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Bills of-exchange
Bills of exchange are negotiable instruments that contain an unconditional order to pay a sum of money. They must be in writing, signed by the maker, contain an order to pay money only, specify the amount to be paid, and fix a time of payment. The key parties are the drawer, who issues the order; the drawee, on whom it is drawn; and the payee, to whom the money is to be paid. Acceptance by the drawee makes them liable to pay the bill on the date of maturity. Bills can be discounted, endorsed, renewed or retired, and dishonored bills must be noted and protested. Related books include bills receivable and bills payable.
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Bills of-exchange
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- 2. Professor & Lawyer PuttuGuru 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” MHRDI’s IIC Ambassador NSS Certified Program Officer, (A.U) 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 ABill 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 ABill Of Exchange ■Date ■Term ■Amount ■Stamp ■Parties
- 7. Special features 1. ABill 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 aBillOf 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 aBillOf Exchange Drawee Theperson onwhomtheBill is drawn (The Debtor). Heis theperson whoacceptsthe Bill of Exchange. Tohimthebill is considered as Bill payable.
- 10. Parties to aBillOf Exchange Payee Theperson towhomtheBill-money is payable. In most of thecasesthedrawerof theBill himself is thePayee. Tohim TheBill is consideredas Bill Receivable.
- 11. Advantages of Billof 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 BillOf Exchange 1. Payableat sight, ondemand orpresentation. 2. Payableafteracertain timein thefuture. It is alsoknown as TermBill.
- 13. Acceptance of aBillOf 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 aBillOf 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 legallyentitled to receive orrecover the moneydueon aPromissoryNote, Bill Of Exchange orCheque.A Holderhaslawfully receivedpossessionof any Commercial Paper.
- 16. Holder in duecourse 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 Itis 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 aBillOf 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 Iftheholderof 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 Itmeans ‘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 BillOf 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 Thestep 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 Onfailureto 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 Whenthe 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 ItisaBill 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 Itcontains bills which arereceivedand recorded.
- 28. Bills PayableBook It containsrecords of bills accepted.
- 29. Professor & Lawyer PuttuGuru Prasad
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