Promissory Notes, Bill of exchange and Cheque
Promissory Notes, Bill of exchange and Cheque: Negotiable Instruments are written contracts in which the benefit of the original holder may be passed on to a new holder. To put it another way, negotiable instruments are papers that guarantee payment to the assignee (the person to whom it is assigned/given) or to a specific person. These are transferrable signed contracts that promise to pay the bearer/holder a certain amount of money when requested or at any later date.
These instruments are transferrable, as previously stated. The money are given to the ultimate possessor, who may spend them as he sees fit. That is to say, once an instrument is transferred, the holder has complete legal ownership to the instrument.
Promissory Notes
A promissory note is a written commitment by a company or a person to pay a certain amount of money to its holder by a specific date. To put it another way, promissory notes reflect the amount that someone owes you or that you owe to someone, as well as the interest rate and the due date.
For example, A buys products for INR 10,000 from B. If A is unable or unwilling to pay for the items in cash, he might issue a promissory note to B. It is A’s promise to pay B on demand or on a certain date. Another option is that A has a promissory note issued by C. He might sign this letter and deliver it to B to be free of his debts.
The seller, on the other hand, is not obligated to accept the promissory note. When considering whether or not to accept a promissory note, a seller considers the buyer’s reputation.
A Bill of Exchange
Promissory Notes, Bill of exchange and Cheque: Bills of exchange are legally binding written documents that order one party to pay another party a set quantity of money. Some of the invoices may specify that payment is due on a certain date in the future, or that payment is required immediately.
A bill of exchange is a document that is used in both goods and service transactions. It is signed by a party who owes money (referred to as the payer) and handed to a party who is entitled to receive money (referred to as the payee or seller), and it may be used to complete a payment contract. A seller, on the other hand, might sign a bill of exchange and deliver it to someone else, thereby shifting payment to someone else.
It should be mentioned that a bank draught is often used when a bill of exchange is issued by a financial institution. It’s commonly referred to as a trade draught if it’s issued by an individual.
In international commerce, a bill of exchange serves mainly as a promissory note; in the transaction, the exporter or seller addresses a bill of exchange to an importer or buyer. A third party, generally banks, is a party to a number of bills of exchange, serving as a guarantee for these payments. It aids in the reduction of any risk that is inherent in every transaction.
Cheques
Promissory Notes, Bill of exchange and Cheque: A check is a written document containing an unconditional order, addressed to a banker, and signed by the person who has deposited money with the lender. This order directs the banker to pay a particular amount of money on demand solely to the bearer of the check (the person who has the check) or to any other person who is explicitly to be paid according to the instructions provided.
Cheques may be a convenient method to pay a variety of expenditures. Despite the fact that the use of checks has decreased over time as a result of internet banking, people still use them to pay for things like loans, college tuition, and auto EMIs. Cheques are also a wonderful method to keep track of all of your paper transactions. Cheques, on the other hand, are a somewhat sluggish type of payment and may take some time to complete.
The Negotiable Instruments (Amendment) Bill of 2017 is a bill that amends the Negotiable Instruments Act.
On January 2nd, 2018, the Negotiable Instruments (Amendment) Bill, 2017 was tabled in the Lok Sabha. The bill proposes to change the current Act. Promissory notes, bills of exchange, and checks are all defined in the bill. The law also establishes penalties for check dishonour and other crimes involving negotiable instruments.
According to a recent circular, a person may be required to pay up to INR 10,000 in addition to interest at the rate of 6% to 9% for cheques that are dishonoured.
The bill also adds a clause that allows a court to award interim compensation for those whose checks have bounced due to a dishonest party (individuals/entities at fault). Interim compensation will not exceed 20% of the whole amount of the check.