In The Knowledge Fair
A Presentation onForgery of Negotiable Instruments: Precautions to be taken for a secured business transaction
Objectives
Our object is to make you know:-
The meaning of forgery
Punishment of forgery
The forgery of negotiable instrument
What we should do to prevent forgery of the instruments
The meaning of negotiable instruments
The various features of negotiable instruments
The various types of negotiable instruments
Introduction to Negotiable Instruments:
A Negotiable Instrument is a document that meets the requirements for circulation without reference to other sources. The Negotiable Instrument Act, 1881 does not define negotiable instrument, it runs as to that “Negotiable Instrument” means Promissory Note, Bill of Exchange, or Cheque payable either to order or to bearer. Negotiable Instruments are certain types of written documents which are transferable, either by delivery or by endorsement, and are used in commercial transactions and monetary dealings.
Features of Negotiable Instrument:
1. It is easily transferable. It may be transferred by mere delivery in case of bearer instrument and by delivery and endorsement in case of order instrument.2. a holder of a negotiable instrument in due course, that is through full payment A major advantage of a Negotiable Instrument is its transferability, but sometimes transferability is not always characteristic of negotiability. A transferable instruments or goods may not be a negotiable instrument.3. and good faith shall not be liable to a third party having title thereto.
Promissory Note
A “Promissory Note” to order or to bearer. is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee, or at fixed or determinable future time, certain in money,
Parties to a Promissory Note
There are primarily two parties involved in a promissory note. They are-
i. The Maker or Drawer – the person who makes the note and promises to pay the amount stated therein.
ii. The Payee – the person to whom the amount is payable.
In course of transfer of a promissory note by payee and others, the parties involved may be -
a. The Endorser – the person who endorses the note in favour of another person.
b. The Endorsee – the person in whose favour the note is negotiated by endorsement.
Features of a promissory note
Let us know the features of a promissory note:
A promissory note must be in writing, duly signed by its maker and properly stamped.
It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is not enough. For example, if someone writes ‘The promise to pay must not be conditional. For example, if it is written
It must contain a promise to pay money only. For example, if someone writes ‘I promise to give B a Maruti car’ it is not a promissory note. A promissory note may be payable on demand or after a certain date. For example, if it is written ‘three months after date I promise to pay S or order a sum of tk. Five Thousand only’ it is a promissory note.
The parties to a promissory note, i.e. the maker and the payee must be certain.
The sum payable mentioned must be certain or capable of being made certain. It means that the sum payable may be in figures or may be such that it can be calculated.
A Specimen of a Promissory Note
Bill of Exchange
A “Bill of Exchange” is an instrument in writing containing an unconditional order, signed by the maker, a certain person or to the bearer of the instrument. directing a certain person to pay on demand or at fixed or determinable future time a certain sum of money only to, or to the order of,
Parties to a Bill of Exchange
There are three parties involved in a bill of exchange. They are-
i. The Drawer – The person who makes the order for making payment.
ii. The Drawee – The person to whom the order to pay is made. He is generally a debtor of the drawer.
iii. The Payee – The person to whom the payment is to be made.
Features of a bill of exchange
Let us know the various features of a bill of exchange:
The order must be unconditional.
The order must be to pay money and money alone.
The sum payable mentioned must be certain or capable of being made certain.
A bill must be in writing, duly signed by its drawer, accepted by its drawee and properly stamped.
It must contain an order to pay. Words like ‘please pay tk. 5,000/- on demand and oblige’ are not used.
The parties to a bill must be certain.
Specimen of a Bill of Exchange
A “Cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Features of a cheque
Let us look into some important features of a cheque.
A cheque must be in writing and duly signed by the drawer.
The payee is always certain.
It is always payable on demand.
The cheque must bear a date otherwise it is invalid and shall not be honoured by the bank.
It contains an unconditional order.
It is issued on a specified banker only.
The amount specified is always certain and must be clearly mentioned both in figures and words.
