Bills of Exchange
Q.7. What are the difference
between cheque and bill of exchange?
Ans: -
|
Basis |
Cheque |
Bills of Exchange |
|
i.
Drawee |
A cheque is
always drawn on a bank or banker. |
A bill of exchange can be drawn on any person including a banker. |
|
ii. Acceptance |
A cheque
does not require any acceptance. |
A bill must be accepted before the Drawee can be
made liable upon it. |
|
iii. Payment |
A cheque is
payable immediately on demand without any days of grace. |
A bill of exchange is normally entitled to three days of grace unless it is payable on demand. |
|
iv. Stamp |
A cheque does not require any stamp. |
A bill of exchange must be stamped. |
|
v.
Protection |
A banker is
given statutory protection with regard to payment of cheques in certain
circumstances. |
No such protection is available to the Drawee or acceptor of a bill of exchange. |
Ans: - There are some difference
between Discounting and Retiring as given below:
Discounting:
i.
It is the
process of selling the bill to the bank or anyone else before the due date.
ii.
The reduction
made by the bank is called discount.
iii.
Discount is a
loss to the person who discounts the bill and a gain to the bank.
Retiring:
i.
It is the
process of paying the amount of the bill before due date.
ii.
The concession
allowed to the acceptor is called rebate.
iii.
Rebate is a
loss to the payee and a gain to the acceptor.
Q.9. What do you mean by dishonour
of cheques? What are the various resons for it?
Ans: - Cheque is ordinarily paid by the drawee bank if it is in
perfect order. But sometimes a cheque is not paid. When a cheque is paid by the
drawee bank, it is said to be honored. When it is not paid it is said to be
dishonored.
In the Following cases the bank may
dishonor a cheque:
i.
When the
customer has died and the bank has notice of his death.
ii.
Where the
customer has become insolvent or an order of adjudication has been passed
against him.
iii.
When the bank
has received an order from the court prohibiting payment out of the funds
belonging to the customer.
iv.
When a
customer becomes a lunatic and the banker has got notice of his insanity.
v.
Where the
drawer countermands payment.
vi.
When the
customer has not got sufficient funds with the bank and there is no overdraft
arrangement.
vii.
Where there
are material alterations or signatures of the drawer or endorses are irregular.
viii. When the drawer has closed his account prior to the
presentation of cheque.
ix. When a cheque is mutilated.
Q.10. What is Endorsement? What are
the kinds or important of Endorsements?
Ans: - Endorsement is the act of
signing a cheque for the purpose of transferring it to somebody else. Under
Negotiable Instruments Act it means the writing of one’s name on the back of
the instrument or any paper attached to it with the intention of transferring
the rights therein.
A
bearer cheque can be transferred by mere delivery but an order cheque is
transferred by endorsement and delivery. Endorsements are usually made on the
back of the cheque, though they can be made on its face as well. If, however,
no space is left on the instrument, it may be made on a separate paper attached
to it.
Endorsements
are of various kinds, the most important being as follow:
i. Blank
or general endorsement: A blank or general endorsement is one in which the
endorser simply puts down his signature. The name of the endorsee, it should be
noticed is not put down. The effect of such an endorsement is to make the
cheque a bearer cheque. The property in the cheque can now be transferred by
mere delivery, no endorsement being required. Thus an order cheque can be made
a bearer cheque by putting down a blank endorsement.
ii.
Special endorsement: Special or
full endorsement is that which contains not only the name of the endorser but
also the name of the endorsee. The effect of special endorsement is that the endorse
must endorse it again if he wants to transfer the property in the cheque to
somebody else.
iii. Restrictive
endorsement: When an endorsement restricts the negotiability or
transferability of proprietorship of a cheque, it is known as restrictive
endorsement.
iv. Partial
endorsement: A partial endorsement is one which means to transfer
the cheque only for a part of its value. For instance a cheque for Rs. 500 may
be endorsed only for Rs.300. Legally such an endorsement is invalid.
Q.11. What do you mean by Maturity of Bill?
Ans: - The term maturity refers the date
on which a bill of exchange or a promissory note becomes due for payment. In
arriving at the maturity date three days, known as day of grace, must be added
to the date on which the period of credit expires instrument is payable.