CA PREPARATION

Bonds - Basics

2012-09-29T16:31:00.004+05:30

Bonds - Basics

A bond is just an organization's IOU; i.e., a promise to repay a sum of money at a certain interest rate and over a certain period of time. In other words, a bond is a debt instrument. Other common terms for these debt instruments are notes and debentures. Most bonds pay a fixed rate of interest (variable rate^{^} bonds are slowly coming into more use though) for a fixed period of time.

Why do organizations issue bonds? Let's say a corporation needs to build a new office building, or needs to purchase manufacturing equipment, or needs to purchase aircraft. Or maybe a city government needs to construct a new school, repair streets, or renovate the sewers. Whatever the need, a large sum of money will be needed to get the job done.

One way is to arrange for banks or others to lend the money. But a generally less expensive way is to issue (sell) bonds. The organization will agree to pay some interest rate on the bonds and further agree to redeem the bonds (i.e., buy them back) at some time in the future (the redemption date). This process is nothing but the taking back of the certificate and returning of the principal.

Companies of all sizes issue corporate bonds. Bondholders are not owners of the corporation. But if the company gets in financial trouble and needs to dissolve, bondholders must be paid off in full before stockholders get anything. If the corporation defaults on any bond payment, any bondholder can go into bankruptcy court and request the corporation be placed in bankruptcy.

Municipal bonds are issued by cities, states, and other local agencies and may or may not be as safe as corporate bonds. The taxing authority of the state of town backs some municipal bonds, while others rely on earning income to pay the bond interest and principal. Municipal bonds are not taxable by the federal government (some might be subject to A Minimum Tax, AMT) and so don't have to pay as much interest as equivalent corporate bonds.

U.S. Bonds are issued by the Treasury Department and other government agencies and are considered to be safer than corporate bonds, so they pay less interest than similar term corporate bonds. Treasury bonds are not taxable by the state and some states do not tax bonds of other government agencies. Shorter-term bonds are called notes and much shorter term bonds (a year or less) are called bills, and these have different minimum purchase amounts.

Debt instruments are nothing but loans taken by either company or the govt. or the municipality. There are various types of debt instruments like debenture, bond, notes, bills and many more. The name varies depending upon the issuer or nature of the instrument. But one common characteristic of most of them is that, they all carry some coupon Interest rate. I say most and not all because Zero coupon bonds do not carry any coupon rate. We will discuss about these instruments else where in this document.

 Variable rate of interest:

The interest of these securities are linked to some reference rate, many cases to LIBOR (London Inter Bank Offer Rate). They may be some basis points above LIBOR, say 200 basis points. This means LIBOR + 2%. If LIBOR is 5%, then the interest comes to 7%. Depending upon the LIBOR movement, the interest rate on the bond also varies.

MOTIVATION MESSAGES

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MOTIVATION MESSAGES
Our lives are not determined by what happens to us
But by how we react to what happens,
Not by what life brings to us,
But by the attitude we bring to life.

If you don’t step forward, you’re always in the same place.
If you don’t ask, the answer is most likely no.
Nothing is achieved without some effort from you.

Never cut the wings of your dreams,
Let it fly all the time as they are the heart-beat
And the freedom of your soul.

A good plan for today is better
Than a great plan for tomorrow…!
Look backward with satisfaction…!
& look forward with confidence.

Grudges are a waste of perfect happiness.
Laugh when you can,
Apologize when you should,
And let go of what you can’t change.

Faith is important.
No matter how you pray, meditate, relax.
Have faith that it will work
and
it really will .

You can see the future with a vision
Study your present situation throughly. Go over in your imagination the various courses of action possible to you. Visualize the consequences which can follow from …

Know the true value of time;
snatch, seize, and enjoy every moment of it.
No idleness, no delay, no procrastination;
never put off till tomorrow what you can do today.

Every Extra ordinary success is an accumulation of thousands of disciplined ordinary efforts The plus symbol is made
with 2 minus symbols!”
So all NEGATIVE things
can B shaped as positives
by our SMART work & POSITIVE thinking!

A.r rehman was asked at his award function:
“which is your best music?”
he replied,
“my next music”
so let ur aim be better than before.

Service Tax

2012-07-11T21:22:00.001+05:30

SERVICE TAX

Service Tax's concept

"Service to mankind is service to goods."

The term service means the act of helping or doing work for another or for a community etc.

Thus its stands for assistance or benefit given to someone.

Though ordinarily for rendering such service certain payment is made but it is not so in all the cases.

The amount charged for such service is the remuneration of the person providing such service.

If we look back, tax on services is not new as we have been paying taxes on services in past also in the form of luxury tax, entertainment tax, expenditure tax, amusement tax, gambling tax, commercial tax, interest tax etc.

Need for Service Tax

In any Welfare State, it is the prime responsibility of the Government to fulfill the increasing developmental needs of the country and its people by way of public expenditure. India being a developing economy is striving to fulfill the obligations of a Welfare State within its limited resources. The Government's primary sources of revenue are direct and indirect taxes.

Central Excise Duty on the goods manufactured / produced in India and Customs Duties on imported goods constitute the two major sources of indirect taxes in India. But revenue receipts from Customs & Excise are not keeping pace with the growth in economy to WTO commitments and rationalization of commodity duties.

It is also well known that services constitute a larger proportion of the consumption of the rich rather than of the poor as the demand for services is income-elastic. Depending on the socio-economic compulsions, each country evolved a taxation system on services adopting either a comprehensive approach or a selective approach.

While most of the developed countries tax all the services with very few and limited exemptions, some of the developing countries tax select services only. India has adopted a selective approach to taxation of services.

Introduction of Service Tax in India

Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech for the year 1994-95 introduced the new concept of Service Tax and stated that "There is no sound reason for exempting services from taxation, therefore, I propose to make a modest effort in this direction by imposing a tax on services of telephones, non-life insurance and stock brokers."

Service Tax had been levied on the recommendations made in early 1990's by the Tax Reforms Committee headed by Dr.Raja Chelliah. The Committee pointed out that the indirect taxes at the Central level should be broadly neutral in relation to production and consumption of goods and should, in course of time cover commodities and services. The Committee felt that we should move towards full-fledged Value Added Tax (VAT) system covering services and commodities.

Service tax must be a part of VAT at the central level. It was envisaged that as the central excise duties on goods would get gradually transformed into a value added tax at the manufacturing level, service tax would get woven into that system. Therefore, a tax could be levied on services that enter into the productive process. The Committee emphasized the importance of moving towards VAT, for making the system of indirect taxation broadly revenue neutral in relation to production and consumption and widening the tax base by covering exempted commodities. The Committee also recommended charging of tax on services such as advertising, insurance, share broking and telecom etc. to begin with on the pattern of advanced economies. The basic objective of Service Tax is broadening the tax base, augmentation of revenue and larger participation of citizens in the economic development of the nation.

Bringing services under taxation is not simple as the services are intangible and are provided by large groups of organized as well as unorganized service providers including retailers who are scattered across the country. Further, there are several services, which are of intermediate nature. The low level of education of service providers also poses difficulties to both-tax administration and assessees.

Authority

Service tax was introduced in India for the first time in 1994. Chapter V of the Finance Act, 1994 (32 of 1994) as amended, (Sections 64 to 96) and Chapter VA of the Finance Act, 2003 deals with imposition of Service Tax. The Authority of levy of Service Tax on specified services is contained in Section 66 of the Finance Act, 1994 as amended. At present this, section stipulates a rate of tax of 12% of the taxable value of these services and Education Cess @2% and Secondary/Higher Education Cess @1% in liable on the Service Tax levied and collected under Section 66 of the Finance Act, 1994.

Administration of Act.
Constitutional Validity

Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. Schedule VII divides this subject into three categories-

a) Union list (only Central Government has power of legislation)
b) State list (only State Government has power of legislation)
c) Concurrent list (both Central and State Government can pass legislation).

To enable parliament to formulate by law principles for determining the modalities of levying the Service Tax by the Central Govt. & collection of the proceeds there of by the Central Govt. & the State, the amendment vide constitution (95th amendment) Act, 2003 has been made.

Consequently, new article 268 A has been inserted for Service Tax levy by Union Govt., collected and appropriated by the Union Govt., and amendment of seventh schedule to the constitution, in list I-Union list after entry 92B, entry 92C has been inserted for taxes on services as well as in article 270 of the constitution the clause (1) article 268A has been included.

Formation and function of DGST

Considering the increasing workload due to the expanding coverage of service tax, it has been decided to centralize all the work and entrust the same to a separate unit supervised by a very senior official. Accordingly, the office of Director General (Service Tax) has been formed in the year 1997.

It is headed by the Director General (Service Tax).

SCHEME FOR LEVY, ASSESSMENT
& COLLECTION-OF SERVICE TAX

Service Tax payable by whom.

The Tax is normally payable by the service provider. However, in special circumstances, the Govt. may notify the payment not by the service provider by a person as notified. Considerations like administrative ease, cost of collection may require the shifting of the burden of payment from the service provider to service receiver or any other person.

To illustrate,

the service Tax leviable on service provided by an insurance agent is not to be paid by the insurance agent himself but by the insurance company accordingly to Section 68(2) of the Finance Act, 1994.

What is Service Tax?

Service tax is an indirect levy imposed by the Union Government in terms of residuary entry No.97 in list (I) of the 7th Schedule of the constitution. The tax is applicable to services specified in the Section 64 to 96 of chapter V of the Finance Act, 1994 as amended.

The Government have also notified the procedures to be followed for levy and collection of service tax vide Service Tax Rules, 1994 as amended. At present the rate of Service Tax is 12% to be levied on the "Value of Taxable Service" and Education Cess @2% and Higher Education Cess@1% is leviable on the Service leived and collected. Generally speaking "Value of Taxable Service" means the gross amount received by the Service provider for the taxable service rendered by him.

The person who provides the Taxable service on receipt of charges is responsible for paying the service tax to the government.

Value of Taxable Service

The value of any taxable service shall be generally the gross amount charged by the Service providers for such services rendered by him (Section 67)

In other words, "Gross Amount" here indicate that no deduction shall be allowed in respect of any expenditure incurred by the service provider which has proximate connection in rendering the services by him.

In a case where the provision of Service is for a consideration not wholly or partly consisting of monthly, be such amount in money as with the addition of Service tax charged.

In a case where the provision of service is for a consideration, which is not accountable, be the amount as may be determined in prescribed manner.

Rules & Regulations

The Finance Act, 1994 (32 of 1994) as amended authorizes levy and collection of Service Tax and also provides the method of levy, the circumstances in which, the levy would arise, the procedures to be followed, and allied subjects like assessments, penalty etc.

The Finance Act, 1994 empowers the Central Govt. to frame the Rules governing the procedural aspects of Service Tax matters. The Govt. vide Notification No. 2/94 dated 28.06.1994 as amended have framed the Service Tax Rules, 1994, which came into effect on 1st day of July, 1994. Similarly, Export of Service Rules, 2005 vide Notification No. 9/2005 ST dated 03.03.2005 as amended, taxation of services, provided from outside India and received in India, Rules 2006 vide Notification No. 11/2006 dated 19.04.2006, Service Tax (Registration of Special Category of Persons) Rules, 2005 vide 17/2003 ST dated 23.07.2003 and Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 vide Notification No. 32/2007 dated 22.05.2007 have been framed.

