promissory note

A “promissory note” is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. Illustrations

  A signs instruments in the following terms:

(a) “I promise to pay B or order Taka 500.”

(b) “I acknowledge myself to be indebted to B in Taka 1,000 to be paid on demand, for value received.”

(c) “Mr. B, I O U Taka 1,000.”

  (d) “I promise to pay B Taka 500 and all other sums which shall be due to him.”

 (e) “I promise to pay B Taka 500, first deducting there out any money which he may owe me.”

(f) “I promise to pay B Taka 500 seven days after my marriage with C.”

 (g) “I promise to pay B Taka 500 on D's death, provided D leaves me enough to pay that sum.”

 (h) “I promise to pay B Taka 500 and to deliver to him may black horse on 1st January next.”

 The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.

Define Negotiable instrument according to the Negotiable instrument Act, 1881

 According to section 13 of the Negotiable Instruments Act, 1881, "a Negotiable Instruments means a promissory note, bill of exchange, or cheque, payable either to order or to bearer whether the words

‘order’ or ‘bearer’ appear on the instrument or not."

According  to section 14 of the Negotiable  Instruments  Act, 1881, “when  a promissory  note,  bill of exchange, or cheque is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated”

What are the instruments that fall under the purview of this Act?

According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments i.e.,

(a) Promissory note,

(b) bill of exchange and

(c ) cheque.

Promissory  Note:  A  ‘Promissory  Note’  is  an  instrument  in  writing  containing  an  unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or the order of certain person, or to the bearer of the instrument (Section 4 of NI Act).

Bill of exchange:  According  to Section  5 of NI Act,  a bill  of Exchange  is “an instrument  in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to order of, a certain person or to the bearer of the instrument”.

Cheque: A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand (Section 6 of NI Act). A cheque is a bill of exchange which is always (i) Drawn on a banker specified therein and (ii) Payable on demand.

importance of introduction and inquiry

 While  opening  account  of  clients  emphasis  must  be  given  on  introduction.  Enquiry  about  the constituent must also be made. No account shall be opened without obtaining satisfactory introduction

& reference. The importance of introductory reference and enquiry are as follows: 1.1    Banker customer  relationship is established through opening an account on obtaining introductory reference and introduction. If there is any lapse in this regard Bank may suffer loss subsequently.

1.2       Banker shall not get protection under section 131 & 131 (a) of Negotiable Instrument Act 1981 for negligence  and will be guilty of conversion  in case of collection  of a cheque/instrument  having defective title if the account is not opened without proper introduction & enquiry.

1.3       If the status of the person is not properly known to the Bank while opening the account, the banker will also be held responsible for negligence. For example, if a person desiring to open an account as an employee, the name of his/her employer together with the name of firm or institution must be obtained. Similarly if he/she is a Partner or a Director of a Company,  the name of the firm or the Company must be also obtained.