Bill of Exchange - Explained in Hindi - YouTube

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Namaskar my name is Mukul and welcome to asset Yogi

Where we unlock finance knowledge

In this video, we are going to talk about the bill of exchange

Bill of exchange is a financial instrument

Which is generally used in international trade

such as a letter of credit and bank guarantee

But the purpose of all these instruments is completely different.

And the working of all of them is also different. I have already made many videos about

Letter of credit and bank guarantee If you haven't seen those videos

then you must watch them I will give their links in the description below

In this video, we will understand about Bill of Exchange working

And in which situation it is used, what are its essential elements ?

What else should we keep in mind when we issue a Bill of Exchange?

Or when we accept it,

So stay tuned till the end of this video.

Let's go straight to the blackboard,

So let's see how the Bill of Exchange concept works.

As I told you in the introduction, this concept is generally used in international trade.

But it is also used in domestic trade.

Suppose the buyer is A, and he wants to buy goods from seller B,

And buyer A does not have the cash to pay immediately

Or maybe he has some cash cycle

He may get this money from somewhere after 2 months, after 3 months, or after 4 months

So in such a situation, the buyer pays the seller that I want to take the goods from you on credit.

So the seller says okay I will give you the goods on credit

But you have to sign a bill of exchange.

So seller B issues a bill of exchange,

And the buyer accepts it.

So remember that when we saw in the promissory note,

the buyer had issued the promissory note

But here the seller is issuing the bill of exchange.

So the bill of exchange will be accepted by the buyer.

All the terms will be written in it that, by this date, you will have to make all the payments.

Signatures of both parties will be done,

the address will be mentioned.

So we will know all these in details

So once the Bill of Exchange is signed,

All the terms were written in it,

So buyer A will pay the seller as per the terms

So this is the whole transaction, and because here the seller has given money on loan

So he will be the creditor, and

because he is issuing a bill of exchange to A so he becomes a drawer

Because he has drawn the Bill of Exchange, we can also call him the maker

And the buyer will be the debtor because he has borrowed

and he will be the drawee because the bill of exchange is issued on his name

So this is the transaction, now let us see what is its technical definition

It is defined under the Negotiable Act 1881

So what is its definition according to this act?

Bill of exchange is an instrument in writing

So first of all, this cannot be an oral agreement,

This is done in agreement writing only.

Containing an unconditional order

This is an order, not a promise

We saw in the promissory note that the buyer promises

Because here the seller is issuing the bill of exchange

He is giving orders to the buyer.

That you pay me this much and the buyer is accepting it.

and it must be an unconditional order

There should not be any condition in the payment.

Which we also saw in the video of the promissory note.

Signed by the maker

the maker will sign it Means the creditor

Directing a certain person to pay a certain sum of money only to, or to the order of

So here the exact sum of money should be mentioned

So the money will be either paid to a certain person

Or else that person can assign someone Or to the order of

So it can also be paid to any third party

And we call that endorsement.

We will also see in detail about the endorsement,

So what happens in this is that the seller assigns to a third party

That you pay this money to a third party instead of paying me.

Or to the bearer of the instrument

Or you can make a payment to a person who is holding that bill of exchange.

If such wordings are written inside the bill of exchange

Or to the bearer of the instrument

So whoever has that bill of the exchange, you will give that money to him.

So this is the definition according to the Negotiable Act 1881

so that's kind of credit

As we saw in the promissory note,

On a promissory note also you are giving loans or lending in a way.

And a bill of exchange is also a kind of credit

Lending is being done through Bill of Exchange,

So which parties are involved in this?

There are two main parties here.

The first one is a drawer, here a drawer is a creditor who makes it,

So we can also call him maker.

He is a creditor basically

Or he is a payee because he will get payment

The second is the drawee in whose name the bill of exchange is issued.

So here he is a buyer

And we can also call it an acceptor because it accepts bills of exchange.

He is a debtor because he is borrowing.

Because he has to pay, we can also call him a payer.

Sometimes a third party also comes in. Which is Endorsee.

As I discussed with you about the endorsement

So here a third party joined who can receive money upon endorsement by seller or drawer

So if the seller says that you make my payment to a third party.

Let's say that instead of paying to B, pay to C.

So in this case C can be the creditor of B.

Maybe B has borrowed some from C.

It may also happen that C has also borrowed from D.

So here D can be the creditor of C.

So here we write C is a creditor.

So in such cases, B will endorse C and then C will endorse D.

an endorsement can be done multiple times

And the endorsement can also be done unlimited time.

Until the due date of the Bill of Exchange

So the holder of the final bill of exchange is called the holder in due course.

We can call it HIDC in short form.

The final holder of the Bill of Exchange

He will go to buyer A and ask him for his payment.

So when buyer A produces that bill of exchange

And after checking it if there is an endorsement on his name he will pay him

If normal payment is done then there is no problem.