Specimen of a Cheque
Types of Cheque
Cheques are of four types, Let us know details about these cheques:
a) Open cheque: A cheque is called ‘Open’ when it is possible to get cash over the counter at the bank. The holder of an open cheque can do the following:
i. Receive its payment over the counter at the bank,
ii. Deposit the cheque in his own account
iii.Pass it to some one else by signing on the back of a cheque.
b) Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous to issue
such cheques. This risk can be avoided by issuing another types of cheque called ‘Crossed cheque’. A cheque can be crossed by drawing two transverse parallel lines across the cheque, with or without the writing ‘Account payee’ or ‘Not Negotiable’. The payment of such cheque is not made over the counter at the bank. It is only credited to the bank account of the payee.
c) Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.
d) Order cheque: The payee can transfer an order cheque to someone else by signing his or her name on the back of it. An order cheque is one which is payable to a particular person. In such a cheque the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written.
What is Forgery?
The creation of a false written document or alteration of a genuine one, with the intent to defraud is known as Forgery.
Common forgery usually involves manufacturing or tampering with documents for economic gain. Besides this Forgery consists of filling in blanks on a document containing a genuine signature, or materially altering or erasing an existing instrument. The intent to defraud remains essential.
According to sec.463 of Penal Code 1860,Whoever makes any false document or part of a document, with intent to cause damage or injury, to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intend to commit fraud or that fraud may be committed, commits forgery.
An underlying intent to defraud, based on knowledge of the false nature of the instrument, must accompany the act.
Methods of forgery include handwriting, printing, engraving, and typewriting.
Instruments of forgery may include bills of exchange, bills of lading, promissory notes, checks, bonds, receipts, orders for money or goods, mortgages, discharges of mortgages, deeds, public records, account books, and certain kinds of tickets or passes for transportation or events.
Cases of Forgery:
Unauthorized use of seal: A, without Z's authority, affixes Z's seal to a document purporting to be a conveyance of an estate from Z to A, with the intention of selling the estate to B and thereby of obtaining from B the purchase-money. A has committed forgery.
By inserting amount on a blank Cheque:A picks up a cheque on a banker signed by B, payable to bearer, but without any sum having been inserted in the cheque. A fraudulently fills up the cheque by inserting the sum of ten thousand taka. A commits forgery.
By tampering of the number of the amount:A leaves with B, his agent, a cheque on a banker, signed by A, without inserting the sum payable and authorizes B to fill up the cheque by inserting a sum not exceeding ten thousand taka for the purpose of making certain payments. B fraudulently fills up the cheque by inserting the sum of twenty thousand taka. B commits forgery.
Cases of Forgery:
By defrauding the banker:A draws a bill of exchange on himself in the name of B without B's authority, intending to discount it as a genuine bill with a banker and intending to take up the bill on its maturity. B dishonestly erases the words "pay to Z or his order" and thereby converts the special endorsement into a blank endorsement. B commits forgery. Here, as A draws the bill with intent to deceive the banker by leading him to suppose that he had the security of B, and thereby to discount the bill, A is guilty of forgery.
By transforming a special endorsement into a blank endorsement: A endorses a Government promissory note and makes it payable to Z or his order by writing on the bill the words "pay to Z or his order" and signing the endorsement.
Punishment for forgery
According to section 465 of Penal Code, Whoever commits forgery shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.
Punishment if cheque dishonored
According to Sec.138 of Negotiable Instrument Act 1881,a person whose cheque is dishonored, shall be punished with imprisonment for a term which may extend to one year, or with fine which may extend to thrice the amount of the cheque, or with both.
Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, , and(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within thirty days of the receipt of the said notice.
Recommendations:
Precautions of banker against fraud and forgery of Cheque
Bank’s safeguard to protect a fraud and forgery are as follows:
Signature of the drawer: The instrument has to be signed by its drawer. Bank shall not pay the money, if the signature of drawer is not found.
Date: Date should be written in the right side of the cheque. If it is not written, incorrect or expired of 180 days, bank doesn’t pay the money.
Amount of money: The amount of money is to be written in figure and words; otherwise, the bank doesn’t pay money.
Similarity in word and figure: The amount mentioned in figure and word should be similar.
Account number: The banker should follow the account number whether it is right or wrong.
Similarities of the signature: The signature given by the drawer or account holder must be similar with the sample signature.
Bank and branch: Bank has to check the branch and bank name. If those are not correct, the bank must not pay the money.
Recommendations:
Genuine payee: The banker should check the identity of payee.
