be made applicable to such proceedings. However, we must
understand first the nature of proceedings under section 138 of the NI Act, 1881.

The offence under section 138 is not a natural crime like hurt or murder. It is an offence created by legal fiction in the
statute. It is a civil liability transformed into a criminal liability, under restricted conditions by way of an amendment to
the NI Act, 1881. It is also stated in the matter of Bhujanpura Cooperative Urban Thrift and Credit Society Ltd. Vs.
Sushil Kumar (2014) that proceedings under section 138 of NI Act, 1881 primarily is of quasi-civil and criminal in
nature.

In a remarkable judgment passed by the Delhi High Court in the matter of Dayawati v. Yogesh Kumar Gosain (2017),
distinction has been drawn between traditional criminal cases and offence under Section 138 of Negotiable Instruments
Act, 1881 and while distinguishing the two it has placed reliance upon the observation made by Supreme Court- in
Damodar S. Prabhu Vs. Sayed Babalal (2010) 5 SCC 663 wherein it has been stated that the provision is really in the
nature of a civil wrong which has been given criminal overtones as the complainant’s interest lies primarily in

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 recovering the money rather than seeing the drawer of the cheque in jail. The threat of jail is only a mode to
ensure recovery.

In another Landmark judgment passed by Hon’ble Supreme Court in the matter of: M/s Meters and Instruments
Pvt. Ltd. & Anr. Vs. Kanchan Mehta (2017), wherein, certain observations on section 138 of NI Act were made:

 The offence under section 138 is primarily a civil wrong.

 The object of the provision is primarily compensatory and punitive element is mainly with the object of
enforcing compensatory element.
Therefore, proceedings under section 138 of the NI Act, 1881 are special in nature, in the sense that, these are primarily
civil in nature, transformed into criminal with the intent to provide the complainant the amount of cheque i.e., nothing but
recovery of money by way of compensation.

However, NCLAT failed to consider the above views and observations made by Hon’ble Supreme Court and various High
Courts in respect of the nature of proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881.

Implications of the decision: Pros and Cons:

It will surely prevent the misuse of Section 10 of the Insolvency & Bankruptcy Code, 2016. As chances are that once
section 138 proceedings will be included within the purview of the moratorium it will certainly incentivize the corporates
to file an application under section 10 of the Code for initiation of insolvency proceedings in order to protect themselves
from the initiation of action being taken against them under Section 138 of the Negotiable Instruments Act, 1881.
However, the protection will only be for a limited period i.e., 180 days from the date of appointment of Interim
Resolution Professional which can further be extended to 90 days and therefore, such misuse is least likely to happen.

The very object of section 14 of the Insolvency & Bankruptcy Code, 2016 is not to stress the assets of Corporate Debtor.
The period of moratorium also referred to as a “clam-period” which is intended to provide creditors and debtors time to
negotiate the viability of the entity. In the calm period a regulated insolvency professional controls the assets under
the supervision of an adjudicating authority. The regulated insolvency professional manages the entity. During
insolvency resolution, there is a time bound moratorium against debt recovery actions and any new cases filed.
During bankruptcy resolution, the assets are in a trust managed by a regulated insolvency professional. This helps
assure creditors and debtor that assets are protected while they negotiate for a viable resolution plan. Therefore, by
allowing the initiation of action under section 138 of the Negotiable Instruments Act, 1881 which is nothing but
proceeding for recovery of money, the whole purpose of the code will be defeated.

Conclusion:

The present position of law in respect of applicability of moratorium to action taken under Section 138 of the NI Act is
that moratorium will not be applicable to proceedings under section 138 of the Act and therefore, those cases which are
pending before the admission of application under section 7, 9 or 10 of the Code i.e., before the initiation of insolvency
process will not be affected by the moratorium. Further, an action under section 138 of the NI Act, 1881 can be initiated
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even after the commencement of insolvency process. Albeit, section 14 of the Insolvency & Bankruptcy Code, 2016 does
not specifically cover the proceedings under section 138 (dishonour of cheque), the intent of the provision is to cover all
such proceedings which are in the nature of recovery of money and to ensure that during this period there is no additional
stress on the assets of the corporate debtor. It cannot be denied that the umbrella of moratorium is not wide enough to
include criminal proceedings but the proceedings initiated under Section 138 of the NI Act, 1881, which is primarily civil
and quasi criminal in nature and the primary object of the provision is nothing but recovery of money. Therefore, it would
be completely incorrect to say that action taken under section 138 of the Negotiable Instruments Act, 1881 is
criminal in nature. Further, not covering the actions taken under section 138 of NI Act, 1881 within the purview of
moratorium is likely to defeat the purpose of moratorium as well as the Insolvency and Bankruptcy Code

