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On demand I promise to pay Vijay Kumar or order the sum of Rupees Ten
Thousand Only together with interest 10% per annum for value received.
Sd/- (Gopal)
Gopal is a maker
Vijay Kumar is payee
Bill of Exchange
Rs.10,000/- Bombay
Date-January 5, 1995
Stamp
Three months after date pay R. Patel or order the sum of Rs. 10,000/- ( Rupees ten
thousand only) for value received.
To
Seth B. Mehta
Karol baug
New Delhi Shiv Ram
Accepted
B. Mehta
New Delhi
Date January 10, 1995
Shivram is a manufacturer and that he owed Patel Rs.10, 000/- for raw materials
supplied while Mehta is a shopkeeper who has bought manufactured articles from
Shiv Ram and owes bills more than that amount. In this case the bill is a Trade Bill
and its commercial advantages are quite obvious, for the payment by Mehta to Patel
will discharge two separate trade debts. But there are other advantages not quite so
obvious. Patel may want money at once for further trade purposes and if he does, he
can take the bill at once to his banker and ask him to discount it. If the banker knows
Shiv Ram as a man of good credit, he will discount. Patel must sign his name on the
back of the bill with or without a further order to pay the bill to the banker. Patel then
becomes endorser and the banker on crediting Patels account with Rs.10,000/- less
discount as agreed, becomes holder for value of the bill, and if neither Mehta nor
Shiv Ram should pay the bill at the maturity then Patel, as endorser, would be liable
to pay it. The banker can either keep the bill and present it for acceptance and
payment or can pass it on to some other person.
Accommodation Bill
All bills are not genuine trade bills as they are often drawn as a convenient
mode of accommodating a friend. Thus Patel may be in want of money and
approach his friend. Shiv Ram and Mehta who, instead of a lending the money
directly, propose to draw Accommodation Bill in his favour. Patel promises to
reimburse Mehta over the period of 3 months is up. If the credit of Shiv Ram and
Mehta is good, this device enables Patel to get or advance of Rs.1000/- from his
banker at the Commercial rate of discount. The real debtor in this case is not Mehta
(the acceptor), but Patel (the payee) who has engaged to find the money for its
ultimate payment, and Patel is here the principal debtor and other merely sureties.
Cheque
Definition A cheque is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise on demand.
In simple language cheque is a bill of exchange drawn on a bank payable on
demand. Thus all cheques are bills of exchange but all bills are not cheques. A
cheque being a species of a bill of exchange, must satisfy all the requirements of a
bill it must be signed by the drawer and must contain an unconditional order on a
specified banker to pay a certain sum of money to or to the order of a certain person
or to the bearer of the cheque. However, it does not require acceptance.
Distinction between Bills and cheques
1. A cheque is a always drawn on a banker, while a bill may be drawn on any
one including a banker.
2. A cheque can only be drawn payable on demand, a bill may be drawn
payable on demand or on the expiry of a certain period after date or sight.
3. A bill must be accepted before payment can be demanded, a cheque does
not require acceptance and is interested for immediate payment.
4. A grace of 3 days is allowed, in a the case of time bills, while no grace
given in the case of cheque.
5. The drawer of a bill is discharged if it is not presented for payment, but
drawer of cheque is discharged only if cheque is not presented for
payment.
6. Notice of dishonour of a bill is necessary, but not in the case of cheque.
7. A cheque being a revocable mandate, the authority may be revoked by
countermanding payment, and is determined by the notice of the
customers death or insolvency. This is not so in the case of a bill.
8. A cheque may be crossed, but not a bill.
It shall be presumed, unless the contrary is proved, that the holder of a cheque
received the cheque of the nature referred to in section 138 for the discharge, in
whole or in part, or any debt or other liability.
Sec. 140. Defence which may not be allowed in any prosecution under section
138
It shall not be a defence in a prosecution of an offence under section 138 that the
drawer had no reason to believe when he issued the cheque that the cheque may be
dishonoured on presentment for the reasons stated in that section.
Sec.141. Offences by companies
(1) If the person committing an offence under section 138 is a company, every
person who, at the time the offence was committed, was in charge of, and was
responsible to the company for the conduct of the business of the company, as well
as the company, shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly:
PROVIDED that nothing contained in this sub-section shall render any
person liable to punishment if he proves that the offence was committed
without his knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any
offence under this Act, has been committed by a company and it is proved
that the offence has been committed with the consent or connivance of, or
is attributable to, any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of that offence
and shall be liable to be proceeded against and punished accordingly.
Explanation: For the purpose of this section
(a) "Company" means any body corporate and includes a firm or other
association of individuals; and
(b) "Director", in relating to a firm, means a partner in the firm.
142. Cognizance of offences