Useful for banking interview

TOPIC: Negotiable Instruments
*NI Act 1881*
1) Promissory Note
~ As the name says its a "promise" - an unconditional promise ( like unconditional love )
~ A written document
~ Signed by the ' maker ' ( say A)
~ To pay a certain some of money
~ Either to order or to bearer of the instrument.
A took Rs 500 from B.
Now, here A has to pay back to B. So B is called the Payee ( to whom payment is to be made )
So A gives P.N to B that he will give back so and so amount after so and so time. A makes the P.N, hence A is called maker/ drawer.
2) Bill of Exchange
~ a written document
~ an unconditional ORDER
~ signed by maker (say A)
~ directing a certain person ( say B) to pay a certain sum of money to order or to bearer of the instrument ( say C )
A ( drawer : giving order) --> to B ( drawee: accepting order to pay a certain sum of money) --> to C ( payee : to whom payment is to be made)
3) Cheque
~ a written document ( a type of BoE )
~ signed by the maker
~ should be properly dated
~ contains unconditional ORDER
~ to pay a certain sum of money
√ Endorsement ??
It is transfer of any document by signing on its back or on a slip of paper attached to it.
Lets take our above P.N example.
Here A gave a P.N to B to pay back Rs 500.
Now when B gets a P.N from A, he signs it ( endorses it ) and tells A to pay Rs. 500 not to me but to C. ( maybe bcoz B had taken Rs 500 from C sometime. )
Here, B makes the endorsement, so he is called the Endorser.
C is the one whom payment will be made after the endorsement , C is called ' Endorsee '
This type of endorsement is called Special Endorsement ( where name of the one to whom payment is to be made is mentioned )
Other endorsements are:
∆ Blank Endorsement : no added notion, payment is done to the bearer of the instrument.
∆ Restrictive Endorsement : wid added condition explaining the manner of payment ( like deposit only)
∆ Conditional Endorsement : wid some specific terms demanded on part of one whom payment is to be made ( like C ko dena hai tab hi jab wo Mera ye ye kam ker chuka ho)
√ Crossing of Cheque ??
Drawing two parallel lines on top left hand corner of the Cheque.
Crossing is necessary in order to have safety, in case cheque is lost, stolen or forged signature is there.
Crossed cheques must be presented through the bank only because they are not paid at the counter.
∆ General Crossing - words are not important, the 'lines' are important.
These can have 4 kinds:
* either just 2 parallel lines ( nothing written in between)
* two parallel lines with " &Co." written in between.
* two parallel lines with " non negotiable " written in between
* two parallel lines with " A/C payee" written in between.
∆ Special Crossing - lines are not important, the 'words' added in between are important.
Payment can be made to only that specific bank mentioned in this case.
4 kinds here as well:
* two parallel lines with just bank name in between.
* two parallel lines + bank name + "&Co."
* two parallel lines + bank name + " non negotiable "
* two parallel lines + bank name + " A/C payee "
Special crossed cheques are of course safer than generally crossed ones.