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Applicable in entire India except the State of Jammu & Kashmir. Deals with law relating to three specific instruments, viz. Promissory note, Bill of exchange and cheque.
MEANING
There are certain documents which are freely used in commercial transactions and monetary dealings. These documents, if they satisfy certain conditions are known as Negotiable Instruments. A Negotiable instrument is a method of transferring a debt from one person to another.
The word negotiable means transferable from one person to another in return for consideration and instrument means a written document by which a right is created in favour of some person.
Negotiable instrument By custom or usage 1) Bank draft. 2) Pay orders. 3) Hundies. 4) Delivery order
Promissory Note
Sec.4 A promissory note is an instrument in writing 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 the bearer of the instrument.
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Parties
MAKER : The person who makes the promissory note and promises to pay is called the Maker. PAYEE : The person to whom the payment is to be made is called the Payee. HOLDER: The holder is either the payee or someone to whom he may have indorsed (transfer) the note is known as Holder. ENDORSER: The person who indorses the note to another is called the Endorser . ENDORSEE: The person to whose favour the note is endorsed is called the Endorsee
1. It must be in writing . 2. It must contain a promise or undertaking to pay a definite sum of money. 3. The promise to pay must be unconditional. 4. It must be sign by the maker. 5. The payee must be identified & must be certain. 6. The sum payable must be certain. 7. The amount payable must be in legal tender in money of India. 8. Other formalities like date, place ,& stamp must be mentioned.
Three months after date I promise to pay Shyam or order the sum of one thousand rupees, for value received. To, Shyam 222, Ashok Vihar Delhi-110052
Stamp Sd/-Ram
Bill Of Exchange
Sec.5 : A bill of exchange is an instrument in writing containing an Unconditional order signed by the maker directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.
Parties
DRAWER: The person who makes the bill of exchange is called drawer. DRAWEE: The person who is directed to pay is called drawee. PAYEE: The person to whom the payment is to be made is called payee. ACCEPTOR: When the drawee accepts the bill is called acceptor.
Sd/-
Krishna
Contd In case of Demand Bill payment is ot be made om demand. Neither the acceptance of the drawee is necessary nor are any days of grace allowed in this case
CHEQUE
Sec.6 : A cheque is a bill of exchange drawn on a specified banker & not expense to be payable on a specified banker & not expense to be payable otherwise than on demand & it includes the electronic image Of a truncated cheque & a cheque in the electronic form.
Parties
DRAWER: The person who makes a cheque is called Drawer. DRAWEE: The person who is directed to pay is called Drawee. PAYEE: The person to whom the payment is to be made.
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2.
It is always drawn by a bank & not by any other institutions. It always payable on demand.
PUNJAB NATIONAL BANK Subzi Mandi,Delhi -110007 Payor bearer the sum of Rs Rs A/c No Sd/-