What is Bill Of Exchange? Essential Characteristics of Bill Of Exchange.

Bill Of Exchange

According to section 5, a bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

The section also clarifies that mentioning the time of payment, or payment in instalments after the lapse of a certain period, or payment after the occurrence of a specific and definite event will not make it a conditional promissory note or bill

of exchange. The mention of the definite rate of foreign exchange, (the prevailing official rate of exchange) or rate of interest will be taken as the certain amount. Misspelt and misnamed person or a person mentioned by designation will not invalidate the document and will be within the meaning of ‘certain’ person as given in sections 4 and 5.

 


Essential Characteristics

In order to operate as a valid bill of exchange, the instrument must satisfy the following conditions:

1) It must be in writing.

2) It must contain an unconditional order directing a certain person to pay.

3) It must be signed by the drawer.

4) The drawer must be a certain person.

5) The payee must be a certain person, or the bearer of the instrument.

6) The drawee must be a certain person.

7) The amount ordered to be paid must be certain.

8) The order must be to pay money only.

For the purpose of the Indian Stamp Act, many instruments are treated as bills which are not bills of exchange as defined in this Act. A hundi is also treated as a bill of exchange under the Indian Stamp Act sections 2(2) and 2(3).

 

Some Illustrations

The bills may be drawn in different forms incorporating the essential requisites discussed above. Some such forms are provided below. These forms are used within the country — all parties being within the country and the money mentioned is in the local currency. Foreign bills are taken up later in this unit.

Illustrations of Inland Bills

Specimen 1

 

New Delhi

l0 March 2019

Rs. 50,000/-

On demand I promise to pay Mr. X or order the sum of Rupees Fifty Thousand with interest at 6 per cent per annum for value received.

Stamp

Mr. L Kumar (Sd/- on stamp)

To

Mr. R.B. Singh

New Delhi

 

 

Specimen 2

 

New Delhi

10 March 2019

Rs. 20,000/-

Sixty days ‘after date pay, to my order the sum of Rupees Twenty Thousand.

Stamp

Mr. L. Kumar (Sd/- on stamp)

To

Mr. R.B. Singh

Allahabad

 

 

Specimen 3

New Delhi

l0 March 2019

Rs. 30,000/-

Three months after date pay to bearer the sum of Rupees Thirty Thousand for value received.

Stamp

Mr. L. Kumar (Sd/- on stamp)

To

Mr. R.B. Singh

Allahabad

 

 

Specimen 4

 

New Delhi

l0 March 2019

Rs. 50,000/-

Three months after date pay to bearer the sum of Rupees Thirty Thousand for value received.

Stamp

Mr. L. Kumar (Sd/- on stamp)

To

Mr. R.B. Singh

Allahabad

 

 

Specimen 5

 

New Delhi

10, March 2019

Rs. 40,000/-

On demand pay to Mr. Ram Kumar or order the sum of Rupees Forty Thousand for value received.

Stamp

Mr. L. Kumar (Sd/- on stamp)

To

Mr. R.B. Singh

Allahabad

 

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