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Promissory Notes

A Promissory note is defined as “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 certain person or to the bearer of the instrument

In simple words, a promissory note is a written unconditional promise by one party, the maker, to pay a specified amount of money to another party, the payee, at a fixed or determinable future time or on demand, only to or to the order of a specified person.


Note: As per Sec.31 (2) of Reserve Bank of India Act, a promissory note cannot be made payable to bearer

In Nutshell

  • Promissory note must be in writing
  • It must be a clear and an unconditional promise
  • There are two parties viz., the maker who is a debtor and the payee who is the creditor
  • The money payable must be certain
  • It should not be made payable to the bearer
  • The payment must be made on demand or at a specified future date
  • It should be properly stamped and signed by the maker
  • It does not require any acceptance as maker himself is acceptor.

Parties to Promissory Note

  • The maker: The person who draws / makes the promissory note is called the maker. He is the person who is liable to pay the money.
  • The Payee: The person in whose favour the promissory note is made is called payee. He is the person who is eligible to receive the money.

Format of Promissory Note

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