Salient Features

No Registration Fee.
(Rule 4(1) Deemed Registration, if registration not granted within 7 days. (Rule 4(5)
Penalty of Rs. 500/- for non-registration or delay in registration. (Section 75A)
No specific records has been prescribed. (Rule 5(1)) Tax on uniform rate @12% advalorem + Education Cess @2% and higher Education Cess @1% on Service Tax
No tax on export of services.
Payment of Tax on realization of value of taxable service. (Rule 6)
Payment of Tax on Quarterly basis for non-corporate assessee and monthly for corporate assessee. (Rule 6)
Simple interest @13% per annum on delay of payment of tax. (Section 75)
Hefty penalty on delay of payment of tax. (Section 76)
Return on Half Yearly basis for all assessee (Rule 7)
Facility for electronically filing of return for selective services.
Penalty for delay in filing of return. (Section 77)
Self adjustment of excess service tax paid in some cases Credit of Service Tax paid on input service.
Self Assessment. (Section 70)
Refund of Service Tax and Appeal against the rejection of refund. (Section 83)
Wide power to issue notice for the production of accounts, documents etc. (Section 83)
Penalty for concealment reduced to 25% from 100% to 200% w.e.f. 14.05.2003.
Administered by Central Excise Department. For this purpose, Section 83 of the Act provides that certain specified Sections of the Central Excise Act, 1944 will also apply in relation to Service Tax as they apply in relation to Central Excise Duty.

Obligations and Time Limits

Section/ Rules	Obligations	Frequency	Time Limit	Prescribed Form
68 read with Rule 6(1)	Payment of Service Tax	Monthly	For coporate assessees 5th for the following month	TR-6 Challan
68 read with Rule 6(1)	Payment of Service Tax	Quarterly	For individuals and firms by 5th for the following month	TR-6 Challan
69 read with Rule 4(1)	Registration under SERVICE TAX	One Time	Within 30 days from the date on which tax is levied or commence the business	Form ST-1
Rule 4(5)	Grant of Certificate of registration	One Time	Within 7 days of registration application, otherwise it will be deemed to have been granted.	Form ST-2
70 read with rules 7(1) & 7(2)	Return of Service Tax	Half Yearly	Within 25 days of end of each half year.	Form ST-3/ST-3A (in triplicate) alongwith copy of Form TR-6.
Rule 6(4) and 6(5)	A statement giving details of the difference between the Service Tax deposited and Service Tax liability to be paid for each month, when assessee opted for provisional assessment.	Monthly/ Quarterly as the case may be	Not Prescribed	Form ST-3A
85 read with Rule 8(1) and 8(2)	Appeals by an Assessee to Commissioner, Central Excise(Appeals)	If required	3 months of the receipt of the order sought to be appealed	Form ST-4
86 (1) and (3) read with Rule 9(1)	Appeals by an Assessee against the Order of Commissioner under Section 84 or Commissioner (Appeals) under Section 85 to the appellate tribunal	if Required	3 months of the receipt of the order sought to be appealed	Form ST-6
86 (2) and (3) read with Rule 9(2)	Appeals by Commissioner on the direction of the Committee of Chief Commissioner/ against the Order of Commissioner under Section 84 to the appellate tribunal.	if Required	3 months of the receipt of the order sought to be appealed	Form ST-7
86 (2A) and (3) read with Rule 9(2A)	Appeals by Asstt/Deputy Commissioner on the direction of the Committee of Chief Commissioner against the Order of Commissioner(Appeals) under Section 85 to the appellate tribunal.	If required	3 months of the receipt of the order sought to be appealed	Form ST-6
86 (4) read with Rule 9(3)	Memorandum of cross objection by Commissioner or Deputy/ Assistant Commissioner or assessee as the case may be.		When Notice of Appeal received	Within 45 days of the receipt of the Notice	Form ST-8

TIME MANAGEMENT

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Setting Yourself Up for Success

Time is the great equaliser — everyone has the same amount in a day.
No matter who you are, where you live, and what you do, you clock the
same 24-hour cycle as the next person. One person may be wealthier than
another, but that doesn’t earn him a minute more than the poorest people on
the planet.

If that simple fact seems a bit discouraging, think of it this way: You may
not have the power to get yourself more time, but you do have the power to
make the most of it. You can take your 365 days a year, seven days a week,
and 1,440 minutes in a day and invest them in such a way that you reap a
return that fullfills your life and attracts the success you dream of.

That’s what this book is about: taking control of how you spend your time to
make sure you’re using it how you really want to. You really are in control of
your time, even though you don’t always feel like it — even if you have a job
that demands overtime; even if you have kids who keep you in the carpool
loop; even if you have dreams and goals that involve developing new skills or
furthering your education.

All in all, discovering how to manage your time well is part mental restructur-
ing and part creating a system. Effective time management requires a little
introspection, some good habits and organizational skills, and more than a
few logistical and tactical tools. But all are achievable, and all are covered
in this book. So if you have the time — and I assure you that you do — get
ready for a journey that’s certain to, if not buy you more time, show you how
to make the absolute most of the 24 hours in your day.

Getting to Know Yourself

Although everyone gets the same number of hours to work with each day,
what people don’t have in equal amounts are other valuable assets: skill,
intelligence, money, ambition, energy, passion, attitude, even looks. All these
unique reserves play into your best use of time. So the better you understand
yourself — your strengths, weaknesses, goals, values, and motivations — the
easier it is to manage your time effectively. In this section, you look at your
strengths and goals, think about how much your time is worth, and observe per-
sonal energy and behavior patterns that affect your focus throughout the day.

Assessing your strengths and weaknesses

As a young man, I thought I was good — okay, I admit it; I thought I was
great — at a much larger group of skills, tasks, and jobs than I do today. In
fact, the older I get, the more I realize the list of what I’m not good at dwarfs
the lists of things I am good at. Being consciously competent at those few,
however, gets me a lot further than being unconsciously incompetent, as
I once was. Despite my poor academic record in high school, as a young
adult, I was a quick study at what I needed to do to be as successful in life
as I wanted to be. At some point, I saw the light and realized I needed to
face up to what I had to do to get where I wanted to go.

First,

I took stock of my assets: I tallied up my strengths, skills, and even my
weaknesses. And I identified things I needed to work on and things I needed to
leverage. That’s when I realized that although some people were smarter, were
more educated, had more money, and knew more influential people than I did,
I had the same amount of time as anyone else. And if I wanted to get ahead, it
was up to me to harness my time and invest it in such a way to get a greater
return. My willingness to invest more time to gain the edge helped equalize the
playing field for me and help me achieve the success I enjoy today.

Chances are that by this point in your life, you’ve discovered some skills that

you come to naturally or perhaps have worked hard to acquire. Maybe you’re

a master negotiator. Or a whiz with numbers. You may be a good writer. Or

you may have a silver tongue. Whatever your strengths, developing the handful

that brings you the most return on your efforts, propelling you forward

to attain your goals, is a more productive course of action than trying to be

the best at everything. For most people, these strengths typically number no

more than a half-dozen.

Naming goals to give you direction

You know how it is: When you’re working toward something, keeping your
focus is much easier. A woman may want to lose weight, for example, but per-
haps she struggles to stick to a diet or exercise plan. But if her son’s wedding
is looming three months away on her calendar, she may be more inspired to
stay on track, cutting back on second helpings and getting in workouts.

Your goals can serve as inspiration in adopting good time-management skills.
After all, managing your time isn’t really a benefit in and of itself, but manag-
ing your time so you can spend more of it doing what’s important to you is —
whether you’re saving for a retirement of travel and adventure or buying the
house in the perfect neighborhood.

Using your aspirations to fire up your time management success means you
have to identify your goals and keep them in the front of your mind. Pinning
down what’s most important to you may require some soul searching. Write
down your goals — all of them — and follow these guidelines:

Cast a wide net. Go for the big goals, such as joining the Peace Corps, aswell as the not-so-big ones, such as getting an energy-efficient car next year.

Think big. Don’t rein in your dreams because they seem unrealistic.

Be as descriptive as possible. Instead of “build my dream house,” flesh it out: Where is this house? How big? What features does it have? What does it look like? When do you want to move in?

Don’t limit goals to a single category. Think about goals for your career, your personal life, your social situation, your financial status, and any other facet of life that’s important to you.

Assigning your time a monetary worth to guide your priorities

Most people think about the value of their time as it relates to on-the-job
activity. The fast-food worker knows he earns a minimum wage per hour. The
freelance artist advertises a per-hour rate. The massage therapist charges
for her services in half-hour and hour increments. But to be truly aware of
the value of your time, you need to carry this concept into your personal life
as well. The value of time in your personal life is at least as valuable as your
work life time. In some cases, personal time is priceless

.
One of the most important points to remember as you work through this book
is that it’s okay not to get everything done. What’s critical is making sure that
the important things are getting done. By assigning value to your time and using
the skills you acquire from this book, you can clearly identify what’s important
and make conscious, wise choices. For example, if you need to save another
$200 per month because you want to start an account for your children’s col-
lege education, you may determine that putting in an extra shift at work may
not be worth the loss of time with your family, even at time-and-a-half pay. Or
if you really detest yard work, then paying someone else $50 to cut your grass
may be a fair trade for the extra two hours of time watching the game.

Identifying your rhythm to get in the zone

Athletes talk about being in the zone, a place where positive results seem to
stick like a magnet. Well, I’m here to tell you that the zone isn’t some magical
place where wishes come true. Anybody can get there, without a lucky token
or fairy dust. What it takes is focus, singular focus.

As an ex-professional athlete in racquetball in the 1980s, I can say I’ve been
in the zone a number of times. And I’ve experienced that same distillation of
focus and electric energy on work projects as well — times when my volume
and quality of work was bordering on unbelievable. If you can get your focus
under control, you can visit the zone every day and make great things happen.
If you know your rhythms — when you’re most on, what times of day you’re
best equipped to undertake certain tasks — you can perform your most
important activities when you’re in the zone. Everyone works to a unique
pace, and recognizing that rhythm is one of the most valuable personal
discoveries you can make.

Scheduling your time and creating a routine

Sticking to a time-scheduling system can’t guarantee the return of your long-
lost vacation days, but by regularly tracking your meetings, appointments,
and obligations, you reduce your odds of double-booking and scheduling
appointments too close. And by planning ahead, you make sure to make time
for all the important things first.

For years, I’ve followed the time-blocking system, The system ensures that you put your priorities first (starting with routines
and then moving to individual tasks/activities) before scheduling in commit-
ments and activities of lesser importance.

Such time-management techniques are just as applicable to the other spheres
of your life. There’s a reason why I advise you to plug in your personal com-
mitments first when filling in your time-blocking schedule: Your personal
time is worthy of protection, and you can further enhance that time by apply-
ing time-management principles.

Organizing your surroundings

A good system of time management requires order and organization. Creating
order in your world saves time wasted searching for stuff, from important
phone numbers to your shoes. But even more, physical order creates mental
order and helps you perform more efficiently.
Yes, your workspace should be clean and orderly, with papers and folders
arranged in some sort of sequence that makes items easy and quick to find.
Your desk should be cleared off, providing space to work. Your important
tools — phone, computer, calculator — ought to be within reach. And your
day planner, of course, should be at your fingertips. Your briefcase, your
meeting planner, even your closet has an impact on your time management
success.

