Difference between Promissory note and Cheque under the NI Act
Difference between Promissory note and Cheque under the NI Act

Difference between Promissory note and Cheque under the NI Act

(1) introduction: 

Personal transaction or business transaction needs payment.  All people like to have a cash payment. But sometimes, cash payment carries risk. To make payment secured, people seek negotiable instruments like cheques or promissory notes.  But it is sorry to say that most of the time, people do the mistake using a cheque or promissory note.

The reason behind that is they do not have a perfect concept either a promissory note or a cheque. As a result that, they make themselves silly using the promissory note instead of the cheque. To avoid the hassle, at first people including you need to know the difference between promissory note and cheque. 

Please do not skip the page as today, this article will make you understand the difference between cheque and promissory note. Let’s have a look at the details. 

(2) What is Cheque?

Definition of cheque – Cheque is a negotiable instrument drawn on a specific bank on behalf of a person or a company. The cheque is the safest mode for money transfer. There are different kinds of cheques such as ‘Bearer Cheque’, ‘Order Cheque’, Anti Dated cheque and post-dated cheque. 

Even there are three parties involved in a cheque. 

1.Drawer – A drawer means an account holder, who drawn the cheque is called a Drawer.

2.Drawee – Drawee means a bank where an account holder maintains his or her account.

3.Payee – This means a name of a person who is mentioned in a cheque. The cheque amount goes to the mentioned parson.

Feature of Cheque – A cheque is recognized by some of the special features. With these features, anyone can easily identify the cheque and use it from his or her side. The essential features are given below. 

  • Cheques should come in written and signed by the drawer.
  • It indicates an unconditional order.
  • The bearer can demand it if he likes to get
  • The amount should be specified clearly both in words and figures.
  • It does not need any acceptance.
  • It comes to be drawn on a specific bank.
  • Cheques contain a particular date.
  • Generally, a cheque contains a validity of three months.
  • Without mentioning any date, the cheque is invalid for paying. 
  • The cheque must be delivered during office hours to the banker and the banker only has to pay the sum upon presentation of the cheque.
  • The signature of the drawer must conform to the signature of the drawer contained in the records of the bank.

It is not that only the concept of the cheque will make you enabled to understand the difference between promissory note and cheque. To have the proper knowledge about the difference, you shall have to look at the details of the promissory note.

(3) What is a promissory note?

In the simple meaning of the promissory note, we can say that a promissory note is a financial instrument that carries a promise with a fixed amount by the issuer to another party. It generally contains the amount, rate of interest, date, place, maturity date, and the signature of the issuer.  In brief, it becomes a written promise to pay a debt. 

Feature of a promissory note: 

To have a clear concept about the difference between promissory note and cheque, the perfect knowledge of promissory notes will guide you properly. 

1.The promissory note should come in the form of a written and no oral promise should not be accepted.

2.It is one kind of promise to pay the money within a time or when the money is demanded.

3.The note is completely signed and stamped by the drawer.

4.The promise to pay is completely unconditional. That means a certain amount of money should be paid in all the cases. 

5.The payments in promissory notes should be made through legal country currency.

6.The promissory note should contain detailed information including the name of the drawer and payee, date of maturity, issuing date, principal amount, and the date.

(4) Difference between cheque and promissory note:

1.The promissory note is one kind of promise made by a person to another person for a certain amount of money.  But a cheque becomes an unconditional order issued by the customer for a specified person or the bearer. 

2.On a promissory note, there are two parties such as the maker and the payee but in a cheque, there must be drawer drawee and payee. 

3.The promissory note is not conditional but a cheque is completely conditional. 

4.The maker of promissory notes cannot pay himself or herself but the drawer can be a payee.

To get a clear idea of the difference between promissory note and cheque, a table is given below.

No Cheque Promissory Note
1. What is a cheque?

A cheque is an order by the drawer to the bank to pay a mentioned amount from his or her account.

What is a Promissory Note?

A promissory note is a written unconditional promise from one to another for payment.  It is completely signed by the maker mentioning a sum of the amount in a certain period.

2. How do you define a cheque?

A cheque is a bill of exchange drawn on a particular bank.

How do you define a Promissory note?

Promissory is a legal instrument signed by the maker to the person or his or her bearer. But it is not a currency note or bank note.

3. To make a cheque, there must be three parties

1. Drawer

2. Drawee

3. Payee

For promissory note, there must be two parties

1. Maker

2. Payee.

4. It comes to be drawn by only the account holder of the bank. Anyone can do it.
5. An order to the bank to pay the amount for a certain person. It is a promise.
6. In cheque, no stamp is required. On a promissory note, the stamp is necessary.
7. In issuing cheques, the drawer can be the payee. Undoubtedly, the drawer does not come as the payee.

(5) Conclusion:

Before you come to use either cheque or the promissory, you need to be very careful. In that time, you need to remember the difference between the cheque and promissory note. If you come to be efficient regarding the feature and the working especially, you can use one out of both at the appropriate place at the right time.  

About Sandeep Bhatt

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