DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Samba Murthy
Designation : Head of Department
Branch : D.C.C.P
Institute : SRRS Govt. Polytechnic,
Sircilla, Karimnagar District
Year/Semester : V Semester
Subject : BANKING – I
Subject Code : CCP504(B)
Topic : Negotiable Instrument Act
Duration : 50 Mts
Sub Topic : Distinguish between Promissory
Note, Bill of Exchange and Cheque
Teaching aids : PPT, ANIMATIONS
CCP504(B).55 1
Objectives :

On completion of this period, you would be

able to:

 Distinguish between Promissory Note and Bill

of exchange

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Recap :

In the previous period, you have learnt:

 The meaning of a Bill of exchange

 Features of Bill of exchange
 Cheque and its features

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Known to Unknown :

 What is a bill?
 What is cheque?
 Who provide cheque facility?
 What are the features of a cheque?
 How do you fill-up a cheque?

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Introduction :

 Basing on the statutory definitions which were

discussed earlier, the distinguishing features of
Cheque, Bill of Exchange and Promissory Note
which are three negotiable instruments
indicating the similarities and contrasts between
them.

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Instruments in Writing:

 The law requires that a cheque, bill of

promissory note must be an instrument in
writing.
 It does not specify any particular material with
which it is to be written.

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NEGOTIABLE INSTRUMENTS

 Though a negotiable instrument written with a

pencil is not prohibited by law, in practice the
bankers do not accept such instrument because
of risk involved.
 Alterations therein may be easily made which
cannot be detected.

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NEGOTIABLE INSTRUMENTS

Unconditional Order/Promise:

 A cheque and a bill of exchange contain an

order to the drawee whereas a promissory
note contains a promise by the maker to his
creditor.

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NEGOTIABLE INSTRUMENTS

 A bill and cheque contain unconditional order.

 Whereas a Promissory note contains
unconditional promise.

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NEGOTIABLE INSTRUMENTS

 However, there is one common feature of a

promissory note, cheque and a bill is the
promise in the former and the order in the
latter must be an unconditional one.

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NEGOTIABLE INSTRUMENTS

 The words in the cheque or bill must be in the

nature of the order.

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NEGOTIABLE INSTRUMENTS

 The words in the promissory note should also

amount to an unconditional promise to pay the
specified amount otherwise it will not be
treated as a promissory note.

CCP504(B).55 12
The Drawee of a Cheque or Bill :

 A cheque is drawn on a specified bank etc.,

 A bill is drawn on a person, firm or company

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 CHEQUE

 Thus only a customer of a bank having a

current or savings bank account is entitled to
draw a cheque on his banker.
 The name and address of the drawee bank
are specifically printed on the cheque form.

CCP504(B).55 14
 BILLS OF EXCHANGE

 A bill of exchange is generally drawn by a seller

on his customer or by a creditor on his debtor.
 Some times accommodation bills are also drawn
to help a familiar party.

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The Amount of the Instrument must be Certain:

 The order of the drawer of a cheque or a bill of

exchange and the promise by the writer of a
promissory note must be to pay a certain sum of
money and not anything else i.e., securities or
goods etc.,

CCP504(B).55 16
The Amount of the Instrument
must be Certain:
 The amount of money to be paid must be certain
and specified both in words and figures.
 According to Section 5, the sum payable may be
‘certain’ although—
 It includes future interest, or

CCP504(B).55 17
The Amount of the Instrument
must be Certain:

 It is payable at an indicated rate of exchange, or

 It is according to the course of exchange, or
 The instrument provides that on default of payment
of an installment, the balance unpaid shall become
due.

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Summary :

 The instruments must be in writing without any

conditional order or promise.
 The amount of the instrument must be certain
without any ambiguity.
 It must also include future rate of interest and
payable at a mentioned rate of exchange.
 The amount may be mentioned in a foreign
currency, if any, as well.

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Quiz :

1. A promissory note may be payable either on

Demand
__________ Fixed period
or after expiry of a ___________

Specified Banker
2. Cheque is drawn on a _________________

3. Incase of Bill of exchange, the drawee can pay the

3 grace
amount after __________ days

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Frequently Asked Questions :

1. Distinguish between cheque and bill of

exchange.
2. Distinguish between promissory note and Bill
of exchange.

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Assignment :

1. Prepare answers for the above questions.

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