Using time-saving technology

Organization extends beyond your work area: Not only should your com-
puter be nearby, but the files, documents, and contact information on that
computer should be ordered for quick access. The computer stores your
address list, tracks your correspondence, and contains your calendar and
upcoming appointments.

But that’s just the beginning. Today’s teleconferencing and videoconferenc-
ing equipment means you can hold weekly meetings with your colleagues
who live on the other side of the globe without anyone having to turn in a
travel expense report. Cellphones and PDAs mean you can conduct business
on the road without having to pull off to find a phone booth.

Overcoming Time-Management Obstacles

Anyone can conquer time management, but it’s not always easy. If your
experience is anything like mine, sometimes your days feel like a video game,
where you’re in constant threat of being gobbled up on your course to the
finish line.

But instead of cartoon threats, your obstacles are your own short-
comings (poor communication skills, procrastination, and the inability to
make wise and quick decisions), time-wasting co-workers and bosses, phone
and people interruptions, and unproductive meetings.

Communicating effectively

Communicating effectively is one of the best ways to maximize your time.
One of the biggest time-wasters on company time is, no surprise, talking
with co-workers.

But what may be a surprise is that the abuse isn’t a func-tion of weekend catch-up discussions that take place at the water cooler orthe gossip circle at the copy machine. Rather, it’s the banter at the weeklystaff status reports, the drawn-out updates of projects that never seem to conclude, the sales presentations that get off-track. It’s all the meetings thatcould be as brief as 10 minutes but somehow take an hour or more.
At your disposal, however, is an amazing weapon for taming these misbehav-ing encounters: your words. With a few deft remarks, you have the power to bring these meetings to a productive close.

Streamlining interactions with co-workers and customers

Most people find themselves in a work environment in which they regularly
interact with others, whether co-workers, business associations, or custom-
ers. The workday is rife with opportunities for interruption, distraction, and
time-wasting.

In addition to the phone calls and cubicle pop-ins, you have
business appointments, associates who keep you waiting, or meetings that
are unfocused and poorly run.

Maintaining control of your time at work requires you to develop some ways

to manage meetings, appointments, and other work interactions so they’re

as efficient and productive as possible.

I explore tac-tics for planning, setting, leading, or just plain attending such gatherings.
Whether you initiate the interaction or you’re merely a participant, you can
have some control over the meeting.

Ah,

but what if you’re in sales or a customer service capacity? In such posi-
tions, taking control of your time is a little more challenging. To make the
sale, you want to take as much time as your prospect wants. And when
addressing a service issue, your most important objective is to make the
customer happy. But you can be successful in sales and serve your clients
well and still keep control of your time.

BODY LANGUAGE

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BODY LANGUAGE IN PRESENTATIONS

The greatest difference between a presentation and a piece of academic writing is the

way in which you are on show. Your appearance and style are very visible and you only

have a short time in which to make an impact. This is why the task of making a

presentation can become an intimidating hurdle for many people.

But don't worry. There are some straightforward and simple techniques that can

enable you to communicate effectively - if you think sensibly and rehearse your

behaviour.

What sort of image do you want to present?

If you want your audience to accept you, you need to appear:

confident

straightforward

in command of your subject

These characteristics reassure your audience that you are worth listening to - and it is
important that you make them share your confidence.
Think back to your own
reactions when you have had to listen to a nervous speaker. As an American politician
once said, “The key is sincerity - once you can fake that, you’ve got it cracked!”
Using Your Hands

Try out these various gestures to see how they feel to you, and why they are either
effective or distracting. Experience them for yourself.

Don’t:

• point at the audience. It makes them feel threatened and produces very
negative reactions to the speaker.

• rub your hands together. This is often interpreted as implying that you are
lying, and subconsciously washing your hands to rid yourself of the untruth.
Get someone else to do this hand movement and watch them while they talk to
you. Would you buy a second-hand car from them?

• fold your arms. This comes across as a protective barrier, separating you from

your audience and distancing them from your message.

• clench your fists by your sides. This looks very nervous and consequently
lacking in confidence.
put your hands in your pockets. If you are wearing trousers, this can feel
reassuring - but you may start to fiddle with your change, which is very
distracting to your audience. Even as experienced a politician as Cecil
Parkinson completely lost his nerve when Dennis Skinner heckled him about
this!

•
Do:

• use your hands to invite your audience to agree with you. You can do this by
keeping your hand open with the palm pointing up. One hand works well - using
both hands can start to look either biblical or desperate!

• keep your hand by your side with the fingers open. This looks very natural and
relaxed.

• use a pointer if you can, even if it's only a pencil to draw attention to items on
your OHP slide. This gives your hands a purpose and can't fail to focus your
audience to the points you feel are important.

• make your hand movements co-ordinate with what you are saying. Avoid

dramatic gestures, especially if you don't get the timing right! Nothing looks

more mechanical and contrived.

Using Your Face

When you are listening to someone, you concentrate on their face. Have you ever raised

your eyebrows when you’ve seen someone you know? This ‘eyebrow flash’ has been

shown to be the widest cross-cultural non-verbal signal that humans use. Expressions

are enormously important, so you need to consider them.

• Use the ‘eyebrow flash’ - sparingly - to signal your warm personality to your
audience and to encourage them to feel included.

• Smile at your audience - but flash them the occasional reassuring smile. Don’t
     glue on a plastic grin and leave it fixed there. Use personal interaction.

• Spread your attention around your audience. Don’t just address one person.
     Try to make sure that no-one feels isolated. Look at people even if they don’t
      seem to be looking back. They will, and they expect to see you talking to them,
     and not to the floor or a piece of paper!
Finally, think about your appearance. Dress so that you feel comfortable, but try to
give the impression that you deserve to be taken seriously.

Think logically

2012-06-17T02:10:00.000+05:30

Some of the HR questions asked to find out if the candidate thinks “out of box”.

Que 1:

“What will you do if I run away with your sister?”

The candidate answered ” There won’t be better match for my sister than you, sir.”
Que 2:

(to girl student) – What if one morning you found that you were pregnant when you woke up ?

I will be very excited and take a day off, to celebrate with my husband. (Why should I think it in the wrong way, she said later when asked.)
Que 3:

Interviewer ordered a cup of coffee for the candidate. Coffee arrived and was kept before the candidate, then he asked “What is before you?”

Candidate: Instantly replied “Tea”.
Answer: Alphabet “T” before Alphabet “U”.
Que 4:

Where Lord Rama have celebrated his “First Diwali”?

People will start thinking of Ayodya, Mithila [Janaki's place], Lanka etc…

But the logic is, Diwali was a celebrated as a mark of Lord Krishna Killing Narakasura. In Dusavataar, Krishnavathaar comes after Raamavathaar.

So, answer is nowhere.
Que 5:

You are driving along in your car on a wild, stormy night, it’s raining heavily, when suddenly you pass by a bus stop, and you see three people waiting for a bus:

An old lady who looks as if she is about to die.
An old friend who once saved your life.
The perfect partner you have been dreaming about.

Which one would you choose to offer a ride to, knowing very well that there could only be one passenger in your car?

This is a moral/ethical dilemma that was once actually used as part of a job application.

The candidate who was hired (out of 129 applicants) had no trouble for his answer. What was his answer?

He simply answered:

“I would give the car keys to my Old friend and let him take the lady to the hospital. I would stay behind and wait for the bus with the partner of my dreams.”
Que 7:

Int: “This is your last question of the interview. Please tell me the exact position of the center of this table where u have kept your files.”

Candidate confidently put one of his finger at some point at the table and said that this was the central point at the table. Interviewer asked “how did you decide that this is the central point of this table?”, then he answers quickly that “Sir you are not supposed to ask any more question, as it was the last question as you promised …..

Que8. Questions That Have a Correct Answer

Question: You’re in a room with three light switches, each of which controls one of three light bulbs in the next room. Your task is to determine which switch controls which bulb. All lights are initially off, and you can't see into one room from the other. You may inspect the room only once. How can you determine which switch is connected to which light bulb?
Answer: Call the switches 1, 2 and 3. Leave Switch 1 off. Turn Switch 2 on for five minutes and then turn it off. Turn Switch 3 on and leave it on. Enter the room. The bulb that is on is controlled by Switch 3 (the one you left on). Feel the light bulbs that are off for heat. The bulb that is off and warm is controlled by Switch 2 (the one you turned on, then off). The bulb that is off and cold is controlled by Switch 1 (the one that you didn't turn on).

Que9. Questions That Don’t Have one Correct Answer

Question: How would you weigh a Boeing 747 without using scales?
Answer: There are many solutions, but one possible response is: you put the jet on a large boat and paint a mark on the hull where the water line is. Now remove the jet and the boat rises. Then, load the ship with items of known weight until it sinks to the line you painted. The total weight of the items will equal the weight of the jet.

Que8. Questions That You Have to Break Down

Question: Here's a mobile phone. Deconstruct it for me.
Answer: This question might not be about mobile phones at all. They might ask you to explain something else entirely. All you have to do here is explain what the thing they're asking about does. So describe what it is as simply as you can, e.g., "this is a device you use to communicate with people in your business and personal life".
Then, just go through and talk about what it does, e.g., "this can be used to store contact details, make phone calls, send emails, take photos or videos, etc." You could also relate it to the job or the workplace and talk about how the mobile phone would be used.

Que10. Questions That Test Your Performance

Question: Please take this pen and sell it to me. Tell me about its design, features, benefits and values.
Answer: Again, it might not be a pen, but whatever the object is, you have to think about what you can say that will convince the interviewer to buy it. You can be creative and make up some different uses for the pen, e.g., you could use it as a hair pin, you could use it to pick a lock, you could use it to scratch your back, etc. The way you deliver this answer is important too - you need to get excited about the pen as a product you really believe in.

This is what Interviewer expects from the Interviewee.

Think out of box in interview

Negotiable instrument part-4

2012-06-15T13:54:00.000+05:30

P.91. The drawer, 'D' is induced by 'A' to draw a cheque in favour of P, who is an existing person. 'A' instead of sending the cheque to 'P', forges his name and pays the cheque into his own bank. Whether 'D' can recover the amount of the cheque from 'A's banker. Decide.

Sol: As per section 131, if banker receives payment for a customer of a cheque crossed generally or specially in the name of that banker in good faith and without negligence, he shall not incur any liability to the true owner of the cheque just because he (i.e. bank) has received payment for customer. This would be so even if the title to the cheque was defective. Thus, Banker will not be liable if it has only collected the payment.

P.92. On a Bill of Exchange for Rs.10,000, X's acceptance to the Bill is forged. A takes the Bill from his customer for value and in good faith before the Bill becomes payable. State with reasons whether A can be considered as a 'holder in due course' and whether A can receive the amount of Bill from X.

Sol: The Negotiable Instruments Act makes no specific provision in respect of forgery. Hence, common law provisions apply. As per common law, a forgery is nullity of law and it passes no title to holder. It is not a mere defect in title but complete absence of title, which cannot be cured. Section 58 of Negotiable Instruments Act does not give protection against forgery, though it gives protection against offence or fraud. Hence, a person does not get good title even if he obtains Bill bona fide and for value, if the signature was forged. Hence, A is not holder in due course and cannot get amount from X.

