Lecture 2 of NI ACT
- 1. NEGOTIABLE INSTRUMENTS, 1881 BY ARUNDHATI BANERJEE SECTION 4 AND SECTION 5
- 2. It is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money to, or to the order of, a certain person, or to the bearer of instrument. In other words, a promissory note is a financial instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (note’s payee) a definite sum of money, either on demand or at a specified future date.
- 3. To be a valid promissory note:- In writing and signed by the maker Undertaking/ promise to pay The promise to pay must be unconditional Money and a certain sum of money Certainty of parties (i.e. payee and maker) Other than a bank note or currency note Payable to bearer or order POINTS TO BE NOTED • BANK NOTE – issuing agency is bank • CURRENCY NOTE – issued by Government of India • But Government has recognized all bank notes as currency notes by executive order.
- 4. It is an instrument in writing containing an unconditional order signed by the maker directing a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. Three parties are necessary to a bill of exchange the ‘drawer’ (maker of the bill), the ‘drawee’ (person who is directed to pay the bill) and the ‘payee’ (the person to whom or to whose order the amount is payable unless the bill is payable to bearer.
- 5. Rs. 3,00,000 Lahore November 30, 1997 Two months after the date pay to Mr. Kamal Nath or his order the sum of Rupees Three Lakh only for value received. To Mr. Amarendra 13 – Lingdon Street Kolkata SD Mr. Suresh Dey AMOUNT PLACE AND DATE PAYEE DRAWER DRAWEE
- 6. The essential characteristics of a bill of exchange are as follows:- 1. It must be in writing 2. Three parties (drawer, drawee, and payee) 3. It must contain an order to pay 4. Unconditional order 5. It must be signed by the drawer 6. The instrument must certain an order to pay money and money only and the sum payable must be certain. POINTS TO BE NOTED:- • BARTER IS NOT BILLS OF EXCHANGE • IF THERE IS NO NAME ON A CHEQUE THEN SECTION 20 OF NEGOTIABLE INSTRUMENT ACT PERMITS TO COMPLETE THE INSTRUMENT. IT IS A BEARER CHEQUE.
- 7. SNO. PROMISSORY NOTES BILLS OF EXCHANGE 1. Two parties – maker and payee. Three parties – drawer, drawee and payee. 2. There is a promise to make a payment There is an order for making the payment 3. It is an unconditional order It is also an unconditional order but under Section 86 the acceptor may accept a Bills of Exchange conditionally. 4. It can’t be made payable to the maker himself. The drawer may order the payment to be made to himself also. 5. The liability of the maker is primary. In a Bills of Exchange which has been accepted the liability of acceptor is primary whereas liability of drawer arises if acceptor doesn’t honor the Bills of Exchange. 6. The person signing a promissory notes is debtor of the payee i.e. there is a debtor and creditor relationship which necessitates the writing of the note. The drawer is generally a creditor of the drawee on whom the bill is drawn.
- 8. SNO. PROMISSORY NOTES BILLS OF EXCHANGE 7. Certain provisions like presentations for acceptance, acceptance are not applicable to promissory notes. Certain provisions like presentation for acceptance, acceptance or drawing of bills in sets are applicable only to a Bills of Exchange. X – DRAWER Y – DRAWEE Z - PAYEE X Y Rs. 500 Z APPLY FOR ACCEPTANCE Y ACCEPT (Y BECOMES PRIMARY LIABLE) REJECT (X BECOMES PRIMARY LIABLE
- 9. THANK YOU PLEASE LIKE AND SUBSCRIBE