PN, BoE, Che and Distinguish

(###)Promissory Note :: Sec.
4 of Negotiable Instruments Act defines a Promissory Note as an instruments i n 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 t he order of a certain person or to the bearer of the instruments'. Thus a promissory note contains a promise by the debtor- to the creditor to pay a certain sum of money after a certain date. Hence, it is always drawn by the de btor. He is called the maker' of the instrument. Promissory note must be in writing and it must be duly stamped in BolIam Venkata iah vs. Venmuddala Venkata Ramana Reddy (1985), it was held that, a pro-note can not be admissible in evidence cannot be admissible to prove the terms of a pro-n ote. (###)Bill of Exchange :: Unlike the promissory note, the bill of exchange contains an order from the cred itor to the debtor, to pay a certain period. Sec, 5 of the Negotiable Instrument s Act defines a bill of exchange as follows: "An instrument in writing containing and-unconditional order, signed by the make r, directing a certain person to pay a certain sum of money only to, or to the o rder of a certain person or to the bearer of the instrument." Thus, a bill is always drawn by the creditor on the debtor. The person who draws it, is called the 'drawer' and the person on whom it is drawn is called 'drawee ' or 'acceptor' and the person to whom the amount is payable is called the 'paye e'. (###)CHEQUES :: A cheque, being a Negotiable Instruments can be passed from hand to hand easily and so it has become a popular mode of payments. A cheque is the most economical and safe method of money transaction because the transfer cost is very low and also the possibility of loss is minimum. Definition of cheque: section of 6 of the Negotiable Instruments Act defines a c heque as follows: "A bill of exchange drawn on a specified banker and not expres sed to be payable otherwise than on demand." Even though a cheque is considered to be very similar to a bill of exchange it is different from a bill in many res pects. Chalmer rightly points out that, "A cheques are bills of exchange but all bills of Exchange are not cheques." (###)CROSSING :: Meaning: A cheque without crossing is called an open cheque. It is open to many risks. In order to protect it from risks, crossing has been introduced. Kinds of crossing: Crossing is of two type's namely general crossing and special crossing. General Crossing: section 123 of the Negotiable Instruments Act, 1881 defines ge neral crossing as follows: "Where a cheque bears across its face an addition of the words. 'And company , or any abbreviation thereof, between two parallel transverse lines or two parall el transverse lines simply, either with or without the words "not negotiable ", that addition shall be deemed to be a 'crossing " and the cheque shall be deemed to be crossing generally. " Special Crossing: Sec.124 of the Negotiable Instruments Act, 1881 defines special crossing as foll ows: "Where a cheque bears across its face, an addition of the words. The name of a b anker with or without the words "not negotiable," that addition shall be deemed a 'crossing " and the cheque shall be deemed to be crossing special; and to be c rossed to that banker.
(###)Definition of Endorsement:: Endorsement has been defined in Sec. 15 of the Negotiable instrument Act 1881 as follows: "where the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiable, on the back or face thereof, or a slip of a paper annexed thereto... he is said to enclose the same , and is called the endorser." It is quit evident from the above mentioned defin ition that, the endorsement can be made that either on the back of the instrumen t or on the face/thereof. But according to Sec. 6 of the Indian securities Act o f 1886, an endorsement made on a document, elsewhere than on the back it self, i s not valid. In practice, an endorsement must be made on the back of the instrum ent. (###)Distinguishing Features of Cheques, Bill of Exchange and Promissory Note::: Based on the above statutory definitions, the following are the distinguishing f eatures of the three negotiable instruments indicating the similarities and cont racts between them: 1. Instruments in writing : The low requires that a cheque, bill or promissory n ote must be an instrument in writing. It does not specify any particular materia l with which it is to be written. Though a negotiable instruments written with a pencil is not prohibited by law, in practice the bankers do not accept such ins truments because of risk involved Alternations therein may be easily made which cannot be detected. 2. Unconditional order/promise: A cheque and a bill of exchange contain an order to the drawee whereas a promissory note contains a promise by the maker to his creditor. Thus the main difference between a cheque and a bill on the one hand a nd a promissory note on the other is that the cheque and the bill contain an ord er from the creditor to the debtor to pay a sum of money while he promissory not e contains an undertaking or promise made by the debtor to his creditor to pay t he sum specified therein. 3. The drawee of a cheque or bill : The main difference between a cheque and a b ill is that the former is always drawn on and is payable by a banker specified t herein, while a bill of exchange may be drawn on any person, firm or company. Th us only a customer of a bank having a current or a savings bank account is entit led to draw a cheque on his banker. 4. The amount of the instrument must be certain: The order of the drawer of a ch eque or a bill and the promise by the writer of a promissory note must be to pay a certain sum of money and not anything else, e.g., securities or goods, etc. T he amount of money to be paid must be certain and specified in words and figures . 5. The payee must be a certain person: The person to whom payment of he instrume nt is to be made must be certain. The payee is considered as certain person? for this purpose even if he is mis-named or is designated by description only (Secti on 5). The term person? includes, besides individuals, bodies corporate, local au thorities societies and associations of persons, etc., and cheque may be drawn p ayable to the Registrar, Principal, Director, Secretary, etc., of these institut ions.

PN, BoE, Che and Distinguish

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(###)Promissory Note :: Sec.

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