But if buyer A says I can't pay you for any reason

And suppose if he dishonours the bill

Either he says that I don't know you, or

Says your endorsement is not correct.

or because of some other reason

or he doesn't have money, and he dishonours the bill

so in this case the holder of due course HIDC

So in such a case, the holder can make a case against buyer A.

Now we will see how it turns out.

So first let us see how many types these are

Mainly these are two types of bills.

The first is an on-demand bill

Demand bill means whenever the seller or the holder in due course will demand,

So A has to pay

And the second one is the term bill

The term bill means a specified future date is given

It is also called usance bill

So in that case on the particular date,

At that date, the seller has to pay A

Or who is the final holder of the bill he has to pay

Suppose HIDC's payment gets dishonoured

So in such a case, the holder can sue

He can file a suit against A

Or he can also file against A B C

He also files against C

Or he can also file a case against B

And he can directly file a case against A

So basically a HIDC can file a suit against all prior parties

So all prior party, from where it has been endorsed

A case may also be filed against them.

and the case can file directly against the drawee

This means the case against the buyer can be filed directly.

So this was the whole concept of the Bill of Exchange

Now we will see what are the essential requirements of the Bill of Exchange

The first thing it should be in writing

An oral agreement is not considered

This must be an unconditional order.

There should not be any kind of condition above the payment.

Like if I get money from somewhere then only I will pay you

Or if someone will die, or if there is a marriage, then I will pay you.

There should not be such conditions.

A drawer is a certain person, its exact name and address should be mentioned.

So all the details of the seller come.

Then how much is the Exact sum payable, that should be mentioned

The name of the drawee should be mentioned

He is also a person,

so the exact name and address of a buyer or a creditor should be mentioned

The date of issue and place of issue is mentioned

The maturity date is written if it is a term bill

If it is an on-demand bill, it may not have a maturity date.

But it is necessary to write the maturity date in the term bill

then it is necessary to stamp it whatever stamp is required.

Either you can affix the revenue stamp of that number.

Or you can sign it on the stamp paper.

And it has to be signed by the drawer

So whoever is issuing the bill, the seller's signature will come.

Along with this, the acceptance of the drawee will come

The buyer will accept it with signature

Interest is generally not charged in the bill of exchange

So here it kind of acts like a post-dated cheque.

So you gave the bill of exchange.

It is mostly given for a short period

so there is no interest charge on it.

But suppose if a particular date is given on the bill of exchange

and till that time the money is not paid

So after that interest can be charged.

But it is necessary to mention this thing inside the Bill of Exchange.

Bill of exchange can be endorsed an unlimited time as I told you earlier

So this can be endorsed by any number of parties.

Two, three, four, five or six

But before the maturity date of the Bill of Exchange.

All these endorsements should be done before it

So in this way an endorsement is made on the bill of exchange.

And the party in whose name the endorsement is done, his signature is also required.

and he accepts the bill

And the party who is endorsing the bill gets its signature too.

So these are all essential requirements of the Bill of Exchange.

Suppose if the bill becomes non-payment or dishonoured then

So in such a case, you can file a suit And this suit can be filed for 3 years.

Suppose if there is a fixed time bill of exchange

So the time till that bill of exchange is valid

From there to 3 years, you can sue. It is also clearly written here,

When the bill or note falls the due

Suppose if the bill of exchange is on-demand is then

At sight or after sight but not at a fixed time,

so whenever the bill is presented or demand

From there to 3 years, you can file a case

This is as per the limitation Act law

And I have extracted the exact clipping from the Limitations law itself.

So if you want you can refer to the Limitation Act

Now let us see the samples of the Bill of Exchange

Here I have given a sample of a very simple bill of exchange.

Which you can use as a template.

So here the exact amount is written. Suppose it is ₹ 100000

So the place of issue will be written here and the date of issue will be written here.

And here it is clearly written 90 days after the date

So from the date which will be written here, it is valid for 90 days.

Pay Mr. XYZ, So whoever this has to pay the seller's name will come here

So it is called seller or drawer.

So this is XYZ he has to pay

Or to order, or its nominee, if he assigns to third party

So if someone Endorse So he has to pay

A sum of ₹1,00,000 for value received

So all the goods that have been received If ₹100000 of goods are received.

So that's why the sum of ₹ 100000 has to be given

All the stamps will be put here. Whatever amount is to be stamped.

Here the name and the address of the drawers came.

Whoever has made the issue, his signature is done here.

And by writing accepted, the drawee signs here.

Whoever is accepting this bill of exchange means that the buyer

So here are the name of drawee is mentioned The name of the buyer will came here

And his address is will be mentioned here

So this is how you can issue a bill of exchange

and I think I have covered all the major points of the bill of exchange

Still, if you have any doubt, then you can ask in the comment section below.

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