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LLM · Group 2 Business Law
2025-26 Examination
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First published on munotes.in on 12 August 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
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The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by the University of Mumbai at the 2025-26 examination.
Three changes date most textbooks on this subject. The Banking Laws (Amendment) Act, 2025, commenced in two stages, on 1 August 2025 for governance and audit and 1 November 2025 for nomination: a depositor may now name up to four nominees, and substantial interest in section 5 of the Banking Regulation Act, 1949, rose from five lakh to two crore rupees, its first revision since 1968. The Banking Regulation (Amendment) Act, 2020, lets the Reserve Bank prepare a scheme of reconstruction under section 45 without first obtaining a moratorium, and brought co-operative banks fully under the Act. And since the 2016 amendment to section 13(8) of the Securitisation Act, 2002, a borrower's right to redeem ends when the auction notice is published and not when the sale is made: Celir LLP v. Bafna Motors, 21 September 2023.
Contents
The questions below are the paper as the University of Mumbai set it at the 2025-26 examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2025-26 examination, reproduced as the University of Mumbai set them, in the order it set them. Nothing has been reworded, added or left out. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 7 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
SECTION I
Paper Subject Code 70508, printer's form 06861. Answer any 4, all questions carry equal marks, cite relevant case laws as required
any four of seven · 100 Marks
Q.1.Define a Negotiable instruments discuss its presumptions, characteristics and kinds.[25]
Answer
For full marks, cover: section 13 first and the point that the Act defines negotiable instruments by enumeration rather than by description, so that the characteristics have to be gathered from sections 4, 5 and 6 and from the common law; then the characteristics, of which the transfer of a better title is the one that matters and the others are consequences; then the kinds, by statute and by usage, and the divisions the Act itself makes; then section 118 clause by clause with its proviso and section 119, and the modern working of the presumptions in a prosecution under section 138.
The definition
Section 13(1) of the Negotiable Instruments Act, 1881, provides that a "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer. The Act therefore defines by enumeration, not by description: it names three instruments and says nothing about what quality makes an instrument negotiable.
The consequence is that the characteristics must be gathered from elsewhere, from the definitions of the three instruments in sections 4, 5 and 6, from the rules on negotiation in sections 14 and 46 to 60, and from the privileges of a holder in due course in sections 9, 20, 36, 43, 53 and 58. It also means that the Act does not exclude instruments made negotiable by usage, and section 1 expressly saves any local usage relating to an instrument in an oriental language, which is what keeps the hundi alive as a distinct legal instrument governed by custom unless the parties contract into the Act.
Two Explanations to section 13 complete the definition. An instrument is payable to order where it is expressed to be so payable, or where it is expressed to be payable to a particular person and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. It is payable to bearer where it is expressed to be so payable, or where the only or last indorsement is an indorsement in blank. Section 13(2) provides that an instrument may be made payable to two or more payees jointly, or in the alternative to one of two or one of several payees.
The characteristics
The essential characteristic, and the only one that is not a consequence of something else, is that a transferee taking in good faith and for value may obtain a title better than that of his transferor. That is a deliberate exception to the maxim nemo dat quod non habet, and it exists so that a commercial instrument can circulate as money does, without each taker having to investigate the history of the paper.
Everything else follows from it. Free transferability, by delivery where the instrument is payable to bearer under section 47, and by indorsement and delivery where it is payable to order under section 48. Title free of prior defects in the hands of a holder in due course: under section 36 every prior party remains liable to him, under section 43 absence of consideration is no answer, and under section 58 he is excepted from the rule that no possessor may claim on an instrument obtained by fraud or an offence.
The right to sue in his own name, without joining prior parties and without notice to the debtor, which is where negotiation differs sharply from an assignment under section 130 of the Transfer of Property Act, 1882. And presumptions in his favour under sections 118 and 119, which relieve him of proving consideration, date, order of indorsement and his own character.
Two further characteristics of form should be stated, because they limit what can be negotiable at all: the engagement must be unconditional and the sum must be certain and in money only, so an instrument payable on an uncertain event, or in goods, or in a sum to be ascertained later, is not negotiable however it is drafted.
The kinds
By source there are two classes. Those recognised by the Act: the promissory note under section 4, an instrument in writing, not being a bank note or currency note, containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or to the order of a certain person or to bearer; the bill of exchange under section 5, containing an unconditional order signed by the maker directing a certain person to pay; and the cheque under section 6, a bill drawn on a specified banker and not expressed to be payable otherwise than on demand, which since the amendment of 2002 includes the electronic image of a truncated cheque and a cheque in the electronic form.
Those recognised by usage or custom include the hundi, saved by section 1, and at common law share warrants to bearer, bearer debentures, dividend warrants and circular notes. Documents of title to goods such as a bill of lading or a railway receipt are transferable but not negotiable, because the transferee takes no better title than his transferor had, and the distinction is regularly examined.
