Promissory Notes
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Pronote uses and financial institutions to crystallize liability.
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A pronote is a widely used negotiable instrument in India – especially by banks and financial institutions to crystallize liability
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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)
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a bank note or a currency note is not a PN
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it is possible to endorse a PN (see the words, “to the order of”)
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it may be payable either “on demand” or “at a fixed or determinable future time”
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where money is to be paid in a foreign currency, the rate of exchange should be mentioned
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making a PN payable to bearer on demand is prohibited
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a PN payable at a specified place must be presented for payment at that place only
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the absence of the clause “for value received” does not invalidate the PN
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omission of place and date does not invalidate a PN
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a PN can transferred through “negotiation” to any person constituting the transferee as the holder of the PN
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a suit to recover the due amount would be the “summary procedure” stipulated under Order 37 of the Civil Procedure Code, 1908
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visit UNCITRAL for UN Convention on International Bills of Exchange & International Promissory Notes, 1988
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Proforma of a Demand PN –
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(on the letter head of the promisor)
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Rs.__________ with Interest
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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
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Laws of India shall govern this Promissory Note and Courts in (say) Mumbai, India shall have exclusive jurisdiction in respect of this DPN
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