Accuracy of cheque drafting: Bank verifies whether the drafting is correct or not.
Legal notice: Bank should inquire whether there is any legal notice on the part of Drawer, Government or Court or not.
Drawer notice: If a drawer sends a notice against any Cheque then the cheque shouldn’t be paid.
Torn Cheque: The amount is not payable in case of a torn Cheque.
Endorsement: Banker should check the process of endorsement either it is legal or not.
Crossing in Cheques: Bank should be cautious about the Crossing of cheque. If a cheque is crossed then the amount mustn’t be paid directly.
Death of the customer: At the death of the customer, the bank doesn’t pay the cheque amount.
Stolen cheque: If it is proved that, the Cheque is stolen before, and then the cheque is dishonored.
Customers duty to prevent forgery
Customer of a bank owes a duty of care in drawing a cheque to take reasonable and ordinary precautions against forgery:
Store your checks, deposit slips, bank statements and canceled checks in a secure and locked location. Never leave your checkbook in your vehicle or in the open.
Reconcile your bank statement within 30 days of receipt in order to detect any irregularities. Otherwise, you may become liable for any losses due to check fraud.
Make sure your checks are endorsed by your financial institution and incorporate security features that help combat counterfeiting and alteration.
Never give your account number to people you do not know, especially over the telephone. Be particularly aware of unsolicited phone sales. Fraud artists can use your account without your authorization and you may end up being responsible.
Unless needed for tax purpose, destroy old canceled checks, account statements, deposit tickets, ATM receipts (they also frequently have your account number and worse yet, your account balance). The personal information on it may help someone impersonate you and take money from your account.
Customers duty to prevent forgery
When you receive your check order, make sure all of the checks are there, and that none are missing. Report missing checks to your bank at once, if any. And if you fail to receive your order by mail, alert your bank. Checks could have been stolen from mail box or lost in transient.
Never endorse a check until you are ready to cash or deposit it. The information can be altered if it is lost or stolen.
Don't leave blank spaces on the payee and amount lines.
Don't write your credit card number on the check.
Don't make a check payable to cash. If lost or stolen, the check can be cashed by anyone.
Thank You
A Presentation onForgery of Negotiable Instruments: Precautions to be taken for a secured business transaction
Objectives
Our object is to make you know:-
The meaning of forgery
Punishment of forgery
The forgery of negotiable instrument
What we should do to prevent forgery of the instruments
The meaning of negotiable instruments
The various features of negotiable instruments
The various types of negotiable instruments
Introduction to Negotiable Instruments:
A Negotiable Instrument is a document that meets the requirements for circulation without reference to other sources. The Negotiable Instrument Act, 1881 does not define negotiable instrument, it runs as to that “Negotiable Instrument” means Promissory Note, Bill of Exchange, or Cheque payable either to order or to bearer. Negotiable Instruments are certain types of written documents which are transferable, either by delivery or by endorsement, and are used in commercial transactions and monetary dealings.
Features of Negotiable Instrument:
1. It is easily transferable. It may be transferred by mere delivery in case of bearer instrument and by delivery and endorsement in case of order instrument.2. a holder of a negotiable instrument in due course, that is through full payment A major advantage of a Negotiable Instrument is its transferability, but sometimes transferability is not always characteristic of negotiability. A transferable instruments or goods may not be a negotiable instrument.3. and good faith shall not be liable to a third party having title thereto.
Promissory Note
A “Promissory Note” to order or to bearer. is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee, or at fixed or determinable future time, certain in money,
Parties to a Promissory Note
There are primarily two parties involved in a promissory note. They are-
i. The Maker or Drawer – the person who makes the note and promises to pay the amount stated therein.
ii. The Payee – the person to whom the amount is payable.
In course of transfer of a promissory note by payee and others, the parties involved may be -
a. The Endorser – the person who endorses the note in favour of another person.
b. The Endorsee – the person in whose favour the note is negotiated by endorsement.
Features of a promissory note
Let us know the features of a promissory note:
A promissory note must be in writing, duly signed by its maker and properly stamped.
