Page 158 - DMGT303_BANKING_AND_INSURANCE

Unit 8: Negotiable Instruments

Parties to a Promissory Note Notes

There are primarily two parties involved in a promissory note. They are
1. The Maker or Drawer: The person who makes the note and promises to pay the amount
stated therein. In the above specimen, Sanjeev is the maker or drawer.

2. The Payee: The person to whom the amount is payable. In the above specimen it is Ramesh.
In course of transfer of a promissory note by payee and others, the parties involved may
be:

(a) The Endorser: The person who endorses the note in favour of another person. In the
above specimen if Ramesh endorses it in favour of Ranjan and Ranjan also endorses
it in favour of Puneet, then Ramesh and Ranjan both are endorsers.
(b) The Endorsee: The person in whose favour the note is negotiated by endorsement. In
the above, it is Ranjan and then Puneet.

Features of a Promissory Note

Let us know the features of a promissory note:

1. A promissory note must be in writing, duly signed by its maker and properly stamped as
per Indian Stamp Act.
2. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness
is not enough. For example, if some one writes 'I owe Rs. 5000/- to Satya Prakash', it is not
a promissory note.

3. The promise to pay must not be conditional. For example, if it is written 'I promise to pay
Suresh Rs 5,000/- after my sister's marriage', is not a promissory note.
4. It must contain a promise to pay money only. For example, if some one writes 'I promise
to give Suresh a Maruti car' it is not a promissory note.
5. The parties to a promissory note, i.e. the maker and the payee must be certain.
6. A promissory note may be payable on demand or after a certain date. For example, if it is
written 'three months after date I promise to pay Satinder or order a sum of rupees Five
Thousand only' it is a promissory note.

7. The sum payable mentioned must be certain or capable of being made certain. It means
that the sum payable may be in figures or may be such that it can be calculated. (See
specimen below).

Rs. 10,000/- New Delhi
September 14, 2002
I, Ramesh, s/o Sadanand of Surat, Gujarat promise to pay Sashikant, s/o Sunil Kumar of
Ahmedabad, Gujarat or order, on demand, the sum of Rs 10,000/- (Rupees Ten Thousand only)
with interest at the rate of 10 percent per annum, for value received.

Sd/-Ramesh
Stamp
To
Sashikant
Ahmedabad, Gujarat

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