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 A Bill Of Exchange is an instrument in writing. It must be signed by the maker. It contains an unconditional order. The order must be to pay money and money only. The sum payable must be specific. The amount must be paid within a stipulated time. The name of the drawee must be clearly mentioned. It must be dated and stamped.

1. Bills Of ExchangeBills Of Exchange

2. Bills Of ExchangeBills Of Exchange
 According to section 5 of NegotiableAccording to section 5 of Negotiable
Instrument Act,Instrument Act,

““A Bill Of Exchange is an instrumentA Bill Of Exchange is an instrument
in writing containing an unconditionalin writing containing an unconditional
order, signed by the maker , directing aorder, signed by the maker , directing a
certain person to pay a sum of money onlycertain person to pay a sum of money only
to or to the order of a certain person or toto or to the order of a certain person or to
the bearer of the instrument”the bearer of the instrument”

3. Specimen Of A Bill Of ExchangeSpecimen Of A Bill Of Exchange
JAMMUJAMMU
2727thth
Nov. 2006Nov. 2006
StampStamp
Three months after due date, pay XYZ or order, theThree months after due date, pay XYZ or order, the
Sum of Rs 1000(one thousand only) for value received.Sum of Rs 1000(one thousand only) for value received.
To,To,
M/S ABCM/S ABC
Gandhi NagarGandhi Nagar
JammuJammu

4. Parts Of A Bill Of ExchangeParts Of A Bill Of Exchange
 DateDate
 TermTerm
 AmountAmount
 StampStamp
 PartiesParties

5. Special featuresSpecial features
1.1. A Bill Of Exchange is an instrument in writing.A Bill Of Exchange is an instrument in writing.
2.2. It must be signed by the maker.It must be signed by the maker.
3.3. It contains an unconditional order.It contains an unconditional order.
4.4. The order must be to pay money and money only.The order must be to pay money and money only.
5.5. The sum payable must be specific.The sum payable must be specific.
6.6. The amount must be paid within a stipulated time.The amount must be paid within a stipulated time.
7.7. The name of the drawee must be clearly mentioned.The name of the drawee must be clearly mentioned.
8.8. It must be dated and stamped.It must be dated and stamped.

6. Parties to a Bill Of ExchangeParties to a Bill Of Exchange
DrawerDrawer
The person who orders a bank to withdrawThe person who orders a bank to withdraw
money from an account to pay a designatedmoney from an account to pay a designated
person a specific sum according to the termperson a specific sum according to the term
of the Bill.of the Bill.

7. Parties to a Bill Of ExchangeParties to a Bill Of Exchange
DraweeDrawee
The person on whom the Bill is drawn (TheThe person on whom the Bill is drawn (The
Debtor). He is the person who accepts theDebtor). He is the person who accepts the
Bill of Exchange. To him the bill isBill of Exchange. To him the bill is
considered as Bill payable.considered as Bill payable.

8. PayeePayee
Parties to a Bill Of ExchangeParties to a Bill Of Exchange
The person to whom the Bill-money isThe person to whom the Bill-money is
payable. In most of the cases the drawer ofpayable. In most of the cases the drawer of
the Bill himself is the Payee. To himthe Bill himself is the Payee. To him
The Bill is considered as Bill Receivable.The Bill is considered as Bill Receivable.

9. Advantages of Bill of ExchangeAdvantages of Bill of Exchange
1.1. A Bill of Exchange is used in settlement ofA Bill of Exchange is used in settlement of
debts.debts.
2.2. It fixes the date of payment.It fixes the date of payment.
3.3. It is a written and signed acknowledgementIt is a written and signed acknowledgement
of debt.of debt.
4.4. A debtor enjoys full period of credit.A debtor enjoys full period of credit.
5.5. A drawer can convert the bill into cash byA drawer can convert the bill into cash by
getting it discounted with the bank.getting it discounted with the bank.