CASE STUDY 2:
That, the complainant has filed the private complaint undersection 200 of Code of Criminal Procedure, for taking action
against the accused for the offence punishable under section 138of the Negotiable Instruments Act.
That, the brief facts of the present case are as under:-
1. That, the accused and complainant are known to each other since several years and the accused in pursuance of said
acquaintance in the 1st week of August 2016 had approached and requested the complainant for advancing him a sum of
Rs.50,000/- for his legal necessities and the complainant considering the said needs of the accused on 09.09.2016 had
advanced him the said amount in cash. That, the accused at the time of availing the said loan amount though, had agreed
torepay the same within a short period, but failed to do so and on persistent demands made by the complainant he issued
in favour of the complainant a cheque bearing No.422604 dated:- 25.01.2018 for a sum of Rs.50,000/- drawn on the
Bengaluru City Co-operative Bank Ltd., Ullal Main Road, Bengaluru - 560 056 and requested the complainant for
presenting the said cheque for encashment in bank on 29.01.2018. That, the complainant on 29.01.2018 had presented the
said cheque for encashment in Sree Thyagaraja Co-operative Bank Ltd., Kamakshipalya branch, Bengaluru and on
30.01.2018 the same was returned with the shara as 'Funds Insufficient'. That, the complainant for the aforesaid acts of the
accused on 14.02.2018 had issued the legal notice to him through RPAD and the same was duly served upon him on
15.02.2018. That, as the accused inspite of receiving the said notice failed to comply with the terms of the same the
complainant has constrained to knock the doors of justice.
2. That, on complaint being lodged by the complainant, this court registered the case in concerned register and took the
cognizance for the offence punishable under section 138 of the Negotiable Instruments Act and thereafter, recorded the
sworn statement of the complainant and after satisfying with the materials placed on record registered the case against the
accused in Register No. III and issued summons to him. That, on 04.06.2018 the accused was produced before this Court
under warrant and he was enlarged on bail. That, the plea of the accused has recorded and read over him in language
known to him and he has not pleaded guilty and claimed to be tried.
3. That, I have heard the arguments and perused the materials placed on record. That, the following points arise for My
consideration and determination:-
1. Whether the complainant has proved that, the accused to discharge his legally enforceable debt had issued in his favour
a Cheque bearing No.422604 dated:-25.01.2018 for a sum of Rs.50,000/- drawn on the Bengaluru City Co-operative
Bank Ltd., Ullal Main Road, Bengaluru - 560 056?
2. Whether the complainant has further proved that, the said cheque was returned with the shara as 'Funds Insufficient' in
the account of the accused and thereby the accused has committedthe offence punishable under section 138 of the
Negotiable Instruments Act?
3. What order?
4. That, the complainant to substantiate his aforesaid contentions has deposed himself as PW1 and got marked the
documents at EXs.P1 to 3(b) and closed his side.
That, the accused has not filed his defense and not cross- examined PW1- the complainant.
5. That, My answer to the aforesaid points are as under:-
Point No.1:- In the AFFIRMATIVE Point No.2 :- In the AFFIRMATIVE Point No.3:- As per the final order for the
following, REASONS

6. Point No.1:- It is specific contention of the complainant that, the accused in the 1st week of August 2016 had
approached and requested him for advancing him a sum of Rs.50,000/- for his legal necessities and considering the said
needs of the accused on 09.09.2016 he advanced him the said amount in cash and the accused at the time of availing the

