Bill Of Exchange Video Lecture - Class 11

bill of exchange and overview hey sis
what are you doing making a sandwich for
myself please do not ask me to make one
for you as I have lots of work to do
are you suggesting that I make you do
all my work absolutely
you are smart now that you already know
how about lending me some money I have
to buy a birthday gift for Zara and my
pocket money is due next month why don't
you just buy it on credit on credit what
is that goods can be bought on credit
with the help of Bills of exchanges or
promissory notes let me explain
according to the negotiable instruments
Act of 1881 a bill of exchange is
defined as 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 the order of a certain person or to
the bearer of the instrument
thus a bill of exchange is a form signed
by one party to request a sum of money
from another party it is used most often
by importers and exporters once the
draft is accepted or guaranteed by a
bank or a company it becomes a bankers
acceptance one Shaha Johan d2l SHINee
Hyundai 3-wood the D hundy there are few
other varieties of hundies like Nam Joo
Koon d-danny Joe Gandhi javadi hundy
hookah me handi filmin Johan D and so on
the features of a bill of exchange are
one a bill of exchange must be in
writing - it is an order to make payment
three the order to make payment is
unconditional for the maker of the bill
of exchange must sign it five the
payment to be made must be certain
six the date on which payment is made
must also be certain seven the bill of
exchange must be payable to a certain
person eight the amount mentioned in the
bill of exchange is payable either on
demand or on the expiry of a fixed
period of time nine
it must be stamped as per the
requirement of law a bill of exchange is
generally drawn by the creditor upon his
debtor let me explain this with an
example
suppose mrs. Shah the owner of Archie's
gallery sells you a gift worth five
thousand rupees for sera from her shop
on credit for two months to ensure
payment on due date she draws a bill of
exchange upon you for five thousand
rupees payable after two months this
bill of exchange has to be accepted by
the Troy or debtor or someone on his or
her behalf and remains just a draft till
it's acceptance is made hence a bill of
exchange will come into existence only
after writing the word accepted and
appending the dry signal on it there to
communicate his or her acceptance
the parties to a bill of exchange our
draw is the maker of the bill of
exchange a seller or creditor who is
entitled to receive money from the
debtor can draw a bill of exchange upon
the buyer or debtor the draw after
writing the Bill of exchange has to sign
it as maker of the bill of exchange Troy
he's the person upon whom the bill of
exchange is drawn joy is a purchaser or
debtor of the goods upon whom the bill
of exchange is drawn B this is the
person to whom the payment is to be made
the draw of the bill himself will be the
pay if he keeps a bill with him till the
date of its payment the Bay may change
in the following situations a in case
the jaw has got the bill discounted the
person who has discounted the bill will
become the B B in case the bill is
endorsed in favor of a creditor of the
draw the creditor will become the B if
the bill is retained by mrs. Shah for
two months and the amount of five
thousand rupees is received by her on
the due date then she will be the B
in most of the cases the draw and the
play are the same person in the given
example mrs. Shaw is the draw as well as
be and you Rickon are the Troi and
acceptor as well now let me twist this
example a bit to explain a different
scenario first if mrs. Shaw endorses the
spill in favor of a creditor Ruchi then
Ruchi will be the be second if mrs. Shaw
gets this bill discounted from the bank
then the bankers will become the pay
third if I Rehana had accepted the bill
instead of you then I would become the
acceptor
correct me if I am wrong PE is the
person to whom the payment is made and
acceptor is the person who accepts the
bill correct now sometimes it is the
buyer who issues a note promising the
seller to make the payment at a future
date such a note is called a promissory
note
what is that let me explain in detail
according to the negotiable instruments
Act of 1881 a promissory note is defined
as an instrument in 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 the order of a certain
person or to the bearer of the
instrument however according to the
Reserve Bank of India act a promissory
note payable to the bearer is illegal
therefore a promissory note cannot be
made payable to the bearer it is a
document signed by a borrower promising
to repay alone under agreed-upon terms
and is also called note following
features of a promissory note emerge out
of the above definition
one it must be in writing too it must
contain an unconditional promise to pay
three it must be signed by the maker for
the son payable must be certain five