10. Types of Bill Of ExchangeTypes of Bill Of Exchange
1.1. Payable at sight, on demand or presentation.Payable at sight, on demand or presentation.
2.2. Payable after a certain time in the future. ItPayable after a certain time in the future. It
is also known as Term Bill.is also known as Term Bill.

11. Acceptance of a Bill OfAcceptance of a Bill Of
ExchangeExchange
The Drawee signs across the face of the Bill with orThe Drawee signs across the face of the Bill with or
without the words, “Accepted”. This denotes hiswithout the words, “Accepted”. This denotes his
acceptance of the Bill. Such acceptance may be—acceptance of the Bill. Such acceptance may be—
1.1.General or Unqualified.General or Unqualified.
2.2.Qualified.Qualified.

12. Acceptance of a Bill OfAcceptance of a Bill Of
ExchangeExchange
General or Unqualified :General or Unqualified :
Here the Drawee accepts to pay the whole amountHere the Drawee accepts to pay the whole amount
mentioned in the Bill without any condition.mentioned in the Bill without any condition.
Qualified :Qualified :
Here the Drawee accepts to pay the Bill subject to someHere the Drawee accepts to pay the Bill subject to some
conditions regarding amounts, tenor of the Bill.conditions regarding amounts, tenor of the Bill.

13. HolderHolder
The person who is legally entitled to receive or recoverThe person who is legally entitled to receive or recover
the money due on a Promissory Note, Bill Of Exchangethe money due on a Promissory Note, Bill Of Exchange
or Cheque. A Holder has lawfully received possession ofor Cheque. A Holder has lawfully received possession of
any Commercial Paper.any Commercial Paper.

14. Holder in due courseHolder in due course
A Holder in due course is that holder of a NegotiableA Holder in due course is that holder of a Negotiable
instrument—instrument—
1.1.Who obtained the instrument for valuableWho obtained the instrument for valuable
consideration.consideration.
2.2.Who became the holder of the instrument before it’sWho became the holder of the instrument before it’s
maturity.maturity.
3.3.Who had no cause to believe that any defect existed inWho had no cause to believe that any defect existed in
the title of the person from whom he derived his title.the title of the person from whom he derived his title.

15. Date of MaturityDate of Maturity
It is the date on which the amount of a Bill becomesIt is the date on which the amount of a Bill becomes
payable by the drawee.payable by the drawee.
A Bill Of Exchange “Payable at sight” becomes dueA Bill Of Exchange “Payable at sight” becomes due
immediately after it’s presentation for payment.immediately after it’s presentation for payment.
A term bill becomes due when the period of a Bill isA term bill becomes due when the period of a Bill is
over. So 3 grace days are added with it.over. So 3 grace days are added with it.
If the bill is payable sometime after date, the tenorIf the bill is payable sometime after date, the tenor
should be counted from the date of drawing the bill.should be counted from the date of drawing the bill.

16. Date of MaturityDate of Maturity
 If the bill is payable sometime after sight, the tenorIf the bill is payable sometime after sight, the tenor
should be counted from the date of acceptance of theshould be counted from the date of acceptance of the
bill.bill.
 If the due date turns out as a public holiday, the dueIf the due date turns out as a public holiday, the due
date shall be the preceding working day.date shall be the preceding working day.

17. ChequeCheque
It is a Bill Of Exchange drawn on a specified BankerIt is a Bill Of Exchange drawn on a specified Banker
and expressed to be payable otherwise than on demand.and expressed to be payable otherwise than on demand.
It operates as a mandate or authority to the drawee’sIt operates as a mandate or authority to the drawee’s
bank to pay the party named as Drawer and debit thebank to pay the party named as Drawer and debit the
account of it’s customer, the Drawer.account of it’s customer, the Drawer.

18. Discounting of BillDiscounting of Bill
If the holder of the bill wants to get money against theIf the holder of the bill wants to get money against the
amount mentioned in the bill at an earlier date beforeamount mentioned in the bill at an earlier date before
the due date, he sells the bill to the Banker or athe due date, he sells the bill to the Banker or a
Discounting house. The latter pays cash against the billDiscounting house. The latter pays cash against the bill
after deducting some amount as discount charge.after deducting some amount as discount charge.

