10 October 2008
Pronote means a promissory Note as per negotiable instrument act
Suppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make a document stating that you will pay the money to Ramesh or the bearer on demand. Or you can mention in the document that you would like to pay the amount after three months. This document, once signed by you, duly stamped and handed over to Ramesh, becomes a negotiable instrument. Now Ramesh can personally present it before you for payment or give this document to some other person to collect money on his behalf. He can endorse it in somebody else’s name who in turn can endorse it further till the final payment is made by you to whosoever presents it before you. This type of a document is called a Promissory Note. Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note 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’. Parties to a Promissory Note There are primarily two parties involved in a promissory note. They are- i. 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. ii. 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. i. A promissory note must be in writing, duly signed by its maker and properly stamped as per Indian Stamp Act. ii. 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. iii. 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. iv. 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. v. The parties to a promissory note, i.e. the maker and the payee must be certain. vi. 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. vii. 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.
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