Promissory Notes

Promissory Notes

Pronote uses and financial institutions to crystallize liability.

A pronote is a widely used negotiable instrument in India – especially by banks and financial institutions to crystallize liability

A written instrument, it records an unconditional undertaking signed by the promisor (maker) to pay a certain sum of money only to or to the order of the promisee or to the bearer (section 2, Negotiable Instruments Act, 1881)

a bank note or a currency note is not a PN

it is possible to endorse a PN (see the words, “to the order of”)

it may be payable either “on demand” or “at a fixed or determinable future time”

where money is to be paid in a foreign currency, the rate of exchange should be mentioned

making a PN payable to bearer on demand is prohibited

a PN payable at a specified place must be presented for payment at that place only

the absence of the clause “for value received” does not invalidate the PN

omission of place and date does not invalidate a PN

a PN can transferred through “negotiation” to any person constituting the transferee as the holder of the PN

a suit to recover the due amount would be the “summary procedure” stipulated under Order 37 of the Civil Procedure Code, 1908

visit UNCITRAL for UN Convention on International Bills of Exchange & International Promissory Notes, 1988

Proforma of a Demand PN –

(on the letter head of the promisor)

Rs.__________ with Interest

ON DEMAND, I/We having my/our principal place of business at ______________________ promise to pay to _______ (the promisee) at their office at __________ OR ORDER, the sum of Indian Rs.____________ (Indian Rupees _______ only) together with interest thereon from this date at __% per annum for value received

Laws of India shall govern this Promissory Note and Courts in (say) Mumbai, India shall have exclusive jurisdiction in respect of this DPN

Place ____________

Date __________