P.93. X, by inducing Y, obtains a Bill of Exchange from him fraudulently in his (X) favour. Later, he enters into a commercial deal and endorses the bill to Z towards consideration to him (Z) for the deal. Z takes the Bill as a holder in due course. Z subsequently endorses the bill to X for value, as consideration to X for some other deal. On maturity, the bill is dishonoured. X sues Y for recovery of money. With reference to the provisions of Negotiable Instruments Act, decide whether X will succeed in the case.

Sol: Section 58 of Negotiable Instruments Act provides that when an instrument is obtained by fraud, offence or for unlawful consideration, possessor or endorsee cannot receive the amount of Instrument. Hence, normally, X would not be entitled to sue Y as X has obtained instrument through fraud.

However, as per section 53, a holder who derives title from holder in due course has all rights of a holder in due course. Since X derives his title from Z (who is a holder in due course), X has all rights of Z.

Second part of section 58 also makes it clear that even if a negotiable instrument is obtained by means of an offence or fraud or for unlawful consideration, the possessor or endorsee is entitled to receive the amount from the maker, if he is a holder in due course or claims through a person who was a holder in due course. Hence, X can sue Y as he is deriving his right from Z, who is holder in due course. Hence, X will succeed.

P.94. State whether the following shall amount to a valid acceptance:

An oral acceptance;
Acceptance by mere signature of the drawee without the addition of the word ‘Accepted’ on the negotiable instrument.

Sol:

It is one of the essential elements of a valid acceptance that the acceptance must be written on the bill and signed by the drawee. An oral acceptance is not sufficient in law. Therefore, an oral acceptance does not stand to be a valid acceptance.
The usual form in which the drawee accepts the instrument is by writing the work “accepted” across the face of the bill and signing his name underneath. The mere signature of the drawee without the addition of the words ‘accepted’ is a valid acceptance.

As the law prescribes no particular form for acceptance, there can be no difficulty in construing an acknowledgement as an acceptance but it must satisfy the requirements of Section 7 of Negotiable Instrument Act i.e. it must appear on the bill and must be signed by the drawee (Manackchand v. Chartered Bank, AIR 1961 and 653). knowledge of yours.

P.95. An acceptor accepts a “Bill of Exchange” but write on it “Accepted but payment will be made when goods delivered to me is sold.” Decide the validity.

Sol: Acceptance may be either general or qualified. An acceptance is said to be general when the drawee assents without qualification order of the drawer. The qualification may relate to an event, amount, place, time etc. (Explanation to Section 86 of the Negotiable Instruments Act 1881). In the given case, the acceptance is a qualified acceptance since a condition has been attached declaring the payment to be dependent on the happening of an event therein stated.

As a rule, acceptance must be general acceptance and therefore, the holder is at liberty to refuse to take a qualified acceptance. Where, he refuse to take it, the bill shall be dishonoured by non-acceptance. But, if he accepts the qualified acceptance, even then it binds only him and the acceptor and not the other parties who do not consent thereto. (Section 86)

P.96. State whether a bill can be said to have accepted by B in each of the following cases:

B delivers the bill confirming orally that he has accepted the bill.
B delivers the bill after writing the words 'accepted' only.
B delivers the bill without writing words 'accepted' but after putting his signature on the face of the bill.
B delivers the bill without writing the words 'accepted' but after putting his signatures on the back of the bill.
B's agent delivers the bill after putting his signature as an agent of the bill.
B puts his signature on the bill and dies. Subsequently, the bill was delivered by B's heirs.
B puts his signatures on the bill and informs the drawer that he has accepted the bill but does not deliver the billto the drawer.

Case	Decision	Reason
(a) (b) (c) (d) (e) (f) (g)	No No Yes Yes Yes [Sec. 27] No [Sec. 46] Yes [Sec. 46]	The acceptance must be in writing. The acceptance has not been signed by the drawee. The acceptance has been signed by the drawee. The use of the word 'accepted' is not compulsory. The acceptance is on the bill. It is immaterial whether the acceptance is on the face or back of the bill. The acceptance may also be signed by a duly authorised agent. The acceptance would not complete until there is delivery thereof. The acceptance has completed on giving notice of acceptance.

P.97. State whether presentment for acceptance is necessary in each of the following cases:

A bill payable on demand. knowledge of yours.
A bill payable 30 days after date.
A bill payable on 1st Jan. 1997.
A bill payable 3 months after sight.
A bill payable 3 months after presentment.
A bill in which there is an express provision that it shall be presented for acceptance before it is presented for payment.
Where the drawee cannot after reasonable search be found.
Where the drawee is a fictitious person.
Where the drawee is a person incapable of contracting.

Sol: First state the provisions relating to ‘presentment for acceptance.’

Presentment is necessary in: (d), (e), (f).

Presentment is not necessary in: (a), (b), (c), (g), (h), (i).

P.98. State whether presentment for payment is necessary to charge the drawer of instrument in each of the following alternative cases:

A promissory note payable on demand and is not payable at a specified place.
A promissory note or bill of exchange payable at a specified period after date of sight thereof.
A bill is not payable at a specified place and the acceptor cannot after due search be found.
A bill is payable at a specified place and neither the acceptor nor any person authorised to pay is present at suchplace during the usual business hours.
If the drawer cannot suffer any damage for want of presentment.

Sol: First state the provisions relating to ‘presentment for acceptance.’

Presentment is necessary: (b).

Presentment is not necessary: (a), (c), (d), (e).

P.99. A signs a blank stamped paper and places it in his drawer from where it was stolen, completed and negotiated. Is A liable to a holder in due course of such instrument?

Sol: A person cannot be held liable on an instrument for merely having signed the same unless it is accompanied by its delivery. To constitute and create any obligation, delivery of the instrument is a must. Therefore, A will not be liable to the holder in due course of such instrument.

P.100. A bill is dishonoured by non-acceptance. The bill is endorsed to 'A'. 'A' endorses it to 'B'. As between 'A' and 'B', the bill is subject to an agreement as to the discharge of 'A'. The bill is afterwards endorsed to 'C', who takes it with notice of dishonour. Decide, with reasons, whether 'C' is entitled to accept the bill in the capacity of a holder in due course.

Sol: To constitute a holder in due course, Section 9 of the Negotiable Instruments Act requires the holder to have obtained the instrument in good faith.

However, Section 53 provides that a holder of a negotiable instrument, who derives title from a holder in due course, will also acquire the status of holder in due course.

If a document reaches the hands of holder in due course, it will be cleansed of all defects and it remains good even if the subsequent holder has the notice past defects provided that he was not a party to them. Thus, 'E' shall get a good title to the bill.

P.101. A draws a bill of exchange on B for Rs.1,000 payable to the order of A. B accepts the bill but subsequently dishonours it by non-payment. A sues B on the bill. B proves that it was accepted for value as to Rs.500 and as an accommodation to the plaintiff as to the residue. Can A recover Rs.1,000?

Sol: No. Consideration absent in part. Can recover only Rs.500.

P.102. A issues a cheque for Rs.25,000/- in favour of B. A has sufficient amount in his account with the Bank. The cheque was not presented within reasonable time to the Bank for payment and the Bank, in the meantime, became bankrupt. Decide under the provisions of Negotiable Instruments Act, 1881, whether B can recover the money from A?

Sol: Section 84(1) provides that cheque should be presented to Bank within reasonable time. If cheque is not presented within reasonable time, meanwhile the drawer suffers actual damage, the drawer is discharged to the extent of such actual damage. This would be so if the cheque would have been passed if it was presented within reasonable time. As per section 84(2), in determining what is reasonable time, regard shall be had to (a) the nature of the instrument (b) the usage of trade and of bankers, and (c) facts of the particular case.

The drawer will get discharge, but the holder of the cheque will be treated as creditor of the bank, in place of drawer. He "Will be entitled to recover the amount from Bank. I [section 84(3)].

In the above case drawer i.e. A has suffered damage as cheque was not presented by B within reasonable time. Hence, A will get discharged but B will be the creditor of bank for amount of cheque and can recover the amount from bank.

P.103. Problem 3: C issues a cheque for Rs.15 without writing the word 'only' and gives it to D. D adds the words 'hundred only' after fifteen and adds two zeros after figure 15 as there is sufficient space for making these additions. The bank pays Rs. 1,500 to D who absconds. Is the bank liable to C for excess payment. knowledge of yours.

Sol: The problem relates to material alteration. In this regard, Section 87 of the Negotiable Instrument Act provides that "any material alteration of a negotiable instrument renders the same void as against anyone who is party thereto at the time of making such alteration and does not consent thereto". So, when a cheque is altered, as in the present case, a banker who makes the payment cannot debit the customer's account. However, Section 89 grants protection to a paying banker where the alteration is apparently not noticeable (similar to the given case) and the payment is made in due course as per Section 10. Thus, assuming that the bank made the payment in due course, it will enjoy protection under Section 89 and will not be liable to the customer (i.e. C).

P.104. A cheque was drawn by a customer on his Bank, marked 'Payee's Account only'. The cheque on the face of it was tampered by some one and converted into a bearer cheque. The bank was negligent in making payment to a bearer instead of payee. State with reference to provisions of Negotiable Instruments Act whether the Bank is liable to pay the amount to the customer.

Sol: Section 85 of Negotiable Instruments Act provides that banker is discharged if he makes payment in due course, if cheque payable to order is purported to be endorsed by or on behalf of payee. However, if there is obvious discrepancy between name of payee and his endorsement, bank will not be protected. Paying bank gets protection only when payment is 'in due course' and in accordance with apparent tenor of the cheque.

In this case, it is clear that payment made by Bank was not in due course in accordance with apparent tenor. Bank was negligent and will be liable to compensate the customer.

P.105. J stole a number of cheques belonging to G, indorsed them to himself and paid them into his account with C Bank. In each case, the money was immediately credited to his account and he was either allowed to withdraw the money or his overdrafts wiped out before the cheques could be cleared. G sues the bank for wrongful conversion of funds. Will he succeed?

Sol: Yes. The circumstances show that the banker was working as a holder and not as an agent. So bank is guilty of mistake and protection under the act will no be available.

P.106. A was a managing director and shareholder of a company. The cheque payable to the company were endorsed by him to himself in the capacity as managing director and deposited in personal account with B Bank. The bank collected the money and allowed him to withdraw. The company soon went into liquidation and the liquidator sues the bank for recovery of the money of the cheques payable to the company but credited to the account of A. Will he succeed?

Sol: Yes. Bank is guilty of negligence.

P.107. The drawer, ‘D’ is induced by ‘A’ to draw a cheque in favour of P, who is an existing person. ‘A’ instead of sending the cheque to ‘P’, forgoes his name and pays the cheque into his own bank. Whether ‘D’ can recover the amount of the cheque form ‘A’s banker. Decide.

Sol: The problem is based upon the privileges of a ‘holder in due course’. Section 42 of the Negotiable Instrument Act, 1881, states that an acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relived from liability to any holder in due cause claiming under an indorsement by the same hand as the drawer’s signature, and purporting to be made by the drawer. In this problem, P is not a fictitious payee and D, the drawer can recover the amount of the cheque from A’s bankers [North and South Wales Bank B. Macketh (1908); Town and Country Advance Co. B, Provincial Bank].