it must be payable to a certain person
six it should be properly stamped a
promissory note does not require any
acceptance because the maker of the
promissory note himself promises to make
the payment the parties to a promissory
note our maker
or draw is the person who makes or draws
the promissory note to pay a certain
amount as specified in the promissory
note he is also called the promise a
draw he ope
he is the person in whose favour the
promissory note is drawn he is called
the promisee generally the joy is also
the pay unless it is otherwise mentioned
in the promissory note in the specimen
of promissory note shown here Rickon is
the draw or maker who promises to pay
five thousand rupees and mrs. Shaw is
the Troy or P to whom payment is to be
made
now let me twist this example a bit
again to explain a different scenario
first if mrs. Shah endorses this
promissory note in favor of Ruchi
then Ruchi will become the pay second if
mrs. Shaw gets this promissory note
discounted from the bank then the bank
will become the pea distinction between
bills of exchange and promissory note
are as follows usage of bill of exchange
is more frequent in business due to
following advantages framework for
relationships certainty of terms and
conditions convenient means of credit
conclusive proof easy transfer ability
meaning of the following basic terms
related to Bills of exchange one
maturity of bill a maturity date the
date on which a bill of exchange or a
promissory note becomes due for payment
is called maturity date B days of grace
if the bill of exchange is payable after
the expiry of a particular period of
time the date of maturity will be
calculated after adding three days and
these days are known as grace days let
me explain this with an example suppose
if a bill dated fifth March is payable
30 days after the date the maturity date
will be 7th April that is 33 days after
fifth March including the three days of
grace in case the bill dated fifth March
is payable after a month of the date the
maturity date will be 8 April that is 34
days after fifth March including the
three days of grace this is because the
month of March has 31 days
now there can be two more cases under
which the maturity date may change first
where the date of maturity is a public
holiday the instrument will become to
you on the preceding business day in
this case if 8th April falls on a public
holiday then 7th April will be the
maturity date
second when an emergent holiday is
declared under the negotiable
instruments Act of 1881 by the
Government of India which may happen to
be the date of maturity of a bill of
exchange then the date of maturity will
be the next working day
immediately after the holiday in this
case if the government declared a
holiday on 8th April under the
negotiable instruments act then 9th
April will be the date of maturity for
this bill discounting of bill meaning
when holder of the bill takes amount
from a bank against the bill before to
date it is known as discounting of bill
discounting charges the amount charged
by the bank for discounting the bill is
called discounting charges 3 negotiation
or endorsement of bill meaning it means
the transfer of the bill from one person
to another person this implies that the
title of the document can be transferred
from one person to another through
endorsement and delivery hence it is a
negotiable instrument
endorser the person endorsing the bill
is known as endorser endorsee the person
to whom the bill is endorsed is called
endorsee
full dishonor of a bill meaning when the
acceptor refuses or is unable to pay the
amount of bill on maturity date is known
as dishonor of bill noting charges when
a bill is dishonoured the holder of the
bill takes a bill to the committee of
persons appointed for this purpose by
the court which is known as notary
public the notary public charges a small
fee for providing its services which is
called noting charges 5 renewal of a
bill meaning when the Troi of the bill
is not able to make the payment on the
maturity date then he may request the
holder of the bill to cancel the old
bill and draw a new bill and if he
agrees to do so that is known as renewal
of bill when the old bill is renewed the
drawer charges interest for the extended
period
six retiring of the bill meaning when
the joy makes the payment of a bill
before the maturity date it is known as
retiring off a bill rebate the discount
allowed by the holder of the bill when
the payment is made before the maturity
date is called rebate to summarize
negotiable instruments like bill of
exchanges and promissory notes assists
the trader or a businessman to buy or
sell goods on credit that was an
interesting piece of information but
since it is used by traders and
businessmen why don't you just give me
the money and not miss an opportunity to
shop all right I will come along and buy
the gift but I hope you understood what
I explained absolutely as you said I'm
smart