19. Endorsement of BillEndorsement of Bill
It means ‘signing on the back”. For transferring hisIt means ‘signing on the back”. For transferring his
own right on the bill to some other person, the maker orown right on the bill to some other person, the maker or
holder of the Bill signs on the bill or on it’s back or on aholder of the Bill signs on the bill or on it’s back or on a
separate sheet of paper annexed with the bill.separate sheet of paper annexed with the bill.
The transferor of the right is called “Endorser” and theThe transferor of the right is called “Endorser” and the
person to whom the transfer is made is calledperson to whom the transfer is made is called
“Endorsee”“Endorsee”

20. Dishonour of Bill Of ExchangeDishonour of Bill Of Exchange
If the drawee of a bill does not accept it, it becomes aIf the drawee of a bill does not accept it, it becomes a
“Dishonour of bill by Non-acceptance”. If the drawee“Dishonour of bill by Non-acceptance”. If the drawee
accepts the bill but fails to pay it’s amount on the dueaccepts the bill but fails to pay it’s amount on the due
date, it becomes “Dishonour of bill by “Non-Payment”.date, it becomes “Dishonour of bill by “Non-Payment”.

21. Noting and ProtestNoting and Protest
The step taken for authenticating the fact of dishonour of a billThe step taken for authenticating the fact of dishonour of a bill
is calledis called NotingNoting. The Holder of bill may get such dishonour. The Holder of bill may get such dishonour
noted by anoted by a NotaryNotary PublicPublic. The noting is made either on the bill. The noting is made either on the bill
or on a separate sheet of paper. It has to be made within aor on a separate sheet of paper. It has to be made within a
reasonable time after dishonour. The fees paid to the Notaryreasonable time after dishonour. The fees paid to the Notary
Public for such noting is calledPublic for such noting is called NotaryNotary Charges.Charges.
After noting, the Notary Public issues a formally drawn-upAfter noting, the Notary Public issues a formally drawn-up
certificate regarding the dishonour under his seal and signature.certificate regarding the dishonour under his seal and signature.
It is calledIt is called Protest.Protest.

22. Renewal of a BillRenewal of a Bill
On failure to pay the Bill on it’s due date, the acceptorOn failure to pay the Bill on it’s due date, the acceptor
may accept a new bill in place of the old bill for amay accept a new bill in place of the old bill for a
further period of time.further period of time.
The amount of the new bill will include interest on theThe amount of the new bill will include interest on the
unpaid amount for such further period.unpaid amount for such further period.

23. Retiring of BillRetiring of Bill
When the acceptor of a bill pays it before it’s due date,When the acceptor of a bill pays it before it’s due date,
then it is known as Retiring of Bill. The holder of thethen it is known as Retiring of Bill. The holder of the
bill usually allows a deduction from the amount of abill usually allows a deduction from the amount of a
bill for such prior payment. Such deduction is calledbill for such prior payment. Such deduction is called
“Rebate”.“Rebate”.

24. Accommodation Bill Of ExchangeAccommodation Bill Of Exchange
It is a Bill drawn, accepted or endorsed without anyIt is a Bill drawn, accepted or endorsed without any
commercial consideration. It helps to arrange temporarycommercial consideration. It helps to arrange temporary
financial accommodation for one or more parties. If thefinancial accommodation for one or more parties. If the
bill is dishonoured, one cannot sue the other. However,bill is dishonoured, one cannot sue the other. However,
where the bill is discounted, the third party can enforcewhere the bill is discounted, the third party can enforce
payment of the amount.payment of the amount.

25. Bills Receivable BookBills Receivable Book
It contains bills which are received and recorded.It contains bills which are received and recorded.

26. Bills Payable BookBills Payable Book
It contains records of bills accepted.It contains records of bills accepted.

27. Thank You