P.108. A induced B by fraud to draw a cheque payable to C or order. A obtained the cheque, forged C’s endorsement and collected proceeds to the cheque through his Bankers. B the drawer wants to recover the amount from C’s Bankers.Decide in the light of the provisions of Negotiable Instruments Act, 1881-

Whether B the drawer, can recover the amount of the cheque from C’s Bankers?
Whether C is the Fictitious Payee?
Would your answer be still the same in case C is a fictitious person?

Sol: According to Section 42 of the Negotiable Instruments Act, 1881 an acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an instrument by the same hand as the drawer’s signature, and purporting to be made by the drawer.

The word ‘fictitious payee’ means a person who is not in existence or being in existence, was never intended by the drawer to have the payment. Where drawer intends the payee to have the payment, then he is not a fictitious payee and the forgery of his signature will affect the validity of the cheque.

Applying the above, answers to the questions asked can be as under:

In this case B, the drawer can recover the amount of the cheque from C’s bankers because C’s title was derived through forged endorsement.
Here C is not a fictitious payee because the drawer intended him to receive payment.
The result would be different if C is not a real person or is a fictitious person or was not intended to have the payment.

P.109. A cheque was dishonoured at the first instance and the payee did not initiate action. The cheque was presented for payment for the second time and again it was dishonoured. State in this connection whether the payee can subsequently initiate prosecution for dishonour of cheque.

Sol: Supreme Court in Sadanandan Bhadran Vs. Madhavan Sunil Kumar case held that on a careful analysis of Section 138 of the Negotiable Instruments Act, 1981 it is seen that a cheque is said to be dishonoured when it is returned by the bank unpaid for any of the reasons mentioned therein. The said proviso lays down three conditions for the applicability of the above section. They are:

the cheque should have been presented to the bank within six months of its issue or within the period of its validity whichever is earlier;
the payee should have made a demand for payment by registered notice after the cheque is returned unpaid (within 30 days of receiving information that cheque was dishonoured); and
the drawer should have failed to pay the amount within 15 days of the receipt of notice.

Prosecution under section 138 can be launched only when all the 3 conditions are satisfied.

So far as the first condition is concerned, clause (a) of the proviso to Section 138 does not put any restriction upon the payee to successively present a dishonoured cheque during the period of validity. It is common for a cheque being presented again and again within its validity period in the expectation that it would be encashed. The question whether dishonour of the cheque on each occasion of its presentation gives rise to a fresh cause of action, the following facts are required to be proved to successfully prosecute the drawer for an offence under Section 138:

that the cheque was drawn for payment of an amount of money for discharge of a debt/liability and the cheque was dishonoured;
that the cheque was presented within the prescribed period; knowledge of yours.
that the payee made demand for payment of the money by giving a notice in writing to the drawer within the stipulated period; and
that the drawer failed to make the payment within 15 days of the receipt of the notice.

If one has to proceed on the basis of the generic meaning of the term' cause of action', certainly each of the above facts would constitute a part of the cause of action, but it is significant to note that clause (b) of Section 142 gives a restrictive meaning in that it refers to only one fact which will give rise to the cause of action and that is failure to make the payment within 15 days from the date of receipt of the notice.

Therefore, the holder / payee of a cheque can initiate prosecution for an offence under Section 138 for its dishonour for the second time, if he had not initiated such prosecution on the earlier cause of action.

P.110. A finance company after having issued a cheque in favour of a depositor informs the depositor not to deposit cheque as well as informs the bank to stop payment. Examine with reference to the provisions of Negotiable instruments Act whether it is an offence under the Act.

Sol: Section 138 of Negotiable Instruments Act provides for penalty of imprisonment and fine if cheque issued by him bounces for insufficiency of funds.

After issue of cheque, drawee can give instructions to bank to stop payment of a cheque. This is termed as countermanding of payment. In such case, it was argued that there is no offence. This would have provided an escape route to unscrupulous people and made the section 138 a 'dead letter'.

Hence, in Modi Cements Ltd. Vs. Kuchil Kumar Nandi case, it was held that the drawer will be liable even if he issues 'stop payment' instructions after issue of cheque.

In Goa Plast Pvt. Ltd. Vs. Chico Ursula D'Souza, it was held that the drawee will be liable even if 'Stop Payment' instructions to Bank are issued before the cheque was due for payment.

P.111. Describe, in brief, the main amendments incorporated by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 in Sections 138, 141 and 142 of the Principal Act i.e. the Negotiable Instruments Act, 1881.

Sol: Amendments in the Negotiable Instruments Act, 1881

The main amendments made through the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 in Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 are as follows:

Section 138:

To increase the punishment as prescribed under the Act from one year to two years.
To increase the period for issue of notice by the payee to the drawer from 15 days to 30 days [Proviso(b) to Section 138].

Section 141: To exempt those directors from prosecution under Section 141 of the Act who are nominated as directors of a company by virtue of their holding any office or employment in the Central Government or State Government or a Financial Corporation owned or controlled by the Central Government, or the State Government, as the case may be [Proviso to Section 141(I)].

Section 142: To provide discretion to the court to waive the period of one month, which has been prescribed for taking cognizance of the case under the Act [Proviso to Section 142(b)].

knowledge of yours

Negotiable instrument part-3

2012-06-15T13:52:00.001+05:30

P.66. C, the payee of a bill, endorses it in blank and delivers it to D, who specially endorses it to E or order. E transfers the bill to F without endorsement. Discuss the rights of F in case of dishonour of the bill.

Sol: In the given problem, C has endorsed the bill to D in blank. In other words, just placed his signature on the back, leaving the name of endorsee D to be recorded. D endorses it specially to E. Thus, D would have written 'Pay E or order' above the signature of C. Thus, D's name or signature does not figure anywhere. E then transfers to F without endorsement. On dishonour, therefore, F can hold the immediate transferor E liable who shall be entitled to hold C, who in turn can make the drawer liable. F, if he is a holder in due course, can hold C and the drawer liable directly also.

P.67. A is the payee and holder of a negotiable instrument. Excluding personal liability by an endorsement 'without recourse' he transfers the instrument to B, indorses it to C, who indorses it to A. State who is liable to A.

Sol: Section 52 of the Negotiable Instruments Act, 1881 specifically provides that where an endorser excludes his liability and afterwards becomes the holder of the instrument, all intermediate endorsers are liable to holder. Thus, in the given case, C as well as B shall be liable to A.

P.68. A is a payee holder of a bill of exchange. He endorses it in blank and delivers, it to B. B endorses it in full to C or order. C without endorsement transfers the bill to D. State giving reasons whether D as bearer of the bill of exchange is entitled to recover the payment from A or B or C.

Sol: Under Section 55 of the Negotiable Instrument Act, if an instrument after having been endorsed in blank is endorsed in full, the endorsee in full does not incur the liability of an endorser, so the amount of it cannot be claimed from him. It means if an endorsement in blank is followed by an endorsement in full, the instrument still remains payable to bear and negotiable by delivery as against all parties prior to the endorse in full, though the endorser in full is only liable to a holder who made title directly through his endorsement and the person deriving title through such holder. In the ensuing case, in view of section 55, D as the bearer of the instrument can receive payment of sue the drawer, acceptor, or A who endorsed the bill in blank; but he cannot sue B or C. But there is an exception to the above rule contained in Section 55. The person to whom it has been endorsed in full, or any one who derives little through him, can claim the amount from the endorser in full.

P.69. A cheque is drawn payable to 'B or order' and delivered to B in payment of a debt. B's agent without having any authority to endorse, endorses the cheque 'Per Pro' for B and obtains payment of the money and misappropriates it. Is the banker discharged by payment in due course?

Sol: Section 27 lays down that every person capable of binding himself or of being bound may so bind by himself or be bound by a duly authorised agent acting in his name.

But, it is essential that at the time of putting his signature to the instrument, the agent must have express or implied authority. A signature by procuration (per pro) operates as a notice that the agent has only a limited authority to sign and that the principal will only be bound if the agent is acting within the actual limits of his authority. The utmost care and caution is required in dealing with person who profess to act as agent on behalf of the principal. A prudent man will always call for proof that the alleged authority has been given. Hence, a person who takes or deals with bill or cheque signed per pro must take or deal with the greatest caution, and should satisfy himself that the authority really exists [Attwood vs. Munnings]. If an agent endorses without authority a bill (or cheque) on behalf of his principal, the endorsement conveys no title to the person taking it (endorsee) [The Bank of Bengal vs. Fagan].

Accordingly, in the given case the paying bank will not be entitled to any protection under Section 85 under which a banker is protected against forgery of endorsements if the payment is made in due course. In fact, the payment cannot be considered as a payment in due course.

P.70. A is holder of a Bill indorsed by B in blank. A writes over B's signature the words 'Pay to X or order'. On the dishonour of the Bill, X sues A as the endorser to recover the amount of Bill. Can A succeed?

Sol: As per section 49, the holder of a negotiable instrument indorsed in blank may simply write above the endorser's signature a direction to pay to any other person as endorsee. He will do so without signing his own name. This will convert the endorsement in blank into an endorsement in full. In such a case, the holder does not become endorser and does not incur the liability of an endorser. In this case, A has only written the words 'Pay X or order'. He has not signed the instrument. Hence, he is not endorser of Bill and is not liable.

P.71. A endorsed a bill to B, B to C, C to D and D to E. Lastly E endorsed it to A. Can A hold E liable if the bill is dishonoured.

Sol: As a general rule, each party to the instrument is liable to prior parties. e.g., A draws a Bill on B making it payable to C. Once the Bill is accepted by B, he becomes primarily liable. If C endorses to D, D to E and E to F, then 'D' is liable to E and F while previous parties A, Band C are liable to D. All parties i.e. A to E are liable to F, but F is liable to no one. Now, let us assume that F endorses the Bill to D. Thus, D who was an endorsee becomes a holder. This is termed as 'Negotiation Bank'. In such a case, D cannot hold prior endorsee i.e. E and F liable. The reason is that even if he holds so, the liability will come back to him, as E and F will in turn hold D liable as he was prior endorsee. Thus, liability will move in an endless circle. Hence, if a document is negotiated back, the holder cannot sue intermediate parties. This is an exception to the rule that a holder can sue all parties prior to the transaction. Of course, D can sue A, B and C.

However, if D had made first endorsement as a conditional endorsement, 'san recourse' (i.e. without liability), he can sue E and F and the liability will not come back to him as circle cannot be completed due to the conditional endorsement of 'san recourse’.

P.72. A bill of exchange is drawn payable to X or order. X endorses it to Y, Y to Z, Z to A, A to B and B to X. State with reasons whether X can recover the amount of the bill from Y, Z, A and B, if he has originally endorsed the bill to Y by adding the words 'Sans Recourse'.

Sol: The endorser of a negotiable instrument may, by express words in the endorsement, exclude his own liability thereon. If the endorser writes the words 'sans recourse' or' sans recourse', he excludes his liability on the instrument. Where an endorser so excludes his liability and afterwards becomes the holder of the instrument, all intermediate endorsers are liable to him [Section 52]. If endorser excludes his liability, further negotiation is not prohibited. It only excludes liability of endorser.