The Act then makes its own divisions. By the person entitled: bearer or order. By place: inland or foreign under sections 11 and 12, an inland instrument being one drawn or made in India and payable in India or drawn on a person resident in India. By time: payable on demand or at a determinable future time. Special classes are the ambiguous instrument under section 17, which the holder may treat as either a bill or a note; the inchoate stamped instrument under section 20; and the accommodation bill, drawn without consideration for the accommodation of a party, on which under section 43 there is no obligation between immediate parties but a holder in due course may recover.
The presumptions
Section 118 provides that until the contrary is proved the following presumptions shall be made. (a) of consideration, that every negotiable instrument was made or drawn for consideration and that every such instrument, when accepted, indorsed, negotiated or transferred, was so for consideration. (b) as to date, that an instrument bearing a date was made or drawn on that date. (c) as to time of acceptance, that an accepted bill was accepted within a reasonable time after its date and before maturity. (d) as to time of transfer, that every transfer was made before maturity. (e) as to order of indorsements, that they were made in the order in which they appear. (f) as to stamp, that a lost promissory note, bill or cheque was duly stamped. (g), that the holder is a holder in due course.
The proviso to clause (g) is what decides contested cases. Where the instrument has been obtained from its lawful owner, or from a person in lawful custody of it, by means of an offence or fraud, or has been obtained from the maker or acceptor by an offence or fraud or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him. The presumption is therefore displaced once the defendant proves the initial fraud or offence, and the burden travels back.
Section 119 adds that in a suit upon a dishonoured instrument the court shall, on proof of the protest, presume the fact of dishonour unless and until it is disproved.
The presumptions do their heaviest modern work in a prosecution under section 138. Section 139 presumes that the holder of a cheque received it in discharge, in whole or in part, of a debt or other liability. Read with section 118(a), the effect is that once the drawing and the signature are admitted or proved, the burden shifts to the accused to raise a probable defence, the standard being the preponderance of probabilities and not proof beyond reasonable doubt, and the accused may discharge it from the complainant's own material without entering the witness box.
The consequence is that section 138, criminal in form, works as a summary recovery procedure, and the Supreme Court has repeatedly had to manage the volume that produces. In Sanjabij Tari v. Kishore S. Borcar, decided on 25 September 2025, the Court observed that cheque dishonour complaints account for a very large share of the criminal pendency of metropolitan trial courts and directed that they be handled in a manner reflecting their quasi criminal and victim centred character, including greater use of compounding and of summary procedure.
Two limits close the topic. The presumptions are rebuttable and not conclusive; and they attach to the instrument, so where execution itself is denied and not proved, section 118 has nothing to operate upon.
The decisions that work the presumptions
The presumptions described above are not academic; they are what makes section 138 work, and the governing case is Rangappa v. Sri Mohan, (2010) 11 SCC 441, decided on 7 May 2010 by three judges. The accused admitted his signature on a dishonoured cheque but denied that any legally enforceable debt existed, relying on earlier observations that the presumption did not extend so far.
The Court held that the presumption under section 139 does include the existence of a legally enforceable debt or liability, and not merely that the cheque was issued. It described section 139 as a reverse onus clause enacted in furtherance of the legislative object of improving the credibility of negotiable instruments, and held the presumption rebuttable on the preponderance of probabilities, the accused being entitled to raise a probable defence from the complainant's own material without entering the witness box.
Read with section 118(a) the consequence is that a complainant who proves the signature has proved his case, and the trial becomes an inquiry into whether the accused can make his denial probable. That is why a provision criminal in form operates as a summary recovery procedure, and why in Sanjabij Tari v. Kishore S. Borcar, decided on 25 September 2025, the Supreme Court observed that these complaints account for a very large share of the criminal pendency of metropolitan trial courts.
Where the drawer is a company the machinery has a formal precondition, fixed in Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, decided on 27 April 2012. An authorised signatory of International Travels Ltd. issued a cheque for Rs 5,10,000 which was dishonoured, and she was prosecuted without the company being arraigned. The Court held that making the company an accused is imperative where the offence is by a company, subject only to lex non cogit ad impossibilia where a legal bar prevents proceeding against it. A holder with a perfect instrument and a defective array of accused loses.
Conclusion. The Act's technique is worth naming. It defines negotiable instruments by listing three of them, leaves the quality of negotiability to be inferred, and then supplies that quality through two devices: the status of holder in due course, who takes free of prior defects, and the presumptions in sections 118 and 119, which relieve a holder of proving the things a purchaser of an ordinary chose in action would have to prove.
Between them those two devices do what the definition does not. They make it commercially safe to take an instrument from a stranger, which is the entire purpose of negotiability, and they make it procedurally easy to sue on one, which is why section 138 read with sections 118(a) and 139 has become the principal debt recovery mechanism for small commercial claims in India. The kinds of instrument matter for the same practical reason: whether a document is a promissory note, a bill or neither decides its stamp duty, and section 35 of the Indian Stamp Act, 1899, makes an insufficiently stamped instrument inadmissible, so a misclassified document can destroy a claim before any of this machinery is reached.
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