It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is not enough. For example, if someone writes ‘The promise to pay must not be conditional. For example, if it is written
It must contain a promise to pay money only. For example, if someone writes ‘I promise to give B a Maruti car’ it is not a promissory note. A promissory note may be payable on demand or after a certain date. For example, if it is written ‘three months after date I promise to pay S or order a sum of tk. Five Thousand only’ it is a promissory note.
The parties to a promissory note, i.e. the maker and the payee must be certain.
The sum payable mentioned must be certain or capable of being made certain. It means that the sum payable may be in figures or may be such that it can be calculated.
A Specimen of a Promissory Note
Bill of Exchange
A “Bill of Exchange” is an instrument in writing containing an unconditional order, signed by the maker, a certain person or to the bearer of the instrument. directing a certain person to pay on demand or at fixed or determinable future time a certain sum of money only to, or to the order of,
Parties to a Bill of Exchange
There are three parties involved in a bill of exchange. They are-
i. The Drawer – The person who makes the order for making payment.
ii. The Drawee – The person to whom the order to pay is made. He is generally a debtor of the drawer.
iii. The Payee – The person to whom the payment is to be made.
Features of a bill of exchange
Let us know the various features of a bill of exchange:
The order must be unconditional.
The order must be to pay money and money alone.
The sum payable mentioned must be certain or capable of being made certain.
A bill must be in writing, duly signed by its drawer, accepted by its drawee and properly stamped.
It must contain an order to pay. Words like ‘please pay tk. 5,000/- on demand and oblige’ are not used.
The parties to a bill must be certain.
Specimen of a Bill of Exchange
A “Cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Features of a cheque
Let us look into some important features of a cheque.
A cheque must be in writing and duly signed by the drawer.
The payee is always certain.
It is always payable on demand.
The cheque must bear a date otherwise it is invalid and shall not be honoured by the bank.
It contains an unconditional order.
It is issued on a specified banker only.
The amount specified is always certain and must be clearly mentioned both in figures and words.
Specimen of a Cheque
Types of Cheque
Cheques are of four types, Let us know details about these cheques:
a) Open cheque: A cheque is called ‘Open’ when it is possible to get cash over the counter at the bank. The holder of an open cheque can do the following:
i. Receive its payment over the counter at the bank,
ii. Deposit the cheque in his own account
iii.Pass it to some one else by signing on the back of a cheque.
b) Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous to issue
such cheques. This risk can be avoided by issuing another types of cheque called ‘Crossed cheque’. A cheque can be crossed by drawing two transverse parallel lines across the cheque, with or without the writing ‘Account payee’ or ‘Not Negotiable’. The payment of such cheque is not made over the counter at the bank. It is only credited to the bank account of the payee.
c) Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.
d) Order cheque: The payee can transfer an order cheque to someone else by signing his or her name on the back of it. An order cheque is one which is payable to a particular person. In such a cheque the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written.
What is Forgery?
The creation of a false written document or alteration of a genuine one, with the intent to defraud is known as Forgery.
Common forgery usually involves manufacturing or tampering with documents for economic gain. Besides this Forgery consists of filling in blanks on a document containing a genuine signature, or materially altering or erasing an existing instrument. The intent to defraud remains essential.
According to sec.463 of Penal Code 1860,Whoever makes any false document or part of a document, with intent to cause damage or injury, to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intend to commit fraud or that fraud may be committed, commits forgery.
An underlying intent to defraud, based on knowledge of the false nature of the instrument, must accompany the act.
Methods of forgery include handwriting, printing, engraving, and typewriting.
Instruments of forgery may include bills of exchange, bills of lading, promissory notes, checks, bonds, receipts, orders for money or goods, mortgages, discharges of mortgages, deeds, public records, account books, and certain kinds of tickets or passes for transportation or events.
Cases of Forgery:
Unauthorized use of seal: A, without Z's authority, affixes Z's seal to a document purporting to be a conveyance of an estate from Z to A, with the intention of selling the estate to B and thereby of obtaining from B the purchase-money. A has committed forgery.
By inserting amount on a blank Cheque:A picks up a cheque on a banker signed by B, payable to bearer, but without any sum having been inserted in the cheque. A fraudulently fills up the cheque by inserting the sum of ten thousand taka. A commits forgery.
