Negotiable instruments act, Promissory note, Hundi

1. Bills Of Exchange
Indigenously
itiscalledas
HUNDI

2. Professor & Lawyer
Puttu Guru Prasad
B.Com., M.Com., M.Phil., M.B.A., PGDFTM., AP.SET.,
M.Phil., DRMS., L.L.B., ICFAI TMF., DIRM., L.L.M.,
Pre PhD (PhD)from JNTUK.,
“Diploma in Psychology from YALE
University”
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Senior Faculty for Business Studies, Economics, Accounts
Head, Board of Administration & Management Science,
Bhagavad Gita & CLAT Program Coordinator,
Commerce Department, VIVA-VVIT, Nambur,
My Blog: puttuguru.blogspot.in

4. Bills Of Exchange
■ Accordingto section 5 of Negotiable
Instrument Act,
■ “
A Bill Of Exchange is an instrument
in writing containing an unconditional
order,signedby the maker, directinga
certain personto pay asumof money only
to orto theorderof acertainperson orto
thebearerof theinstrument”

5. Specimen Of A Bill Of Exchange
JAMMU
27th Nov. 2006
Stamp
Three months after due date, pay XYZ or order, the
Sum of Rs 1000(one thousand only) for value received.
To,
M/S ABC
Gandhi Nagar
Jammu

6. Parts Of A Bill Of Exchange
■Date
■Term
■Amount
■Stamp
■Parties

7. Special features
1. A Bill Of Exchangeisan instrument in writing.
2. It must besigned by themaker.
3. It containsan unconditional order.
4. Theordermust beto pay money and money only.
5. Thesumpayablemust bespecific.
6. Theamount must bepaid within astipulatedtime.
7. Thenameof the draweemust beclearlymentioned.
8. It must bedated and stamped.

8. Parties to aBill Of Exchange
Drawer
Theperson who orders abank towithdraw
money froman account topay adesignated
person a specific sum according to the term
of theBill.

9. Parties to aBill Of Exchange
Drawee
Theperson onwhomtheBill is drawn (The
Debtor). Heis theperson whoacceptsthe
Bill of Exchange. Tohimthebill is
considered as Bill payable.

10. Parties to aBill Of Exchange
Payee
Theperson towhomtheBill-money is
payable. In most of thecasesthedrawerof
theBill himself is thePayee. Tohim
TheBill is consideredas Bill Receivable.

11. Advantages of Bill of Exchange
1. A Bill of Exchange is used in settlement of
debts.
2. It fixes the dateof payment.
3. It is awritten and signed acknowledgement
of debt.
4. A debtor enjoys full periodof credit.
5. A drawer can convert the bill into cashby
gettingit discounted with thebank.

12. Types of Bill Of Exchange
1. Payableat sight, ondemand orpresentation.
2. Payableafteracertain timein thefuture. It
is alsoknown as TermBill.

13. Acceptance of aBill Of
Exchange
TheDrawee signs acrossthe faceof the Bill with or
without the words,“Accepted”.Thisdenoteshis
acceptanceof theBill. Suchacceptancemay be—
1.General orUnqualified.
2.Qualified.

14. Acceptance of aBill Of
Exchange
GeneralorUnqualified :
Herethe Drawee accepts to pay the whole amount
mentioned in the Bill without any condition.
Qualified:
Herethe Drawee acceptsto pay the Bill subject to some
conditions regardingamounts, tenorof the Bill.

15. Holder
Thepersonwho is legally entitled to receive orrecover
the moneydueon aPromissoryNote, Bill Of Exchange
orCheque.A Holderhaslawfully receivedpossessionof
any Commercial Paper.

16. Holder in due course
A Holderin duecourseis that holderof aNegotiable
instrument—
1.Whoobtained theinstrument for
valuable consideration.
2.Who becamethe holderof the instrument before it’s
maturity.
3.Who had nocauseto believe that any defect existed in
the title of thepersonfromwhomhederived his title.

17. Date of Maturity
It is the date onwhichthe amount of aBill becomes
payableby thedrawee.
➢A Bill Of Exchange “Payableat sight” becomes
dueimmediately after it’s presentation for payment.
➢A termbill becomesduewhen theperiodof aBill
is over. So3 gracedays areadded with it.
➢If thebill ispayablesometimeafter date, the
tenor should becountedfromthedate of drawing
the bill.

18. Date of Maturity
➢ If thebill ispayablesometimeafter sight, thetenor
should becounted fromthe dateof acceptanceof the
bill.
➢ If theduedate turnsout asapublicholiday, thedue
date shall betheprecedingworkingday.

19. Cheque
It is aBill Of Exchange drawn onaspecified Banker
and expressedto bepayableotherwise than ondemand.
It operates asamandate orauthority to the drawee’
s
bank topay the party namedas Drawerand debit the
account of it’s customer, the Drawer.

20. Discounting of Bill
If theholderof thebill wants toget money against the
amount mentioned in the bill at an earlierdate before
the duedate, hesells thebill to theBankerora
Discounting house. Thelatter pays cashagainst the bill
afterdeductingsomeamount asdiscount charge.

21. Endorsement of Bill
It means ‘signingonthe back”. Fortransferringhis
own right onthe bill to someother person, the makeror
holderof the Bill signs onthe bill oronit’s backorona
separate sheet of paperannexed with the bill.
Thetransferor of the right is called “Endorser”and the
personto whomthe transferis madeis called
“Endorsee”

22. Dishonour of Bill Of Exchange
If the drawee of a bill does not accept it, it becomes a
“Dishonour of bill by Non-acceptance”. If the drawee
accepts the bill but fails to pay it’s amount on the due
date, it becomes“Dishonourof bill by “Non-Payment”.

23. Noting and Protest
The step taken for authenticating the fact of dishonour of abill
is called Noting. The Holder of bill mayget such dishonour
noted by a Notary Public. The noting is madeeither onthe bill
oron aseparate sheet of paper. It has to bemadewithin a
reasonable time after dishonour. The fees paid to the Notary
Public for such noting is called Notary Charges.
After noting, theNotary Publicissues aformally drawn-up
certificate regarding thedishonour underhisseal and signature.
It is called Protest.

24. Renewal of aBill
On failureto pay theBill on it’sduedate, theacceptor
may accept anew bill in placeof theold bill for a
furtherperiodof time.
Theamount of the new bill will include interest on the
unpaid amount for such further period.

25. Retiring of Bill
When the acceptor of abill pays it before it’s duedate,
then it isknown as Retiringof Bill. Theholderof the
bill usually allows adeduction from the amount of a
bill forsuchprior payment. Such deduction is called
“Rebate”.

26. AccommodationBill Of Exchange
It isaBill drawn, acceptedorendorsedwithout any
commercial consideration. It helpsto arrangetemporary
financial accommodationforoneormoreparties.If the
bill is dishonoured,onecannot suethe other. However,
where the bill is discounted, the third party canenforce
payment of theamount.

27. Bills Receivable Book
It contains bills which arereceivedand recorded.

28. Bills PayableBook
It contains records of bills accepted.

29. Professor & Lawyer
Puttu Guru Prasad

30. Thank You