a brief explanations for all the subjects that the title mentioned

1. PROMISSORY NOTE
BILL OF EXCHANGE
CHEQUE

2. Mohammed shafath k m
MBA
School of Management Studies, Palakkad
University Of Calicut

3. PROMISSORY NOTE

4. PROMISSORY NOTE
 A promissory note is a legal instrument (more
particularly, a financial instrument), in which one party
(the maker or issuer) promises in writing to pay a
determinate sum of money to the other (the payee),
either at a fixed or determinable future time or on
demand of the payee, under specific terms. If the
promissory note is unconditional and readily salable, it
is called a negotiable instrument.
 A signed document containing a written promise to pay
a stated sum to a specified person or the bearer at a
specified date or on demand.

5. DEFINITION
 According to secion 4, a promossory note 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 only to, or to the order of, a certain
person, or to the bearer of the instrument.

6. PARTIES OF A PROMISSORY
NOTE
There are primarily two parties involved in
a promissory note. They are
 The maker or drawer: The person who makes the
note and promises to pay the amount stated therein.
 The payee: The person whom the amount is
payable.

7. In course of transfer of a promissory note
By payee and others, the parties involved
May be –
 The Endorser:- The person who endorses the note
in favour of another person.
 The Endorsee:- The person in whose favour the
note is negotiated by endorsement.

8. ESSENTIALS OF
PROMISSORY NOTE
 It must be in writing.
 It must contain a promise or undertaking to pay.
 The promise to pay must be unconditional.
 It must be signed by the maker.
 The maker must be a certain person.
 The payee must be certain.
 The sum payable must be certain.
 The amount payable must be in legal tender money
of india.
 other formalities.

9. SPECIMENS OF PROMISSORY
NOTES
Rs.5000 Bombay,
1st March, 2015
On demand I promise to pay ABC the sum of five thousand rupees.
XYZ
Rs.2000 Chennai
31st July, 2014
Three months after date, I promise to pay ABC the sum of two
thousand rupees.
XYZ

11.  A 1926 Promissory Note from the Imperial
Bank of India, Rangoon, Burma for 20,000
Rupees plus interest

12. BILL OF
EXCHANGE

13. BILL OF EXCHANGE
DEFINITION
Section 5 of the negotiable instrument act defines a
bill of exchange as follows:
"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".

14. PARTIES TO A BILL OF EXCHANGE
There are 3 parties to a bill of exchange.
 Drawer:- The person who gives the order to pay or
who makes the bill is called the drawer.
 Drawee:- The person who is directed to pay is called
the drawee.
 Payee:- The person to whom the payment is to be
made is called the payee.

15.  Holder:- The drawer, or, if the bill is
endorsed to the payee, the endorsee, who is
in possession of the bill is called the
‘holder’.
 Acceptor:- When the drawee accepts the
bill, by writing the words ‘accepted’ and then
signing it, he is called the ‘acceptor’.

16. ESSENTIALS OF BILL OF
EXCHANGE
 It must be in writing.
 It must contain an order to pay.
 The order to pay must be unconditional.
 It must be signed by the drawer.
 The drawer, drawee, payee must be certain.
 The sum payable must be certain.
 The bill must contain an order to pay money only.
 It must comply with the formalities as regards date,
consideration, stamps, etc.

17. SPECIAL BENEFITS OF
BILL OF EXCHANGE
 A Bill of exchange is double secured instruments.
 In case of immediate need of money a bill can be
discounted with a bank by the payee.
 Two separate trade debt can be discharged by a bill of
exchange.

18. SPECIMEN OF A BILL OF
EXCHANGE
Rs.500 Calicut, January 14, 2015
Three months after date pay to Ram or order, the
sum of rupees five hundred for value received.
To
Palace house
153/33 Calicut.
Calicut-673003
In case of need with Accepted
Federal bank Calicut Antony
Stamp
Sd/-
Shankar

19. TYPES OF BILL OF EXCHANGE
There are some types of Bill
 Accommodation Bill
 Fictitious Bill
 Documentary Bill

20. ACCOMMODATION BILL
An accommodation bill is apparently quite similar
to an ordinary trade bill of exchange. The special
feature which distinguishes it from an ordinary bill
is that such a bill is not supported by any
consideration or a trading transaction. The drawer
does not give any consideration to the drawee but
instead it is drawn with an object of providing
financial help either to the drawer or to both the
drawer and the drawee.

21. FICTITIOUS BILL
When in a bill of exchange the names of both
drawer and the payee are fictitious, the bill is said to
be a fictitious bill. Such a bill is drawn in a fictitious
name and is made payable to the drawer’s order and
such the names of both the drawer and the payee are
said to be of a fictitious person. A fictitious person
is one who is imaginary.

