Presented by:

• Mini Karmakar
• Aqsa Khan
• Nitu Jogdand
 Promissory Note
A promissory note is a financial instrument that
contains a written promise by one party to pay another
party a definite sum of money, either on demand or at a
specified future date. A promissory note typically
contains all the terms pertaining to the indebtedness,
such as the principal amount, interest rate, maturity
date, date and place of issuance, and issuer's signature.

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Parties involved in a promissory note
 Drawer: the person who makes a promissory note.
He is also called the promisor, the maker, the payor,
the debtor.
 Drawee: the person in whose favor the promissory
note is drawn and who is meant to receive the
payment. He is also called the promisee , the payee,
the creditor.

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Parties involved in a promissory note
 Bearer: the person who holds a promissory note. He
is also called the holder. The bearer and the payee is
usually the same person, but they can be different.
 Endorser: the person who endorses a promissory
note.
 Endorsee: the person in whose favor the promissory
note is endorsed and who receives it after
endorsement. He becomes the new bearer and payee
after endorsement.

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Types of Promissory Notes
 Inland promissory notes
In this kind of promissory note, the maker and the
Drawee belong to a same country. The inland note may
be individual or joint note.
 Foreign promissory notes
In foreign promissory notes, the maker and the Drawee
belong to different countries and also is individual or
joint note.

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Essentials of Promissory Note
 It should be in written shape.
 It must contain a guarantee to give money.
 The promise to give money must be unconditional.
 It must be signed by the maker.
 The maker should be a certain person.
 The payee must also be a certain person.
 The amount must be certain.
 Payment should be of money only.
 Time or period of payment should be fixed.

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 Difference Between Promissory Notes
and Bill of Exchanges
BASIS FOR
BILL OF EXCHANGE PROMISSORY NOTE
COMPARISON
Meaning Bill of Exchange is an A promissory note is a
instrument in writing written promise made by
showing the indebtedness the debtor to pay a certain
of a buyer towards the sum of money to the
seller of goods. creditor at a future
specified date.

Defined in Section 5 of Negotiable Section 4 of Negotiable

Instrument Act, 1881. Instrument Act, 1881.
Parties Three parties, i.e. drawer, Two parties, i.e. drawer
drawee and payee. and payee.

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Drawn by Creditor Debtor
Liability of Maker Secondary and Primary and absolute
conditional

Can maker and payee Yes No

be the same person?

Copies Bill can be drawn in Promissory Note

copies. cannot be drawn in
copies.

Dishonor Notice is necessary to Notice is not

be given to all the necessary to be given
parties involved. to the maker.

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Features of Bill of Exchange
 It is important to have a bill of exchange in writing
 It must contain a confirm order to make a payment and not
just the request
 The order should not have any condition
 The bill of exchange amount should be definite
 Fixed date for the amount to be paid
 The bill must be signed by both the drawee and the drawer
 The amount stated on the bill should be paid on-demand or on
the expiry of a fixed time
 The amount is paid to the beneficiary of the bill, specific
person, or against a definite order

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Types of Bill of Exchange

By Documents:
 Documentary Bill
By Place:
 Inland Bill
 Foreign Bill

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Types of Bill of Exchange
By Purpose:
 Accommodation Bill
 Trade Bill
By Parties:
 Order Bill
 Bearer Bill

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Parties of Bill of Exchange
 Drawer
The person who makes the bill, or who gives the order
to pay a certain sum of money, is the drawer of the
instrument.
 Drawee
The person who accepts the bill of exchange, or who is
directed to pay a certain sum, is called drawee.
 Payee
The person receiving payment is called the payee, who
can be a designated person or the drawer himself.

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Bills of Exchange Example
Let’s say that ABV Company has issued a bill for
BVX Company. BVX Company has purchased
goods worth of $20,000 from ABV Company on
credit. ABV Company writes that – “Three months
after the date, pay to us a sum of twenty thousand
dollars.” BVX Company has accepted the bill, but
on a due date couldn’t pay the amount due.

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 CHEQUE
Definition: Cheque refers to a negotiable instrument that contains an unconditional
order to the bank to pay a certain sum mentioned in the instrument, from the
drawer’s account, to the person to whom it is issued, or to the order of the specified
person or the bearer.

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 CHEQUE VS BILL OF EXCHANGE
CHEQUE
• All cheque are bill of exchange
• Only a banker can be drawee
• Requires no acceptance.
• The drawer of a cheque is not discharged
by the holder’s delay in presenting it for
payments, unless the drawer has been
injured because of the delay.
• No notice of dishonor is necessary.
• Cheque may be crossed.
• Is payable immediately on demand
without any days if grace.
• Payment can be counter manded by the
drawer.
• Not required to be noted or protested for
dishonor
• Payable to bearer on demand cheque can
be drawn so.
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BILL OF EXCHANGE
• All bills of exchange are not cheques.
• Anyone can be a drawee including a
banker.
• It must be presented for acceptance.
Drawee is liable only after his acceptance.
• It must be dully presented for payment or
else the drawer will be discharged.
• Notice of dishonor is to be given to all the
parties liable to pay.
• Can never be crossed.
• Is entitled to three days of grace unless it
is payable on demand.
• Can not be counter manded by the
drawer.
• it may be noted or protested for dishonor.
• Can not to drawn payable to bearer on
demand
 TYPES OF CHEQUES

1. Open Cheque

2. Bearer Cheque

3. Order Cheque

4. Crossed Cheque

5. Self Cheque

6. Blank Cheque

7. Stale Cheque

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 TYPES OF CHEQUES

1.Post-dated Cheque

2.Ante-dated Cheque

3.Banker’s Cheque

4.Cancelled Cheque

5.Mutilated Cheque

6.Traveler's Cheque

7.Gift Cheque

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 DISHONOUR OF CHEQUE

 Over the years there have been many important changes in the way cheques are
issued/bounced/dealt with. Commercial globalisation has resulted in giving a big boost
to our country. With the rapid increase in commerce and trade, use of cheque also
increased and so did the cheque bouncing disputes. The object of Sections 138-142 of
the Negotiable Instruments Act, 1881 is to promote the efficacy of banking operations
and to ensure credibility in transacting business through cheques.
 Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any
cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing to the credit of the bank.

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Section 138:- casts a criminal liability punishable with imprisonment or fine or with
both on a person who issues a cheque towards discharge of a debt or liability as a
whole or in part and the cheque is dishonoured by the bank on presentation. Section
138 was enacted to punish unscrupulous drawers of cheques who, though purport to
discharge their liability by issuing cheque, have no intention of really doing so. Apart
from civil liability, criminal liability is sought to be imposed by the said provision on
such unscrupulous drawers of cheques. However, with a view to avert unnecessary
prosecution of an honest drawer of the cheque and with a view to give an opportunity
to him to make amends, the prosecution under Section 138 of the Act has been made
subject to certain conditions. These conditions are stipulated in the proviso to Section
138.

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 CHEQUE DISONOURED

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 Case Study
Abhishek holds the promissory note as a holder
in due course. He gives it to Aishwarya. Is
Aishwarya holder in due course why?

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Thank You

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