[51]
said loan amount though, had agreed to repay the same within a short period but, failed to do so. That, the complainant
has further contended that on persistent demands made by him the accused had issued in his favour a Cheque bearing
No.422604 dated:-25.01.2018 for a sum of Rs.50,000/- drawn on the Bengaluru City Co-operative Bank Ltd., Ullal Main
Road, Bengaluru - 560 056 - EX.P1.
It is to be noted here that, in the instant case from perusal of contents of the complaint and evidence of the complainant it
clearly appears that the accused on 09.09.2016 had availed a sum of Rs.50,000/- from the complainant and to discharge
his legally enforceable debt had issued in his favour EX.P1. It is pertinent to note here that, as stated above the accused
though, has appeared before this Court but, failed to contest the matter. It is pertinent to note here that, in absence of any
contra evidence there is no reason to disbelieve the contentions of the complainant. It is to be noted here that, the accused
has not disputed the issuance and execution of EX.P1 in favour of the complainant. It is pertinent to note here that, as the
signature in the cheque is admitted by the accused, then the presumption envisaged under Section 118 of the Negotiable
Instruments Act, can legally be inferred that the cheque was made over to the drawer for consideration on the date which
the cheque bears. It is to be noted here that, Section 139 of the Negotiable Instruments Act, enjoins on the Court to
presume that the holder of the cheque is received it for discharge of some debt or liability. It is to be noted here that, in the
instant case the presumptions envisaged under Sections 118 and 139 of the Negotiable Instruments Act, arises in favour of
the complainant. It is pertinent to note here that, in view of My above all findings and without much discussion I hold
that, the complainant has convincingly proved that the accused to discharge his legally enforceable debt had issued in his
favour EX.P1. In view of the same, point No.1 is answered in the AFFIRMATIVE.
7. Point No.2:- It is specific contention of the complainant that, he presented the EX.P1 for encashment in Sree
Thyagaraja Co-operative Bank Ltd., Kamakshipalya branch, Bengaluru and on 30.01.2018 the same was returned with the
shara as 'Funds Insufficient' in the account of the accused and for which on14.02.2018 he issued the legal notice to him
and on 15.02.2018 the same was duly served upon him.
It is to be noted here that, the complainant to substantiate his aforesaid contentions in his evidence has got marked a
cheque return memo issued by the said Bank at EX.P2, Legal notice issued to the accused dated:-14.02.2018 at EX.P3,
Postal receipt at EX.P3(a) and Postal acknowledgement at EX.P3(b).
It is to be noted here that, from perusal of EX.P2 it appears that EX.P1 was dishonoured as 'Funds Insufficient' in the
account of the accused.
8. It is to be noted here that, at this juncture I have gone through the provisions of section 146 of Negotiable Instruments
Act and which contemplate as under:-
Bank's slip prima facie evidence of certain facts:- The Court shall, in respect of every proceeding under this Chapter, on
production of bank's slip or memo having thereon the official mark denoting that the cheque has, been dishonoured,
presume the fact of dishonor or such cheque, unless and until such fact is disproved.
It is to be noted here that, in the instant case the accused has failed to rebut the presumptions envisaged in section 146 of
the Negotiable Instruments Act. It is to be noted here that, in view of My above findings and without much discussion I
hold that, complainant has convincingly proved that the accused has committed the offence punishable under section 138
of Negotiate Instruments Act. In view of the same, point No.2 is answered in the AFFIRMATIVE.
9. Point No.3:- That, as discussed on points No.1 and 2, I proceed to pass the following:-
ORDER That, acting under section 255(2) of Code of Criminal Procedure, the accused is convicted for the offence
punishable under section 138 of the Negotiable Instruments Act.
That, the accused shall deposit a fine amount of Rs.50,000/- and if he fails to deposit the said fine amount, he shall
undergo a simple imprisonment for one month.
That, out of total fine amount of Rs.50,000/-, Rs.48,000/- shall be paid to the complainant as a compensation as
provided under section 357(1) of Code of Criminal Procedure and Rs.2,000/- shall be remitted to the State Exchequer

CONCLUSION:

10 YEARS GOING FORWARD

We are living where everything is getting paperless, cashless, and faceless services across the country. Where RBI
is providing electronic payment options for day to day business. New technologies and opportunities are opening

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up for businesses. While some of these will stay by 2030 where some will not. But since every Coin also has two
sides, as new technologies increases its security measure also increases.
For example: Transferring money with help of digital cheque. Sometimes technology succeeds or fails depending
upon the social needs.
Negotiable instrument nothing but a written and signed document entitling a person to a sum of money specified in
it and which is transferrable from one person to another either by delivery or by an endorsement and delivery. All
these Electronic payment options such as biometrics payments, blockchain technology, USSD, etc will act as an
alternative for negotiable instrument in future. All these instruments will not be vanished in coming 10 years but
also won’t be used. Use of such advanced technologies have indeed changed the revolution, i.e. called electronic
revolution, changing the face of these instruments. Even though electronic revolution has brought about many
changes in the present world, but negotiable instruments are still in use. The electronic revolution is considered as
the next major step which replaces the negotiable instruments. For this the future could improve and develop the
problems which prevail in e-revolution. In the present world, people in all fields of profession are getting used to e-
revolution. The present world need to be train to get used to this system of working with e-revolution. It still takes
time for the next generation to be ready to use the e-revolution with no difficulties.
New technologies are opening up new opportunities for businesses to offer new kinds of payment and new forms of
currency. Some of these will fail in the market and some will stay. By 2030, we will all be used to paying for things
in a variety of new ways, and authenticating payments in new ways too. This paper looks at some of the changes.
Many believe could be coming along and the key factors that will determine which ones will have a lasting impact.
Technology generally succeeds or fails depending how well it meets our everyday social needs, so it is a good idea
to look at these. Then, expanding on one important area of these, security, we will address some other key factors
that will affect adoption. We will consider how all this could play out in the 5 and 15 years periods, leading up to an
overview of how payments will look in 2030. 2030 has been chosen for this report because it is far enough away
for technology to have time to develop and mature, and for society to adopt or reject the various types of
contenders, but not so far in the future that predictions are just guesswork or science fiction.
A Negotiable Instrument is nothing but written documents, signed by the maker or the drawer containing an
unconditional promise to pay or an order to pay a certain sum of money at a definite time to the bearer or to the
order. Negotiable Instruments can either be negotiable or non-negotiable. But, they must come under one of the two
categories. An instrument becomes negotiable either by statute or by mercantile usage. Among all other negotiable
instruments, bills of exchange, cheque and promissory notes are the three important negotiable instruments which
are widely used in international trade.
As these Instruments started becoming an integral part of business, there also felt a need to unify them. These
Instruments, so as to be used for trade and commerce, were needed to be well defined. It became imperative that a
set of rules were to be established to set a common ground for the usage of these instruments, thereby accepted by
all those affected by them. Negotiable Instruments like Cheque and Promissory note, also aided non traders with
their money transactions. For instance, people could lend money to others without having to worry about the risk of
non-payment by the lending party. On the grounds of negotiable instruments, it became easy to collect money from
debtors.

