{"id":18802,"date":"2023-12-31T03:28:12","date_gmt":"2023-12-30T21:58:12","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=18802"},"modified":"2025-04-05T13:11:33","modified_gmt":"2025-04-05T07:41:33","slug":"promissory-note","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/promissory-note\/","title":{"rendered":"What is a Promissory Note?"},"content":{"rendered":"<h2>About Promissory Note<\/h2>\n<ul>\n<li>A promissory note is a\u00a0written and signed promise to repay a sum of money in exchange for a loan or other financing.\u00a0<\/li>\n<li>Promissory notes are\u00a0binding legal documents used to protect both the lender and the borrower.<\/li>\n<li>It is\u00a0issued by the debtor and states that he will pay the requisite amount within a certain time frame.<\/li>\n<li>The\u00a0person making the promise is\u00a0called the \u2018maker,\u2019 and the\u00a0person to whom the payment is to be made is called the \u2018payee.\u2019\u00a0<\/li>\n<li>It\u00a0typically contains all the terms involved, such as the principal debt amount, interest rate, maturity date, payment schedule, the date and place of issuance, and the issuer&#8217;s\u00a0signature.<\/li>\n<li>Promissory notes can also be\u00a0divided into secured and unsecured notes.\n<ul>\n<li>In the case of a secured promissory note, the\u00a0borrower must provide collateral to the lender to secure the amount.<\/li>\n<li>Unsecured notes\u00a0do not require collateral and are issued based on trust. Unsecured notes are very common among friends and family.<\/li>\n<\/ul>\n<\/li>\n<li>Promissory notes in India:\n<ul>\n<li>In India, a promissory note can be\u00a0issued under Section 4 of the Negotiable Instruments Act, 1881, therefore making it a legal instrument and binding the parties by law.<\/li>\n<li>Promissory Notes\u00a0issued in one Indian state,\u00a0can be presented in another state provided that the note bears a valid stamp. There is no requirement for additional stamp duty to be paid.<\/li>\n<li>A Promissory Note\u00a0must always be written by hand.<\/li>\n<li>It\u00a0must include all the mandatory elements, such as the legal names of the payee and maker&#8217;s name, amount being loaned\/to be repaid, the full terms of the agreement, and the full amount of liability, beside other elements.<\/li>\n<li>The note\u00a0must clearly mention only the promise of making the repayment\u00a0and no other conditions.<\/li>\n<li>After issuance, a Promissory Note\u00a0must be stamped\u00a0according to the regulations of the Indian Stamp Act. It\u00a0can also be issued on a stamp paper in case revenue stamps are unavailable.<\/li>\n<li>All Promissory Notes are\u00a0valid only for a period of 3 years starting from the date of execution, after which they will be invalid.<\/li>\n<li>There is\u00a0no maximum limit in terms of the amount which can be lent or borrowed.<\/li>\n<li>The\u00a0issuer\/lender of the funds\u00a0is normally the one who will hold the Promissory Note. When the loan amount has been disbursed or repaid fully, the Promissory Note must be cancelled and marked &#8220;Paid in Full&#8221;, after which it can be returned to the borrower \/ payee.<\/li>\n<li>While the\u00a0signature of a witness is not a mandatory requirement, it is advisable to have a note signed by a witness who is independent of the transaction.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Key Facts about Negotiable Instruments Act, 1881<\/h2>\n<ul>\n<li>The Act was enacted to\u00a0provide a uniform legal framework for the use of negotiable instruments\u00a0in India.<\/li>\n<li>It governs the use of negotiable instruments in India.<\/li>\n<li>It provides for the regulation of\u00a0promissory notes, bills of exchange, and cheques.\u00a0<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1) What is a bill of exchange?<\/h3>\n<p>A bill of exchange is a written order binding one party to pay a fixed sum of money to another party on demand or at some point in the future. A bill of exchange often includes three parties\u2014the drawee is the party that pays the sum, the payee receives that sum, and the drawer is the one that obliges the drawee to pay the payee.<\/p>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/www.livelaw.in\/high-court\/karnataka-high-court\/karnataka-high-court-ruling-promissory-note-recovery-unconditional-undertaking-245152\" target=\"_blank\" rel=\"nofollow noopener\"><u>NI Act | Promissory Note Conferring On Payer A Right To Recover As Per Law Does Not Dilute Unconditional Undertaking: Karnataka HC<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A promissory note is a written and signed promise to repay a sum of money in exchange for a loan or other financing. <\/p>\n","protected":false},"author":5,"featured_media":18803,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-18802","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/18802","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=18802"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/18802\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/18803"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=18802"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=18802"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=18802"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}