BANKING AFFAIRS

Detailed explanation-1: -Section 5 of the Negotiable Instruments Act, 1881 defines bills of exchange. According to this definition, a bill of exchange is an instrument in writing containing an unconditional order. Furthermore, the bill’s maker directs a certain person to pay some money either to a specific person or its bearer.

Detailed explanation-2: -5. “Bill of exchange”.-A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

Detailed explanation-3: -Negotiation by indorsement.-Subject to the provisions of section 58, a promissory note, bill of exchange or cheque 1[payable to order], is negotiable by the holder by indorsement and delivery thereof.

Detailed explanation-4: -The bill of exchange contains an unconditional order to pay a certain amount on an agreed date while the promissory note contains an unconditional promise to pay a certain sum of money on a certain date. In India these instruments are governed by the Indian Negotiable Instruments Act 1881.