In the above case, normally, X cannot hold Y, Z, A and B, as if X holds them responsible, the responsibility will come back to him by circuitry of action. However, in this case, X had endorsed 'without recourse'. Hence, Y, Z, A and B cannot hold X liable and hence circle does not get complete. On the other hand, X is holder after Y, Z, A and B and can hold them liable, as provided in Section 52.

P.73. A is a payee of bill of exchange. He endorses it in blank and delivers it to B. B endorses it in full to C or order. C without endorsement transfers the bill to D. State giving reasons whether D as bearer of the bill of exchange is entitled to recover the payment from A or B or C.

Sol: As per explanation (ii) to section 13, a bearer instrument is one

(a) which is expressed to be payable to bearer or

(b) on which the only or last endorsement is in blank.

In the given case, the original instrument was payable to a particular person (A) and not to bearer. The instrument was converted into blank instrument by A. The blank instrument was converted into full by B and delivered to C. Thus, instrument is no more a blank instrument. Hence, C cannot transfer the instrument to another without endorsement. Thus, D has no title to the instrument and cannot sue anyone. D would get title only if C signs i.e. endorses in blank and delivers instrument to D.

However, if originally instrument was drawn as payable to bearer, it continues to be payable to bearer, irrespective of any subsequent endorsement. In that case, even if B has endorsed in full, the instrument is still payable to bearer. Hence, even if C had not made any endorsement, D will have title to instrument and can recover the amount from B or C.

P.74. A is the holder of a bill of exchange made payable to the order of 'B'. The bill of exchange contains the following endorsements in the blank. First endorsement 'B', second endorsement 'C', third endorsement 'D', fourth endorsement 'E'. - - 'A' strikes out, without E's consent, the endorsement by 'C' and 'D'. Decide with reasons whether 'A' is entitled to recover anything from 'E'.

Sol: Every endorser is entitled to recover amount of Bill from prior endorsers. Hence, Section 40 provides that if a holder of a negotiable instrument destroys or impairs the endorser's remedy against a prior party (without the consent of the endorser), the endorser is discharged from liability to the holder as if the instrument had been paid at maturity.

In the above case, A is a holder who has cancelled endorsement of C and D without consent of E. This has destroyed remedy which E had against C and D. Hence, E gets discharged from his liability towards A, as provided in section 40.

P.75. X is a holder of a bill of exchange made payable to the order of Y which contains the following endorsements in blank:

First endorsement : “Y”

Second endorsement : “G.T.Krishan”

Third endorsement : “T.P.Mathew”

Fourth endorsement : “K.L.Abdul.”

On dishonour, the holder X puts in suit against K.L. Abdul and strikes out without K.L. Abdul’s consent the endorsements of G.T.Krishan and T.P. Mathew. Is X entitled to recover anything from K.L.Abdul. State reasons for your answer.

Sol: No. This is so because X has destroyed Abdul’s remedy against prior parties by deleting the endorsements of G.T.Krishnan and T.P.Mathew.

P.76. A draws a bill on B. B accepts the bill without any consideration. The bill is transferred to C without consideration. C transferred it to D for value, Decide –

(i) Whether D can sue the prior parties of the bill, and

(ii) Whether the prior parties other than D have any right of action intense?

Give your answer in reference to the Provisions of Negotiable Instruments Act, 1881.

Sol: Section 43 of the Negotiable Instruments Act, 1881 provides that a negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

(i) In the problem, as asked in the question, A has drawn a bill on B and B accepted the bill without consideration and transferred it to C without consideration. Later on in the next transfer by C to D is for value. According to provisions of the aforesaid section 43, the bill ultimately has been transferred to D with consideration. Therefore, D can sue any of the parties i.e. A, B or C, as D arrived a good title on it being taken with consideration.

(ii) As regards to the second part of the problem, the prior parties before D i.e., A, B and C have no right of action inter se because first part of Section 43 has clearly lays down that a negotiable instrument, made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction prior to the parties who receive it on consideration.

P.77. State whether the following alterations are material or not:

A bill dated 1^st April 1999 is changed to a bill dated 1^st May 1999.
A bill payable 3 months after date is changed to a bill payable 3 months after sight.
A bill payable at Delhi is changed to bill payable at Bombay.
A bill for Rs.1,000 is changed into a bill for Rs.2,000.
A bill is accepted payable at Dena Bank is changed to a bill accepted payable at Canara Bank.
A bill payable to P is changed into a bill payable to P and Q.
A bill was endorsed in blank and handed over to Y, who endorsed as 'Pay to Z or order’.
The holder of a bill inserts the words 'or order'.
A bill was dated 1989 instead of 1999 & subsequently the agent of the drawer corrected the mistake.
A cheque payable to bearer was converted into a cheque payable to order.
Crossing a cheque.

Sol: First write the provisions related to ‘Material Alteration’

Cases (a) to (g): Material alterations.

Cases (h) to (j): Non-material alterations.

Case (k): Material alteration authorised by the Act without any authentication.

P.78. X draws a cheque for Rs 2,000 and Y, a holder without the consent of X alters the figure of Rs 2,000 to Rs 20,000 and makes the instrument look like a cheque drawn for Rs 20,000. The banker pays the cheque in due course. Discuss the legal position of the banker.

Sol: First write the provisions related to ‘Protection given to paying banker’

The banker is discharged from all liabilities since the banker made the payment in due course and alteration was not apparent. The banker also gets protection under the act if he pays the cheque with due diligence and without any negligence. knowledge of yours.

P.79. A promissory note was made without mentioning any time for payment. The holder added the words 'on demand' on the face of the instrument. State whether it amounted to material alteration and explain the effect of such alteration.

Sol: In the given problem, addition of the words 'on demand' does not amount to material alteration since according to Section 19 of the Negotiable Instruments Act, a promissory note, in which no time for payment is specified, is payable on demand. Thus, since the instrument even without use of the words 'on demand', was nevertheless payable on demand; the addition of these words does not amount to change of its tenor and hence it is not material alteration. The expression 'material alteration' is described to mean alteration which tends to speak a language different from the one intended originally.

Effect of material alteration: Section 87 of the Negotiable Instruments Act states that any material alteration of a negotiable instrument renders the same void as against anyone who is party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties. Further, any such alteration, if made by endorsee, discharges his endorser from all liability to him in respect of the consideration thereof.

P.80. Do the following alterations of a negotiable instrument render the instrument void?

The holder of a bill alters the date of the instrument to accelerate or postpone the time of payment.
The drawer of a negotiable instrument draws a bill but forgets to write the words 'or order'. Subsequently, the holder of the instrument inserts these words.
A bill payable three months after date is altered into a bill payable three months after sight.
A bill was dated 1992 instead of 1993 and' subsequently the agent of the drawer corrected the mistake.
A bill is accepted payable at the Union Bank, and the holder, without the consent of the acceptor, scores out the name of the Union Bank and inserts that of the Syndicate Bank.

Sol: (a) Yes. (b) No. (c) Yes. (d) No. (e) Yes.

According to Section 87 of the N.I. Act, 1881 any material alteration of a Negotiable Instrument renders the same void as against anyone who is party there to at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties. If any such alteration is made by an endorsee, the endorser his discharged from all liability to him in respect of the consideration thereof. The alteration must be so material that it alters the character of the instrument, to a great extent. Generally, alteration of the date, amount payable, time, place of payment is regarded as material alteration.

P.81. When is an alteration made in negotiable instrument called ‘Material Alteration’? State with reasons whether there is any ‘Material Alteration’ in the following cases:

(i) the holder of a bill of exchange alters the date of the instrument to accelerate or prepone the time of payment;

(ii) the drawer of a bill exchange forgets to write the words, ‘or order’ on the bill. Subsequently, the holder of the bill of exchange inserts these words on the bill.

Sol: After considering the given cases with respect to material alteration, the following conclusions can be drawn:

(i) Yes, there is material alteration, since alteration in the date and time of payment is treated as material alteration in the eye of law. (A. Subba Reddy vs. N. Ramana Reddy, AIR, 1966 A.P. 267).

(ii) No, there is no material alteration. Addition of he words ‘or order’ do not in any way affect the validity of the instrument. (Eyron vs. Thompson (1839), 11 A. & E. 31)

P.82. State with reasons whether there is any 'material alteration' in following cases and whether to invalidates the instrument – knowledge of yours.

D, in possession of an inchoate instrument where the amount has not been written on the instrument, writes himself the amount
K, in possession of an uncrossed cheque received from A writes 'Payee's Account Only' on the face of instrument.

Sol:

Such filling in is permitted u/s 20 of the Act and hence is not 'material alteration'
Crossing of uncrossed cheque or converting general crossing to special crossing is permitted u/s 125. This is notmaterial alteration. Thus, in both cases, instrument is valid and enforceable.

P.83. L had two promissory notes of Rs.500 each issued by S Banking Corporation. He placed them in the pocket of his coat and having forgotten, he washed, dried and starched the coat. He remembered of the notes while he was ironing his coat. He searched for them in the pocket of his coat and could find them in spoiled condition. The identity of the notes was rested to a certain extent except its numbers. Can he recover the money from the bank.

Sol: Yes. The principle of material alteration does not apply to mere accidents. L can prove his right of receiving payment through any other evidence and obtain payment on it.

P.84. A promissory note did not contain the rate of interest in the space provided for the purpose. The creditor puts in the rate. The debtor contends that it is a material alteration and, therefore, he is not liable to pay. Decide.

Sol: It amounts to material alteration. So, Debtor’s contention is correct.

P.85. State with reasons whether the following shall amount to material alteration and invalidate the instrument.

D, in possession of an inchoate instrument where the amount has not been written on the instrument, writes himself the amount.
K, in possession of an uncrossed cheque received from A, write “Payee’s A/C only” on the face of the instrument.

Sol:

No material alteration as sec. 20 permits and
No material alteration as section 125 permits it.

P.86. A draws a cheque in favour of B. A's clerk forges B's endorsement and negotiates the cheque to C, who takes it in good faith and for value. C receives payment on the cheque. Discuss the rights of A and C.

Sol: In the given problem, issues involved are:

Can A claim the reimbursement of the payment from his bank for the payment having been made to a person under forged endorsement?

C having received the payment, does he enjoy the right of retaining the amount?

Regarding the first issue i.e., right of A, it may be stated that a paying banker is not expected to know the signature of the payee or endorsers. Therefore, if it makes the payment in due course and without negligence, Section 85 of the Negotiable Instruments Act offers the bank protection against any action for wrongful payment. Thus, A may have no claim unless negligence or connivance of the banker's staff can be established.

Regarding C's right, since it is stated that he took the cheque in good faith and for value, he is a holder in due course and he can get better title than that of transferor of the instrument. Therefore, he will have lawful right to retain the amount.

P.87. H is the holder in due course of a bill of which A is the acceptor. 0, the drawer of the bill is fictitious. Can A escape from his liability to H?

Sol: Section 42 of the Negotiable Instruments Act provides that, where a bill of exchange is drawn by a fictitious person and is payable to his order, the acceptor cannot be relieved from his liability to the holder in due course. Thus, H being holder in due course, A cannot escape liability. However, H should establish that the bill was endorsed by the same hand as drawer's signature.

P.88. A cheque is payable to M or order. It is stolen and the thief forges M's signature and presents it to the banker who makes the payment in due course. Can M recover the amount from the banker?

