COM COMPUTERS, GENERAL (i) present the cheque within a reasonable

time:-The collecting bank should present the cheque collected from the customer to the drawee bank within the reasonable time otherwise he is liable for the loss suffered by the customer due to delay.

(ii) Reasonable

care:-A collecting banker as an agent of the customer is bound to protect the interest of the customer. If he is not careful while discharging the duty as an agent, it may lead to a loss to the customer. Therefore, the collecting banker is not supposed to be negligent.

(iii) Notice of

dishonor:-In case the cheque is dishonored the collecting banker should give notice of dishonour to the customer by returning the cheque with a covering letter including the reason of dishonour of the cheque. It may be given orally or in writing. It may be given in person or by post.

(iv) Appointment of

agent:-In case of out-station cheques the bank may appoint agents. These agents. These sub-agents are liable only to the sub-agents. If the customer asks the banker only to forward a cheque to a specified banker for the collection then that bank may be treated as an agent and not as an sub-agent.

(v) Collecting banker as holder for

value:-The collecting banker becomes the holder for value when he pays the cash to the payee before the cheque is collected from the paying banker.

Statutory protection for collecting

banker:-A collecting banker is given statutory protection under sec. 31 of the Negotiable Instruments Act, as a banker who has in good faith and without negligence receives the payment of the cheque crossed. In the case, the title of the cheque proves defective incur any liability to the owner of the cheque by reason of having received such payment.

The collecting banker have got the following statutory protections.

(i) Good faith & without negligence:- The collecting banker have performed this function in good faith, honestly and without negligence. In case of dispute, a collecting banker has to prove that he acted without negligence in collection of the cheque.

B.COM COMPUTERS, GENERAL

(ii) Received crossed cheque:- The collecting banker cannot claim protection if the cheque is crossed after coming to his hands, further he cannot claim for protection. If he allowed the customer to open an account without proper introduction.

(iii) Examination of Endorsement:- A collecting banker must satisfy himself that all the endorsements on the cheques are regular.

4Q What is Negotiable Instruments Act, 1881 ? OR

Explain the different types of Negotiable Instruments ?

Ans: The term negotiable instruments literally means a written document which creates a write in favour of some person and which is easily transferable.

According to section 13 of Negotiable Instrument Act “A Negotiable Instrument means a Promissory Note (or) a Bill of Exchange (or) A cheque payable either to order or to the bearer of the instrument.

There are three types of Negotiable Instruments. They are :-1. Promissory Note

2. Bills of Exchange 3. Cheque

1. Promissory Note:

Section 4 of the Negotiable Instrument Act, “A Promissory Note is an instrument in writing 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”.

Features of Promissory Note:

• It is an instrument in writing

• It is a promise to pay

• The undertaking to pay is unconditional

• It should be signed by the maker

• The maker must be certain.

• The promise to pay should be in money and money only.

• The amount should be certain

• The creditors name and address should be mentioned

Specimen of a Promissory Note:

Rs.500/-

22-Feb.2008

B.COM COMPUTERS, GENERAL

On demand. I promise to pay Shri. Surya or order a sum of Rupees Five Hundred value received.

To

Shri. Suresh

Stamp Sd/- Rakesh

2. Bills of Exchange:

A bills of exchange is defined by Section 5 of negotiable act as on instrument in writing containing an unconditional order signed by the maker ordering him to pay or to order a certain sum of money only to the bearer or to the order of the instrument.

Features of Promissory Note:

• It must be in writing

• It must be signed by the Drawer

• The Drawer, Drawee and Payee must be certain

• The sum payable must also be certain

• It is an order to pay which is properly stamped.

In case of bills of exchange their right be two or more parties.

Drawer, Drawee and Payee. The person who makes the bill is the drawer, the person who is directed to pay is called the Drawee. The person to whom the payment will be made is called payee. The Drawer and Payee might be the same person.

Specimen of a Bills of exchange:

Rs.500/-

22-Feb.2008

Hyderabad

Three months after date pay to me or order, a sum of rupees five hundred value received.

To

Shri. Surya

B.COM COMPUTERS, GENERAL

Stamp Sd/- Raj & Co.

3. Cheque:

It is another type of negotiable instrument section 6 of the negotiable instrument act defines cheques as a Bills of exchange on a specified banker and not expressed to the payable otherwise than on demand.

A cheque can be defined as a bill of exchange on a particular banker which is payable on demand.

Features of Cheque:

• A cheque is an instrument in writing.

• It is an unconditional order.

• It should be always drawn on a specified banker.

• A cheque must be an order to pay a certain sum of money.

• It is always payable on demand and not necessary to use the word on demand.

• The payee must be certain, it means the person to whom payment is to be made must be certain.

Specimen Copy of a cheque:

STATE BANK OF INDIA Date:________

Pay to _____________________________

Rupees ______________________________________ only Cheque No.

Signature

5Q What do you mean by cheque crossing : Explain its kinds:

Ans: A cheque is said to be crossed when two transverse parallel lines drawn across the cheque on the left top of the cheque. A crossing is the direction to the paying banker to pay the money through his deposit account to a particular person and not the bearer of the cheque.

Objectives of Crossing:

B.COM COMPUTERS, GENERAL

Crossing ensures security to the owner. Since payment of such a cheque made through a banker. It can therefore helps in detecting the person who receives the money in case of loosing the cheque crossing helps to avoid money going in wrong hands. A cheque without crossing is known as open cheque open for many risks.

Kinds of Crossing:

Crossing can be classified into two kinds.

• General Crossing

• Special Crossing

i) General Crossing: Section 123 of the negotiable instruments act defines general crossing as “A cheque bears a crossing on its face with or without the wards not negotiable in other words drawing two parallel transverse lines on the left top of the cheque is called as general crossing”.

The effect of general crossing is to direct the paying banker not to make payment unless it is presented through a banker.

Features of General Crossing:

The transverse parallel lines are of great importance in general crossing.

• The line must be transverse

• They should not be straight lines

• The lines are generally drawn on the left top of the cheque.

• The words not negotiable, and company might be written in between those two lines, but it is not necessary.

Specimen Copy of General Crossing:

STATE BANK OF INDIA Date:________

Pay to _____________________________

Rupees ______________________________________ only Cheque No.

Signature

B.COM COMPUTERS, GENERAL