Tag: accounting for bills of exchange

A negotiable instrument must bear the signature of its maker. Without the signature of the drawer or the maker, the instrument shall not be a valid one. ... Any negotiable instrument like a cheque or a promissory note is not complete till it is delivered to its payee.

A Promissory Note must always be written by hand. It must include all the mandatory elements such as the legal names of the payee and maker's name, amount being loaned / to be repaid, full terms of the agreement and the full amount of liability, beside other elements.

The drawer issues the promissory note and promises to pay a certain amount to the drawee (payee). He is also called the promisor. The drawer of a promissory note can theoretically consist of 2 or more parties.

Negotiable instrument must be freely transferable from one party to another party: negotiable instruments are easily and freely transferable. There are no formalities or much paperwork involved in such a transfer. The ownership of an instrument can transfer simply by delivery or by a valid endorsement.

Time of Payment must be Certain: If the order is to pay when convenient then such an order is not a negotiable instrument. Payee also must be certain: The person to whom the payment is to be made must be a specific person or persons. Also, there can be more than one payee for a negotiable instrument.

 It held that the promissory executed in other State was liable for stamp duty in the State where it was produced, and for not paying necessary stamp duty, the document would be inadmissible. For such a contingency Section 19 of the Indian Stamp Act would apply.