22. DOCUMENTARY BILL
When documents relating to the goods represented by
the bill, e.g., bill of lading or railway receipt, invoice,
marine insurance policy, etc., are attached to a bill, the
bill is called a documentary bill. Such documents are
delivered to the buyer only an acceptance or payment of
the bill. Such bills are usually used in foreign trade. In
inland trade, generally ‘clean bills’ are used with which
no other documents are attached.

23. DIFFERENCE BETWEEN PROMISSORY
NOTE AND BILL OF EXCHANGE
MODES PROMISSORY NOTE BILL OF EXCHANGE
No: of parties Only two parties
(maker of the note & payee)
There are 3 parties
(Drawer, drawee, payee)
Maker & payee Maker cannot be the payee. Drawer and the payee may
be one.
Promise & order Promise to make payment. Order for making the
payment.
Acceptance Requires no acceptance as it
is signed by person who liable
to pay.
Drawer is creditor so it must
be accepted by the drawee
before presenting to
payment.
Nature of liability The liability of maker is
primary and absolute.
The liability of drawer is
secondary and conditional.
Notice of
dishonor
No notice is necessary to
maker.
Notice of dishonor must be
given by the ‘holder’.

24. CHEQUE

25. CHEQUE
l an order to a bank to pay a stated sum from the drawer's
account, written on a specially printed form.
l The Negotiable Instruments Act, 1881 defines a cheque
as a bill of exchange drawn on a specified banker and
not expressed to be payable otherwise than on demand.
l A Cheque is a negotiable instrument issued by a bank
account holder to make payments and to withdraw cash
from the bank. It is one of the safest and the convenient
mode of making payments and is transferred by mere
delivery. One of the benefits of Cheque is that you can
transfer a high value transaction without any hassle
which would be very difficult if hard cash was used
instead.

26. DEFINITION
Section 6, as substituted by the negotiable instruments
act, 2002 defines a cheque as follows:
‘A cheque is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than
on demand and it includes the electronic image of a
truncated cheque and a cheque in the electronic form’.

27. A CHEQUE CONTAINS
FOLLOWS
• A cheque should be dated.
 A cheque should mention the amount of money
infigures and words.
 A cheque must be signed by the person (Drawer)
issuingthe chequed.
 A cheque must be drawn upon a specified bank
(Drawee).
 A cheque must have the name of the recipient
(Payee)of the cheque.

29. FEATURES OF CHEQUE
Let us look into some important features of a cheque
n A cheque must be in writing and duly signed by the
drawer.
n It contains an unconditional order.
n It is issued on a specified banker only.
n The amount specified is always certain and must be
clearly mentioned both in figures and words.
n The payee is always certain.
n It is always payable on demand.
n The cheque must bear a date otherwise it is invalid
and shall not be honoured by the bank.

30. DIFFERENCE BETWEEN CHEQUE
AND BILL OF EXCHANGE
MODES CHEQUE BILL OF EXCHANGE
Drawee Only a Banker can be a
drawee.
Any one can drawee
including banker.
Acceptance A Cheque is requires no
acceptance.
Drawee is liable only after
the acceptance.
Payment 3 months from the date of
issue.
Three days of grace after
maturity, unless payable on
demand.
Notice In case of dishonour no
notice of dishonour
necessary.
Notice of dishonour is to be
given to all the parties liable
to pay.
Crossing A cheque may be crossed. Bill of exchange can never
be crossed.
Stamp Cheque requires no stamp. Bill must be properly
stamped.

31. TYPES OF CHEQUE
Broadly speaking,cheques are of four types.
uOpen cheque
uCrossed cheque
uBearer cheque
uOrder cheque

32. OPEN CHEQUE
A cheque is called open when it is possible to get
cash over the counter at the bank. The holder of an open
cheque can do the following.
A.Receive its payment over the counter at the bank.
B. Deposit his cheque in his own account.
C. Pass it to some one else by signing on the back of the
cheque.

33. CROSSED CHEQUE
It is dangerous to issue open cheque due to the risk
of theft. This risk can be avoided by issuing another
types of cheque called ‘crossed cheque’. The
payment of such cheque is not made over the
counter at the bank. It is only credited to the bank
account of the payee. A cheque can be crossed by
drawing to transverse parallel lines across the
cheque, with or without the writing ‘account payee’
or ‘not negotiable’.

34. BEARER CHEQUE
A cheque which is payable to any person who
presents it for payment at the bank counter is called
‘bearer cheque’. A bearer cheque can be transferred
by mere delivery and requires no endorsement.

35. ORDER CHEQUE
An order cheque is one which is payable to a
particular person. In such a cheque the word
‘bearer’ may be cut out or cancelled and the word
‘order’ may be written. The payee can transfer an
order cheque to someone else by signing his/her
name on the back of it.

36. Mohammed shafath k m