By tampering of the number of the amount:A leaves with B, his agent, a cheque on a banker, signed by A, without inserting the sum payable and authorizes B to fill up the cheque by inserting a sum not exceeding ten thousand taka for the purpose of making certain payments. B fraudulently fills up the cheque by inserting the sum of twenty thousand taka. B commits forgery.
Cases of Forgery:
By defrauding the banker:A draws a bill of exchange on himself in the name of B without B's authority, intending to discount it as a genuine bill with a banker and intending to take up the bill on its maturity. B dishonestly erases the words "pay to Z or his order" and thereby converts the special endorsement into a blank endorsement. B commits forgery. Here, as A draws the bill with intent to deceive the banker by leading him to suppose that he had the security of B, and thereby to discount the bill, A is guilty of forgery.
By transforming a special endorsement into a blank endorsement: A endorses a Government promissory note and makes it payable to Z or his order by writing on the bill the words "pay to Z or his order" and signing the endorsement.
Punishment for forgery
According to section 465 of Penal Code, Whoever commits forgery shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.
Punishment if cheque dishonored
According to Sec.138 of Negotiable Instrument Act 1881,a person whose cheque is dishonored, shall be punished with imprisonment for a term which may extend to one year, or with fine which may extend to thrice the amount of the cheque, or with both.
Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, , and(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within thirty days of the receipt of the said notice.
Recommendations:
Precautions of banker against fraud and forgery of Cheque
Bank’s safeguard to protect a fraud and forgery are as follows:
Signature of the drawer: The instrument has to be signed by its drawer. Bank shall not pay the money, if the signature of drawer is not found.
Date: Date should be written in the right side of the cheque. If it is not written, incorrect or expired of 180 days, bank doesn’t pay the money.
Amount of money: The amount of money is to be written in figure and words; otherwise, the bank doesn’t pay money.
Similarity in word and figure: The amount mentioned in figure and word should be similar.
Account number: The banker should follow the account number whether it is right or wrong.
Similarities of the signature: The signature given by the drawer or account holder must be similar with the sample signature.
Bank and branch: Bank has to check the branch and bank name. If those are not correct, the bank must not pay the money.
Recommendations:
Genuine payee: The banker should check the identity of payee.
Accuracy of cheque drafting: Bank verifies whether the drafting is correct or not.
Legal notice: Bank should inquire whether there is any legal notice on the part of Drawer, Government or Court or not.
Drawer notice: If a drawer sends a notice against any Cheque then the cheque shouldn’t be paid.
Torn Cheque: The amount is not payable in case of a torn Cheque.
Endorsement: Banker should check the process of endorsement either it is legal or not.
Crossing in Cheques: Bank should be cautious about the Crossing of cheque. If a cheque is crossed then the amount mustn’t be paid directly.
Death of the customer: At the death of the customer, the bank doesn’t pay the cheque amount.
Stolen cheque: If it is proved that, the Cheque is stolen before, and then the cheque is dishonored.
Customers duty to prevent forgery
Customer of a bank owes a duty of care in drawing a cheque to take reasonable and ordinary precautions against forgery:
Store your checks, deposit slips, bank statements and canceled checks in a secure and locked location. Never leave your checkbook in your vehicle or in the open.
Reconcile your bank statement within 30 days of receipt in order to detect any irregularities. Otherwise, you may become liable for any losses due to check fraud.
Make sure your checks are endorsed by your financial institution and incorporate security features that help combat counterfeiting and alteration.
Never give your account number to people you do not know, especially over the telephone. Be particularly aware of unsolicited phone sales. Fraud artists can use your account without your authorization and you may end up being responsible.
Unless needed for tax purpose, destroy old canceled checks, account statements, deposit tickets, ATM receipts (they also frequently have your account number and worse yet, your account balance). The personal information on it may help someone impersonate you and take money from your account.
Customers duty to prevent forgery
When you receive your check order, make sure all of the checks are there, and that none are missing. Report missing checks to your bank at once, if any. And if you fail to receive your order by mail, alert your bank. Checks could have been stolen from mail box or lost in transient.
Never endorse a check until you are ready to cash or deposit it. The information can be altered if it is lost or stolen.
Don't leave blank spaces on the payee and amount lines.
Don't write your credit card number on the check.
Don't make a check payable to cash. If lost or stolen, the check can be cashed by anyone.
Thank You
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