Sol: M being the payee need not be a customer of the paying bank. The paying bank, therefore, is not expected to know M's signature. Section 85 of the Negotiable Instruments Act, therefore, grants protection to paying bankers in case of forged endorsements. The section provides that if a cheque payable to order purports to be indorsed by or on behalf of the payee, and the banker on whom it is drawn pays it in due course, the banker is discharged, even though the endorsement of the payee might turn out to be a forgery. However, to claim protection, the banker has to prove that the payment was a payment in due course.

P.89. B obtains A's acceptance to a bill by fraud. B indorses it to C who takes it as a holder in due course. C endorses the bill to D who knows the fraud. Can D recover from A?

Sol: Yes; D can recover the amount from A as he derived the title from C who is a holder in due course. Moreover, D is not a party to the fraud. Once, the title has been cleansed of the defect, notwithstanding notice of the fraud, D shall get a good title. According to Section 53 of the Negotiable Instruments Act, 1881 any defect in the title of the transferor will not affect the rights of the holder in due course even if he had knowledge of the previous defect provided he himself is not a party to the fraud.

P.90. Mr. Clever obtains fraudulently from J a cheque crossed 'Not Negotiable'. He later transfers the cheque to D, who gets the cheque encashed from ABC Bank, which is not the Drawee Bank. J, on coming to know about the fraudulent act of Clever, sues ABC Bank for the recovery of money. Examine with reference to the relevant provisions of the Negotiable Instruments Act, 1881, whether J will be successful in his claim. Would your answer be still the same in case Clever does not transfer the cheque and get the cheque encashed from ABC Bank himself?

Sol: According to Section 130 of the Negotiable Instruments Act, 1881 a person taking cheque crossed generally or specially bearing in the words 'Not Negotiable' can’t get a better title than that of transferor. Thus, if the title of the transferor is defective, the title of the transferee will also be defective.

Basing on above provisions, it can be concluded that if the holder has a good title, he can still transfer it with a good title, but if the transferor has a defective title, the transferee is affected by such defects, and he cannot claim the right of a holder in due course by proving that he purchased the instrument in good faith and for value.

In the given case Mr. Clever had obtained the cheque fraudulently. As his title is defective, he could not give good title to D and ABC Bank would be liable for the amount of the cheque for encashment. (Great Western Railway Co. vs. London and County Banking Co.)

The answer in the second case would not change and shall remain the same for the reasons given above. Thus in both cases, J will be successful in his claim from ABC Bank.

Negotiable instruments part-2

2012-06-15T13:48:00.000+05:30

P.41. X obtains Y’s acceptance to bill by fraud. X endorses it to Z who takes it as holder in due course. Z endorses the bill to F who knows of the fraud. Can F recover from X?

Sol: Yes. When a document reaches the hands of holder in due course it will be cured from all defects. Even an ordinaryholder deriving title from such holder in due course will get pure title. In the above case, X’s title was defective as it wasobtained by fraud. As Z is a holder in due course he gets pure or defective title and instrument will be cured of all defects. Now the instrument reaches the hands of F, who knowingly accepts the instrument. So F becomes holder. But he will also get pure title to the instrument and thus he can recover money from X.

P.42. J purchases some bills amounting to Rs.1,727 for a sum of Rs.200 only. He knows at the time of purchase that both drawer and the acceptor are in embarrassed circumstances but accepts them without enquiry and explanation. The billproved to have been obtained by fraud. J insists that he is a holder in due course and is therefore entitled to get the fullvalue of the instruments. Will he succeed?

Sol: No. According to Sec.9 of the Act - Holder in due course means any person who, for consideration, became thepossessor of a promissory note, bill of exchange or cheque, if payable to the bearer, or the payee or endorsee thereof, ifpayable to the order, before the amount mentioned in it became payable, and without having sufficient cause to believethat any defect existed in the title of the person from whom he derived his title.”

In the given case there are clear grounds of suspicion and J has shown negligence in enquiring the validity of the instrument. So, he can’t be considered as holder in due course.

P.43. A sells a radio to M, a minor, who pays for it by cheque. A indorses the cheque to B who takes it in good faith andfor value. The cheque is dishonoured on presentation. Can B enforce payment of the cheque against A or M?

Sol: Payment can’t be enforced against M as he is a minor. But the instrument can be enforced against A.

P.44. A bill is dishonoured by non-acceptance. The bill is endorsed to ‘A’. ‘A’ endorses it to ‘B’. As between ‘A’ and ‘B’, the bill is subject to an agreement as to the discharge of ‘A’. The bill is afterwards endorsed to ‘C’, who takes it withnotice of dishonour. Decide, with reasons, whether ‘C’ is entitled to accept the bill in the capacity of a holder in duecourse.

Sol: Section 59 of the Negotiable Instruments Act, 1881 states that the holder of negotiable instrument, who has acquired it after dishonour, whether by non-acceptance or non-payment, with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor.

Accordingly where a negotiable instrument has been dishonoured, any person who takes it with notice of dishonour, takes it subject to any defect of title attaching thereto at the time of dishonour. The transferee of a dishonoured instrument takes it subject to any defect of title attaching thereto at the time of dishonour. The transferee of a dishonoured instrument, who takes it with notice of dishonour, cannot acquire a better title to it than that which his transferor had.

In the problem given here, the transferor ‘A’ has acquired the bill which has already been dishonoured by non-acceptance. Mr. ‘A’ has indorsed it to B subject to the agreement as to the discharge of ‘A’. After endorsement ‘C’ takes it with notice of dishonour. ‘C’ who takes it with notice of dishonour cannot acquire a better title to it than that which his transferor ‘B’ had. ‘C’ takes the bill subject to the agreement between ‘A’ and ‘B’ and not a better title than this.

Further ‘C’ is also not a holder in due course under Section 9 of the Act because he has not acquired the instrument before it became payable. Although the holder in due course is not affected by the defect in the title of his transferor, but it is not so in the case of a holder who acquires the instrument after dishonour or after maturity. Hence ‘C’ is not entitled to accept the bill in the capacity of a holder in due course.

P.45. X by inducing Y obtains a Bill of Exchange from him fraudulently in his (X) favour. Later, he enters into acommercial deal and endorses the bill to Z towards consideration to him (Z) for the deal. Z takes the bill as a Holder-in-due-course. Z subsequently endorses the bill to X for value, as consideration to X for some other deal. On maturity thebill is dishonoured. X sues Y for the recovery of the money. With reference to the provisions of the NegotiableInstruments Act, decide whether X will succeed in the case?

Sol: The problem stated in the question is based on the provisions of the Negotiable Instruments Act as contained inSection 53. The section provides : ‘Once a negotiable instrument passes through the hands of a holder in due course, itgets cleansed of its defects provided the holder was himself not a party to the fraud or illegality which affected theinstrument in some state of its journey. Thus any defect in the title of the transferor will not affect the rights of the holder in due course even if he had knowledge of the prior defect provided he is himself not a party to the fraud. (Section 53)

Thus applying the above provisions it is quite clear that X who originally induced Y in obtaining the bill of exchange in question fraudulently, cannot succeed in the case. The reason is obvious as X himself was a party to the fraud.

P.46. X, on attaining the age of majority, makes a fresh promissory note in consideration of a promissory note made byhim during his minority. Can a suit be maintained on the fresh promissory note?

Sol: A suit cannot be maintained on the fresh promissory note because the fresh promissory note is void in the absence of consideration. On the other hand a minor can’t ratify the transactions entered by him during his minority.

P.47. X sells a TV to M, a minor, who pays for it by his cheque. X endorses the cheque to Y who in turn endorses it infavour of Z. The cheque is dishonoured. Discuss the legal position.

Sol:

Y can enforce payment of the cheque against X only and not against M because a minor cannot bind himself.
Z can enforce payment of cheque against X and Y.

P.48. A draws a bill payable three months after sight on B. It passes through several hands before X becomes its holder.On presentation by X, B refuses to accept the bill. Discuss the right of X.

Sol: The effect of dishonour of a negotiable instrument, whether by non-acceptance or by non-payment, is to render thedrawer and all the endorsers liable to the holder. Thus, in the present case, since the bill is payable certain months (3months) after sight, acceptance is necessary for fixing its date of maturity. Non-acceptance by drawee (B) amounts to itsdishonour. X may, therefore, hold the endorsers as well as the drawer liable thereon. However, their liability can beinvoked only if the holder (X) gives them notice of such dishonour. The drawee (B) shall not be liable as he has notaccepted the bill. He can be held liable only in the event of non-payment of an accepted bill.

P.49. M draws a cheque in favour of N, a minor. N endorses it in favour of P. The cheque is dishonoured by the banker on the ground of insufficiency of funds? Discuss the rights of P.

Sol: Section 26 of the Negotiable Instruments Act, 1981 provides that a minor may draw, endorse, deliver and negotiateinstruments so as to bind all parties except himself. In the given problem, P shall have a right to proceed against M only. N, the minor, cannot be held liable.

P.50. A promissory note duly executed in favour of minor is void. (Correct/Incorrect)

Sol: As per section 26, a minor may draw, indorse, deliver and negotiate any negotiable instrument so as to bind allparties except himself. Hence, the instrument is valid. Minor can even indorse the instrument. He will not be bound bysuch indorsement, but other parties will be bound. Estoppel is not applicable against him. A minor can deny validity ofBill, even if he himself was drawer [As per section 120, a maker cannot deny validity of instrument as originally made.However, minor can deny the validity of the instrument].

P.51. X, a major, and M, a minor, executed a promissory note in favour of P. Examine with reference to the provisions ofthe Negotiable Instruments Act, the validity of the promissory note and whether it is binding on X and M.

Sol: Every person competent to contract has capacity to incur liability by making, drawing, accepting, endorsing,delivering and negotiating a promissory note, bill of exchange or cheque (Section 26, para 1, Negotiable InstrumentsAct, 1881).

As a minor’s agreement is void, he cannot bind himself by becoming a party to a negotiable instrument. But he may draw, endorse, deliver and negotiate such instruments so as to bind all parties except himself (Section 26, para 2).

In view of the provisions of Section 26 explained above, the promissory note executed by X and M is valid even though a minor is a party to it. M, being a minor is not liable; but his immunity from liability does not absolve the other joint promisor, namely X from liability [Sulochana v. Pandiyan Bank Ltd., AIR (1975) Mad. 70].

P.52. A bill is addressed to Herbert Morris who is partner in the firm “Perkin and Partner”. Herbert Morris accepts the bill in the firm’s name. Explain whether he will be personally liable on the bill or not.

Sol: Yes. He is the drawee and has given his acceptance to the instrument. On the other hand a partnership firm has noseparate legal identity and the liability of each partner is joint and several.

P.53. Shyam fraudulently encashed the cheque obtained from Kamal, crossed "Not negotiable" at a bank other than thedrawee bank. Is the drawee bank liable for conversion? (Not liable) Explain the liability of a drawee of cheque.

Sol: As per section 31, a drawee of cheque (i.e. banker) must make payment of cheque, as long as drawer has sufficientbalance in his account in the bank. If bank makes a default, it must compensate the drawer of cheque for any loss ordamage caused by such default. Thus, banker is liable only if there is 'default' on his part. The liability is towards drawerand not the holder. Banker is obliged only to compensate for loss or damage. Thus, exemplary damages cannot beawarded, even if banker is found to be negligent. In some cases, bank can refuse to honour a cheque and it will not beconsidered as default. 'Damage' is to the credit of drawer. Smaller the amount of cheque dishonoured, greater is damage to credit of drawer.

