Dishonour and Discharge of Bills in Detail
Goods are sold in lieu of cash or credit. The seller immediately gets the payment for the goods sold for cash; however, when it’s a credit transaction, the buyer intends to make payment within the agreed credit period. This promise of paying in the future by the purchaser can be noted in the written promise; in the sense that it can either be the promissory note or Bill of Exchange.
Definition of the Bills of Exchange
As per the Negotiable Instrument Act, 1881, the bill of exchange is the written instrument that holds the unconditional order which is signed by the drawer that directs a specific person for paying the certain amount only to, or to the order of, the bearer of the instrument or a definite person.
Conditions when Drawer is the Payee
Here the drawer is the payee himself and if he keeps the bill with himself until the date of the payment.
Conditions when Drawer is not the Payee
The drawer is not the payee if he gets the discounted bill or if the bill gets endorsed in favour of the creditor.
The Bills of Exchange Features
The bill of exchange should be in writing, and it cannot be verbal.
It is made and signed by the drawer.
It is the unconditional order to the person for whom credit has been granted.
The drawee or person is payable to the person whose name gets mentioned in the bill.
The bill also has a mention of the date by which the specified amount needs to be paid by the drawee.
The bill should be accepted by the drawee for making it legal.
The Types of Bills of Exchange
The types of bills of exchange are the trade bill and accommodation bill.
Trade Bill: The trade bill is the bill of exchange that is drawn and accepted for settling the trade transaction. It is known as the trade bill. This bill of exchange is essentially drawn by the seller of goods, and it is accepted by the purchaser.
Accommodation Bill: In this category, the bill of change is made and accepted for mutual help, and it is known as the accommodation bill. This bill is used for mutual benefit without the trade transaction. It doesn’t involve the purchase or sale of any specific goods or services. This type of bill has an agreement between the parties for giving financial assistance to others.
FAQs on Dishonour and Discharge of Bills: Legal Implications
1. Name any Two Types of Commonly Used Negotiable Instruments.
Two negotiable instruments are bills of exchange and promissory note.
2. State the Three Parties Involved in Bills of Exchange.
Drawer, drawee and payee are the three parties involved in bills of exchange.
3. What does the Discounting of Bills of Exchange Mean?
Discounting of the bills of exchange means taking the amount from a bank against the bill before its due date. Bank debits a certain amount from the face value of the bill and pays the remaining balance to the person discounting the bill.
4. Anand Drew a Bill on Ranjit and Ranjit Accepts the Same. State with Reason, Who Among them Cannot Endorse the Bill to Manav?
Ranjit cannot endorse the bill to Manav, as he is a drawee. Only Anand can endorse the bill.
5. What do you mean by the discharge of bills?
The discharge of bills is essentially an activity that frees an individual from all obligations associated with that bill. Usually when the drawee tends to make the payment, then it is said that the bill is discharged. The bills get discharged in the following conditions: Through the payment of a bill of exchange, when the bill is waived off when there is a cancellation of the instrument, and through the lapse of time or the material alteration.
6. What is meant by the dishonour of a bill by non-acceptance?
The bill of exchange is said to be dishonoured by non-acceptance under section 91 when the drawee doesn’t accept the bill within the stipulated 48 hours of the presentment for the acceptance and when this presentation of the bill is excused or continues to remain unaccepted. It is also considered dishonoured by non-acceptance when the drawee cannot be found even after the reasonable search or the drawee is incompetent to the contract.
7. What is meant by the dishonour of a bill by non-payment?
When the specific drawee refuses to complete the payment, then under section 92, the promissory note or the bill of exchange is said to be dishonoured. The bill can be dishonoured by non-payment when the bill is promptly presented for the payment and there are no sufficient funds within the account thus resulting in the non-payment. The bill is also dishonoured when the bill is overdue and the payment is not done at the time of maturity.
8. How can I get access to the Vedantu notes on “Dishonour and Discharge of bills”?
If you want to refer to the Vedantu notes on “Dishonour and Discharge of bills” then it is available for download on the website and app. These notes are provided in PDF format and are available for free. You need to visit the specific link on the Vedantu app or website and then click on the “Download PDF” option for downloading the file on your device.
9. How reliable are the Vedantu notes on “Dishonour and Discharge of bills”?
The Vedantu notes on “Dishonour and Discharge of bills” are incredibly reliable and can be depended upon for preparing for your commerce exams. These notes are prepared by expert professionals and teachers with a proficient grasp of the subject. These notes are specifically structured keeping the comprehension skills of the students in mind to provide them with the best resource for learning and preparing for the exams.