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As trade and commerce evolved through ages, so did negotiable instruments. Advancement of technology brought
advancement in the usage of these instruments. CTS i.e. cheque truncation is one of such examples. This system
prevents the actual physical movement of cheque between banks and sending the required information via
electronic medium thus saving time, efforts and money. Similarly, the concept of digital money, where money is
electronically transferred from one account to another, acts as a replacement for instrument like cheque. Digital
cheque also works on similar grounds thus giving the same set of advantages. Also, with respect to promissory
notes and bill of exchange, e-promissory note and e-bill of exchange may act as probable advancement for these
instruments as we saw in the document. Also with the use biometric system the use of Negotiable Instruments
promises to be more safe and clean. Use of such advance technologies, has indeed brought a revolution in the realm
of Negotiable Instruments, this revolution is rightly called as the ‘Electronic Revolution’, changing the face of
these instruments.
Even though electronic revolution has brought about many changes in the present world, but negotiable instruments
are still in use. The electronic revolution is considered as the next major step which replaces the negotiable
instruments. For this the future could improve and develop the problems which prevail in e-revolution. In the
present world, people in all fields of profession are getting used to e-revolution. The present world need to be train
to get used to this system of working with e-revolution. It still takes time for the next generation to be ready to use
the e-revolution with no difficulties.
Globally, there are many options to dematerialize these financial instruments, but a very few can provide
guaranteed security to the user’s information and money. In order to maintain the security level & to save the time;
Government needs to use more resources, do research about the latest facilities, test them, regularize it & spread
awareness about these facilities.

RECOMMENDATIONS
Future Prospects on Transactions

Governments and some companies are moving away from strictly financial assessments of wealth and
incorporating more quality of life measures, and social strengths are big components. Far future companies will
become much more integrated into the fabric of communities. This makes community cash forms and direct peer-
to-peer payment systems more viable, but also means social networks will keep companies in check and punish
those that misbehave.

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As social entrepreneurs continue to make clever use of the web and phones, some social network based payment
systems could be developed that are free of commission and fees, and if so, they will provide strong competition
for today’s payment systems, which charge retailers a percentage of each transaction. Governments would
encourage this since removing fees and commission will be an economic stimulus equivalent to reducing VAT.
Tribal social networks will therefore be a key driver of change for banks, credit card companies and phone based
cash providers. This will also make it hard for walled gardens to survive, where companies try to take a slice of
each transaction on their systems. People will demand the ability to spend their own cash on any platform without
having to pay commissions and social entrepreneurs will deliver the means to do so. Companies that try to resist
will suffer and likely see people simply boycott their platforms.
Battery drain on phones will remain a problem, particularly when people have to use many applications that rely
on continuous access to wireless common positioning systems.

BIBLIOGRAPHY
 Business Law by Satish B Mathur
 Business Law by Bulchandani

REFERENCES
_https://en.wikipedia.org/wiki/Negotiable_Instruments_Act,_1881
_https://en.wikipedia.org/wiki/Reserve_Bank_of_India_Act,_1934
http://www.indiancorplaw.in/
http://www.lawteacher.net/
http://www.indiankanoon.org/
http://www.scribd.com/doc/213870059/Negotiable-Law
http://www.investopedia.com/
http://www.ddegjust.ac.in/studymaterial/mcom/mc-207-f.pdf
http://www.ddegjust.ac.in/studymaterial/mcom/mc-207-f.pdf

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http://ww2.frost.com/news/press-releases/frost-sullivan-biometrics-can-be-alternative-conventional-authentication-
technologies-mobiles/

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