bill of exchange -negotiable instrument

1. IVIN SEBASTIAN
MBA-15

2. Sec(5) of the NIA 1881 defines ‘ A bill of
exchange is an instrument in writing
containing the unconditional order, signed by
the maker, directing a certain person to pay
a certain sum of money only to or to the
order of certain person or to the bearer of
the instrument.’
Thus bill of exchange is an order from the
creditor to the debtor to pay a specified
amount to a person mentioned therein.

3.  Mr. A purchased goods from B rs.1000
 Mr. B purchased good from D rs.1000
 Mr. B may order to Mr. A to pay rs.1000. Mr. D
which will be nothing but a bill of exchange.

4.  There are three parties in a bill of exchange:
1. Drawer
2. Drawee
3. Payee

5. Drawer
The maker of a bill of exchange is called the
drawer.
Drawee
The person who is directed to pay is called
drawee.
Payee
The person who will receive the money is
called the payee.

6.  The drawer or payee who is in possession of
the bill, is called the holder.
 It is the holders duty to present the bill to
the drawee for his acceptance.
 The drawee signifies his acceptance by
signing on the bill. After such signature the
drawee becomes the acceptor.

7. The essential elements of a bill of exchange
are more or less the same as the promissory
note and are subject to the same formalities
as regards date, place, stamp, signature etc.
These essential elements are:
 The instrument must be in writing.
 The instrument must contain an order to pay,
which is express and unconditional.
 There must be in three parties, drawer,
drawee, payee and they must be certain and
definite individuals.

8.  The instrument must be signed by the
drawer.
 The amount of money to be paid must be
certain.
 The payment must be in the legal tender
moneys of India.
 The money must be payable to a definite
person or according to the order.
 It must comply with the formalities as
regards date, consideration, stamp etc.

9. Rs.5000 Trivandrum
23-06-15
Three months after date, pay to Rajesh or order, the sum of rs.5000(five
thousand rupees only) for value received.
To
Mrs. Jaya
‘Yamuna’
Trivandrum-23 stamp
Sd Babu

10. 1. There are 2 parties, promisor and
promisee in a promissory note while there
are three parties, payee, drawer and
drawee in a bill of exchange.
2. A promissory note is an unconditional
promise to pay while a bill of exchange is
an unconditional order to pay.
3. In a promissory note liability of the
maker is primary and absolute while
liability of the drawer of the bill of
exchange is secondary and conditional.

11. 4. A promissory note cannot be made payable
to the maker himself while the drawer and
the payee may be the same in a bill of
exchange.
5. A promissory note cannot be drawn
payable to bearer while a bill of exchange
can be so drawn provided it is not payable
to bearer on demand.
6. Maker of the promissory note stands in
immediate relation with the payee.
Drawer of a bill in immediate relation with
the acceptor and not the payee.

12. 7. promissory note cannot be drawn in sets. A
bill can be drawn in sets.
8. presentment of a promissory note for
acceptance and acceptance for honour are
not necessary while they are necessary for a
bill.