Section 85 specifically provides that banker is discharged if he makes payment in due course, if cheque payable to order is purported to be endorsed by or on behalf of payee. The protection is available only if Bank makes payment in due course. If payment is not in due course', Bank will be liable.

P.54. P, the holder of a bill of exchange, transfers it to Q without consideration. Q also transfers it to R withoutconsideration. R transfers it to X for consideration. X transfers it to Y without consideration. State whether Y can recoverthe amount of such instrument from X or P.

Sol: As per Section 43, a negotiable instrument made, drawn, accepted, endorsed or transferred without consideration orwhere consideration fails, creates no obligation for payment between the immediate parties. Of course, holder who hasobtained Bill for consideration can recover the consideration paid by him. Section 43 uses the words 'creates noobligation between the parties to the transaction'. Thus, the section applies only to immediate parties to transaction andnot other parties.

In the above case, Y cannot recover from X as there is no consideration and X is 'immediate party'. However, Y can sue P, Q or P. The reason is Y holder, who is deriving title from X who is a holder in due course. He has all rights what X has.

P.55. B signs the following endorsements on different negotiable instruments payable to bearer. Classify theendorsements with reasons as Blank Endorsement or Full Endorsement or Restrictive Endorsement or PartialEndorsement or Conditional Endorsement. Also, state whether the following Endorsements are valid or invalid.

No other words except B's signature.
Pay C.
Pay C or order.
Pay C only.
Pay C or order for the account of B.
Pay C or order Rs 500 out of Rs.1,000.
Pay C or order being the unpaid residue of the bill.
Pay C or order on safe receipt of goods.
Pay C sans Recourse.
Pay C sans Frais.
Pay C, notice of dishonour dispensed with.

Sol:

Case	Decision	Validity	Reason
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k)	Blank endorsement Full endorsement Full endorsement Restrictive endorsement Restrictive endorsement Partial endorsement Partial endorsement Conditional endorsement Conditional endorsement Conditional endorsement Conditional endorsement	Valid Valid Valid Valid Valid Invalid Valid Valid Valid Valid Valid	No other words have been used. The use of word C. The use of word ‘C or order’. The use of word ‘only’. The use of word ‘for the account of B’. The endorsement purports to transfer only a part of the amount due on instrument. The endorsement is for the unpaid balance. Use of the words ‘on safe receipt of goods’. The use of the words ‘Sans Recourse’. The use of words the ‘Sans Faris’. The use of words ‘Notice of dishonour dispensed with’.

P.56. B signs the following endorsements on different negotiable instruments payable to bearer. State whether each of these alternative endorsement excludes the right of further negotiation by C or not:

"Pay the contents to C only"
"Pay C for my use"
"Pay C or order for the account of B"
"The within must be credited to C"
"Pay C "
"Pay C value in account with the State Bank "
"Pay the contents to C, being part of the consideration in certain deed of assignment executed by the endorserand other".

Sol: Section 50 of the Negotiable Instruments Act, 1881 provides that the endorsement of a negotiable instrument followed by delivery, will transfer the property therein to the endorsee with the right of further negotiation. But the endorsement may, by express words, restrict or exclude such right, or may merely constitute the endorsee an agent to indorse the instrument, or to receive its contents for the endorser, or for some other specified person.

(a)

(b)

(c)

(d)

(e)

(f)

(g)

Yes

The use of the word 'only' excludes the right of further negotiation.

The use of the words 'for my use', excludes the right of the further negotiation.

The use of words 'or order for the account of B' excludes right of further negotiation

The use of the words 'must be credited to C' excludes the right of further negotiation.

The endorsement does not contain words excluding the right or further negotiation.

The endorsement does not contain words excluding the right of further negotiation.

The use of the words 'others' gives the right of further negotiation.

P.57. B accepts a bill drawn upon by A who endorses it to C who in turn endorses it to D, who in turn endorses it to A. Discuss the legal position of A.

Sol: This is clearly a case of Negotiation back. In case of negotiation back, if any endorser subsequently becomes holder of the instrument then all intermediary parties are discharged from their liability. This is to avoid circuitry of action. In the given case A can sue B only because B is a prior party to his original endorsement. A cannot sue C or D because it will lead to circuitry of action (i.e., if A is allowed to sue C or D, then C or D in turn can sue A because A is a prior party).

P.58. B accepts a bill drawn upon A who endorses it with words 'Sans Recourse’ to C, who in turn endorses it to D, who in turn endorses it to A. Discuss the legal position of A.

Sol: The holder of a bill may indorse it in such a way that he does not incur the liability of an endorser to the endorsee. He can do so by adding the words ‘sans recourse’ (without recourse) to the endorsement. Examples of such endorsement are ‘Pay A or order without recourse to me’ or ‘Pay A or order sans recourse’ or ‘Pay A or order at his own risk’.

If the instrument is dishonoured the subsequent holder or endorsee can’t claim the endorser for payment of the same. In the given case A can sue B, C or D because it will not lead to circuitry of action as A at the time of first endorsement, expressly excludes his liability by using the words' Sans recourse'.

P.59. P, the holder of a Bill of Exchange, transfers it to Q without consideration. Q also transfers it to R without consideration. R transfers it to X for consideration. X transfers it to Y without consideration. State giving reasons whether Y can recover the amount on such instrument from X or P.

Sol: In this case the bill of exchange has been transferred without consideration. Section 43 deals with rights of the parties in such a case. Section 43 lays down the following two rules regarding absence of consideration in negotiable instruments.

a. As between immediate parties: If a negotiable instrument is made, accepted endorsed or transferred without consideration or for a consideration which faces, it create no obligation of payment between the parties to the transaction. As between the immediate parties the defendant can plead absence of consideration and avoid liability.

b. As between remote parties: If a holder acquires a negotiable instrument for consideration, every subsequent holder desiring title from him with or without consideration may recover the amount due on such instrument from the transferor for consideration or from any other party thereto. This means that once the instrument gets into the hands of a holder in due course, he or any subsequent holder deriving title from him can recover the amount from any or all of the prior parties thereto.

Here X and Y are immediate parties and no consideration passed from Y to X. Hence first rule applies and Y has no rights against X.

X is the holder for value. Hence X and every subsequent holder deriving title from him may recover the amount due on such instrument from the transferor for consideration or any prior party thereto. The second rule applies. Hence Y can recover the amount from P.

P.60. B accepts a bill drawn upon A who endorses it to C without consideration, and C endorses it to D in good faith for valuable consideration and D, in turn endorses it to E as a gift. E endorses it to A. Discuss the legal position of A.

Sol: A can sue B because B is a prior party to his original endorsement. A can sue C because A was not liable to C as the endorsement was without consideration [Section 43]. A cannot sue D or E because it will lead to circuitry of action.

P.61. A bill is payable to X or order, X endorses the bill in blank. The bill is there after lost and comes into the hands of Y. Discuss the legal position in each of the following alternative cases:

If Y receives the payment of the bill.
If Y passes the bill by simple delivery to Z as a gift.
If Y passes the bill after maturity by simple delivery to Z who takes the bill in good faith for valuable consideration.
If Y passes the bill before maturity by simple delivery to Z who takes the bill in good faith for valuableconsideration.

Sol:

The true owner can recover the amount from Y because Y had no title to bill.
The true owner can recover the amount from Y and Z because Y and Z (not being holders in due course)had no title to bill.
The true owner can recover the amount from Y and Z because Y and Z (not being holders in due course)had no title to bill.
The true owner can recover the amount from Y and not from Z because Z being a holder in due course had a good title to bill.

P.62. A bill is payable to X or order. The bill is thereafter lost and comes into the hands of Y, who forges X's signature to affect an endorsement in blank. Discuss the legal position in each of the following alternative cases:

If Y passes the bill by simple delivery to Z as a gift.
If Y passes the delivery before maturity by simple delivery to Z who takes the bill in good faith for valuableconsideration.

Sol: In both the cases, the true owner can recover from Y and Z because under forged endorsement no person, whether he is a holder in due course or not, acquires any legal title to the bill.

P.63. A bill is payable to X or order, X endorses the bill in blank. It comes into the hands of Y who passes it on by simple delivery to Z, who forges Y's signature and transfers it to W. Can W sue any of the parties to the bill?

Sol: W can sue all the prior parties because he derives his title through genuine endorsement by X and not through forged endorsement by Z.

P.64. X obtains Y's acceptance to a bill by fraud. X endorses it to Z who takes it in good faith for valuable consideration. Z endorses the bill to F who knows of the fraud. Discuss the rights of X, Y and Z.

Sol:

X cannot recover from Y because X is not a holder in due course.
Z can recover from X or Y because Z is a holder in due course. [Section 58].
F can recover from X, Y and Z because F derives the title from Z who is a holder in due course and at the sametime Z is not a party to fraud. [Section 53]

P.65. A draws a bill in favour of B upon X, B endorses it to C who, in turn endorses it to D who, in turn, endorses it to E who, in turn, endorse to F. On presentment for acceptance, X refuses to accept the bill. Who has a right of action against whom in each of the following alternative cases:

If F gives no notice of dishonour.
If F gives notice of dishonour only to E.
If F gives notice of dishonour only to E and A.

Sol: First state the provisions relating to Notice of dishonour.

Case	Decision
(a) (b) (c)	F has no right of action against any prior party because all prior parties who do not receive the notice of dishonour are discharged. [Section 93] F has right of action against E only and not against A, B, C or D. F has right of action against E and A only and not against B, C or D. [Section 93]

CA PREPARATION

Bonds - Basics

Bonds - Basics

MOTIVATION MESSAGES

MOTIVATION MESSAGES

Service Tax

SERVICE TAX

Service Tax's concept

Introduction of Service Tax in India

Authority

Administration of Act.Constitutional Validity

Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. Schedule VII divides this subject into three categories-

Formation and function of DGST

SCHEME FOR LEVY, ASSESSMENT & COLLECTION-OF SERVICE TAX

Service Tax payable by whom.

What is Service Tax?

Value of Taxable Service

Rules & Regulations

Salient Features

Administered by Central Excise Department. For this purpose, Section 83 of the Act provides that certain specified Sections of the Central Excise Act, 1944 will also apply in relation to Service Tax as they apply in relation to Central Excise Duty.

TIME MANAGEMENT

Setting Yourself Up for Success

Getting to Know Yourself

Assessing your strengths and weaknesses

Naming goals to give you direction

Assigning your time a monetary worth to guide your priorities

Identifying your rhythm to get in the zone

Scheduling your time and creating a routine

Organizing your surroundings

Using time-saving technology

Overcoming Time-Management Obstacles

Communicating effectively

Streamlining interactions with co-workers and customers

BODY LANGUAGE

What sort of image do you want to present?

Don’t:

Think logically

Que8. Questions That Have a Correct Answer

Que9. Questions That Don’t Have one Correct Answer

Que8. Questions That You Have to Break Down

Que10. Questions That Test Your Performance

Negotiable instrument part-4

Negotiable instrument part-3

Negotiable instruments part-2

Administration of Act.
Constitutional Validity

SCHEME FOR LEVY, ASSESSMENT
& COLLECTION-OF SERVICE TAX