Q:What is Negotiable Instrument ?
A:According to Sec. 13 of Negotiable Instruments Act, 1881, A Negotiable Instrument means a promissory note, bill of exchange, payable either to order or bearer.
Q:What is Promissory Note.
A:As per Sec.4 of N.I.Act, 1881” Promissory Note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only or the order of a certain person, or to the bearer of the instrument.”
The promise can be singly or jointly by more than one person.
There are two parties in a Promissory Note
Maker(Drawer)- Is the person who promises to pay
Payee – Is the person to whom promise is made.
Q:List Essential requirements of a Promissory Note.
A:It must be in writing .
It must contain an unconditional undertaking to pay
The maker should sign it
The promise to pay should be unconditional
The promise to pay money and money only
Maker should be certain
It must contain the name of the Payee – it can not be bearer i.e. the person to whom the amount is to be paid has to be mentioned { a bearer promissory note gets the status of a currency note.-prohibited by Sec.31 of Reserve Bank of India Act,1934}
It should bear the date and place of issue
It can be payable on demand i.e. sight or after a certain period
It is not necessary to mention the consideration i.e. “Value Received”
It cannot be tied up with any future event
It attracts stamp duty under Stamp Act.1899.
Q:What is Bill of Exchange.
A:As per Sec.5 of N.I.Act, 1881 “ 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 certain person or bearer of the instrument.”
There are three parties to the Bill of Exchange
– Drawer or Maker:is the person who Orders to pay
– Drawee – The person on whom the bill is drawn.(who is ordered to pay)
– Payee – To whom the payment is to be made. Payee is the person whose name is mentioned in the instrument, to whom or to whose order the money is directed to be paid by the instrument.
Q:List Essential Requirements of bill of exchange.
A:It must be in writing.
It should be an unconditional order to pay
It should be signed by the maker/drawer
It must contain direction to a certain person (i.e. drawee) to pay
The sum payable must be certain
Drawee must be certain
It is direction by the drawer / maker to a person (i.e. drawee) to make payment to a definite person or as per his order or to the bearer of the instrument.
Payee must be certain.
Bill of Exchange can either be Sight or Usance. Usance bills contain a specified period on which the payment is to be made. Usance bills need acceptance of the payee. Three days of grace is given for payment of usance bills.
Q: What is Cheque.
A:As per Sec. 6 of NI Act, 1881 “ a cheque is a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.”
It is an instrument in writing containing an unconditional order signed by the maker, directing a certain banker to pay a certain sum of money, on demand to, or to the order of, a certain person or to the bearer of the instrument. All cheques are bill of exchange, but all bill of exchange are not cheques.
Q:List Difference between a cheque and a bill of exchange.
A:A cheque does not require acceptance
It can be crossed
Does not attract stamp duty.
It gets statutory protection under Sec. 85 and Sec. 131 of NIAct.
It is not entitled to days of grace
A cheque is presented for payment, whereas a bill in the first instance is presented for acceptance unless it is a bill on demand.
No notice of dishonour is required
A cheque is not noted or protested.
A:According to Sec. 13 of Negotiable Instruments Act, 1881, A Negotiable Instrument means a promissory note, bill of exchange, payable either to order or bearer.
Q:What is Promissory Note.
A:As per Sec.4 of N.I.Act, 1881” Promissory Note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only or the order of a certain person, or to the bearer of the instrument.”
The promise can be singly or jointly by more than one person.
There are two parties in a Promissory Note
Maker(Drawer)- Is the person who promises to pay
Payee – Is the person to whom promise is made.
Q:List Essential requirements of a Promissory Note.
A:It must be in writing .
It must contain an unconditional undertaking to pay
The maker should sign it
The promise to pay should be unconditional
The promise to pay money and money only
Maker should be certain
It must contain the name of the Payee – it can not be bearer i.e. the person to whom the amount is to be paid has to be mentioned { a bearer promissory note gets the status of a currency note.-prohibited by Sec.31 of Reserve Bank of India Act,1934}
It should bear the date and place of issue
It can be payable on demand i.e. sight or after a certain period
It is not necessary to mention the consideration i.e. “Value Received”
It cannot be tied up with any future event
It attracts stamp duty under Stamp Act.1899.
Q:What is Bill of Exchange.
A:As per Sec.5 of N.I.Act, 1881 “ 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 certain person or bearer of the instrument.”
There are three parties to the Bill of Exchange
– Drawer or Maker:is the person who Orders to pay
– Drawee – The person on whom the bill is drawn.(who is ordered to pay)
– Payee – To whom the payment is to be made. Payee is the person whose name is mentioned in the instrument, to whom or to whose order the money is directed to be paid by the instrument.
Q:List Essential Requirements of bill of exchange.
A:It must be in writing.
It should be an unconditional order to pay
It should be signed by the maker/drawer
It must contain direction to a certain person (i.e. drawee) to pay
The sum payable must be certain
Drawee must be certain
It is direction by the drawer / maker to a person (i.e. drawee) to make payment to a definite person or as per his order or to the bearer of the instrument.
Payee must be certain.
Bill of Exchange can either be Sight or Usance. Usance bills contain a specified period on which the payment is to be made. Usance bills need acceptance of the payee. Three days of grace is given for payment of usance bills.
Q: What is Cheque.
A:As per Sec. 6 of NI Act, 1881 “ a cheque is a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.”
It is an instrument in writing containing an unconditional order signed by the maker, directing a certain banker to pay a certain sum of money, on demand to, or to the order of, a certain person or to the bearer of the instrument. All cheques are bill of exchange, but all bill of exchange are not cheques.
Q:List Difference between a cheque and a bill of exchange.
A:A cheque does not require acceptance
It can be crossed
Does not attract stamp duty.
It gets statutory protection under Sec. 85 and Sec. 131 of NIAct.
It is not entitled to days of grace
A cheque is presented for payment, whereas a bill in the first instance is presented for acceptance unless it is a bill on demand.
No notice of dishonour is required
A cheque is not noted or protested.
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