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Promissory notes have had an interesting history. At times, they have circulated as a form of alternate currency, free of government control. In some places, the official currency is in fact form of promissory note called a demand note (one with no stated maturity date or fixed term, allowing the lender to decide when to demand payment).

In the United States, however, promissory notes are usually issued only to corporate clients sophisticated investors. Recently, however, promissory notes have also been also seeing increasing use when it comes to selling homes and securing mortgages.




"Promissory note" — A "promissory note" is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

The terms of the note usually include the principal amount, the interest rate if any, the favor, the date, the repayment terms (which may include interest) and the maturity date. Sometimes, provisions concerning the rights of the payee are included in the event of default, which may include foreclosure of the manufacturer's property.

·        A promissory note is a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date.


·        A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer's signature.


·        In terms of their legal enforceability, promissory notes lie somewhere between the informality of an IOU and the rigidity of a loan Contract


·        A promissory note is an agreement made in writing. In which a person makes an unconditional promise to give another person voluntarily and a certain amount of money or something like land, in a given time.


·        This promissory note is made / attested in front of a person who is authorized by law (eg notary or registrar etc.).If a person writes that I had borrowed money from such a person and I owe it to him, then this statement will also be considered as promissory note.


The definition and use are established internationally by agreement to provide uniform legislation for a bill of exchange and promissory notes signed in Geneva in 1930. Article 75 of the treaty states that a promissory note shall include:

The term "promissory note" inserted in the body of the instrument and expressed in the language employed in drawing up the instrument

·        an unconditional promise to pay a determinate sum of money;

·        a statement of the time of payment;

·        a statement of the place where payment is to be made;

·        the name of the person to whom or to whose order payment is to be made;

·        a statement of the date and of the place where the promissory note is issued;

·        the signature of the person who issues the instrument (maker).



There are two parties in the promissory note, the first one is called the maker who promises to pay the money and the second is called the payee, these things should be kept in mind while writing the promissory note: -

THE PROMISSORY NOTE MUST BE IN WRITING: - It is very important to have the promissory note in written form and in clear language, and if it is possible to prove it, then it is easy to prove even the marks of the leaders of both the parties.


HANDWRITING OF PROMISSORY NOTE: The promissory note must be in clear, clear and easy language so that it can be easily proved in court if needed.


MODE OF PAYMENT: - Whatever promise or promise is taken in the promissory note, it should be unconditional, if you put any kind of condition in it, then it becomes an agreement, so without any condition, directly and in short words Make a promissory note.

THE REASON FOR THE PAYMENT IS NOT NECESSARY: ​​- Like the agreement, it is not necessary in the promissory note that you should mention in the promissory note why you are giving money to the front.


SIGNATURE: - The signatures of both the parties are required to be signed with their name and full address and if possible, the thumb is also attached.


THERE MUST BE TWO WITNESSES: - It is necessary to have 2 witnesses in any promissory note on which their name, address is signed and if possible, the thumb is also attached.


RECEIPT: - If there is a money transaction, then the receipt of that transaction is even better.

MODE OF PAYMENT: - If the promissory note is related to money, then it is important for you that the money is in a certain amount and the date of payment should also be fixed.


HOW THE PROMISE SHOULD BE MADE: - Whatever promise is given in the promissory note, the promise of giving money or land must be clear and the time limit should also be described. If there is a description of giving money then it should be with no interest.


IN WHICH LANGUAGE SHOULD THE PROMISSORY NOTE BE MADE: - Promissory Note Hindi, English or you can make it in the language of your state.


·        In the promissory note, first write his headings such as promissory note for money transaction

·        After this, write the name, age, and address of both the parties.

·        After this, mention the transaction in the Promissory Note, to determine the time and price of which party has to give the money or any item, such as land, and promise to do so.

·        After this, the names of the two witnesses with the signature of the original parties along with the address and if possible, should be affixed with the mark of objection.






The following are the major differences between bill of exchange and promissory note:

1.     Bill of Exchange is a financial instrument showing the money owed by the buyer towards the seller. Promissory Note is a written document in which the debtor promises the creditor that the amount due will be paid at a future specified date.

2.     Bill of Exchange is defined in Section 5 of the Negotiable Instrument Act, 1881 whereas Promissory Note is defined in Section 4.

3.     In a bill of exchange, there are three parties while in the case of a promissory note the number of parties is 2.

4.     Creditor creates Bill of Exchange. On the other hand, Promissory Note is prepared by the debtor.

5.     The liability of the maker of the bill of exchange is secondary and conditional. Conversely, the liability of the maker of the promissory note is primary and absolute.

6.     In the case of the bill of exchange, the drawer and payee can be the same person which is not possible in case of the Promissory Note. 




Venkatasubbaiah v. Bhushayya, 1963 (1) An.WR (NRC) 31. That was a case in which the Hon’ble High Court of A.P considered the fact of Section 35 of the Stamp Act. It held that the promissory executed in other State was liable for stamp duty in the State where it was produced, and for not paying necessary stamp duty, the document would be inadmissible. For such a contingency Section 19 of the Indian Stamp Act would apply. According to this Section, promissory note drawn or made out of India shall, before it is presented for acceptance or payment or endorses, transfers or otherwise negotiate in India, affix thereto the proper stamp and cancel the same. Prima facie the said section would not apply to the promissory note executed in India, and any promissory note executed in one State may be presented in any other State in India with the stamp bearing on the promissory note, no additional stamp duty need be paid. Section 19 contemplates that a promissory note drawn out of India and used in India or any State, it requires proper stamp duty as per Indian Law.


The Hon’ble Supreme Court in Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay [AIR 1961 SC 1316], speaking through his lordship K. Subba Rao, J. considering the scope of the presumption had laid down the law thus:

"Section 118 lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable or endorsed for Consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be.

The phrase "burden of proof" has two meanings- One, the burden of proof as a matter of law and pleading and the other the burden of establishing a case; the former is fixed as a question of law on the basis of the pleading and so unchanged during the entire trial whereas the latter is not constant but shifted as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be directed evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact. A plaintiff who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was reflected for a particular consideration should produce the said account books. If such a relevant evidence is withheld by the plaintiff, S.114, Evidence Act enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised under Section 118 of the Negotiable Instrument Act."


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