A bill of exchange is a type of paper that entitles the holder to pay a certain amount of money to the debtor named in the document. The bill of exchange is both a means of payment and an instrument for making payment. The bill of exchange is typically a paper on orders, but it can also be issued as a value paper to a name. Because the bill of exchange appears as a means of payment and an instrument for securing payment, it also appears as a means of international payment. The bill of exchange can evolve into a modern crediting and payment instrument. As the credit market develops, the bill of exchange becomes a means for the drawer and the drawee to pay before the deadline for submission. The bill of exchange is now a toll for a discount. Based on this, we can Assume that the bill of exchange serves the following functions: – as a means of credit; -bill of exchange serves as a means of payment; and -bill of exchange serves as a means of discounting.
EXECUTION OF BILLS OF EXCHANGE
Section 22 of the Companies Act of 2013 is the one which deals with Bills of Exchange.
Section 22 of the 2013 Act incorporates sections 47 (Bills of exchange and promissory notes) and 48 (Execution of deeds) of the 1956 Act. Section 22 of the 2013 Act states as follows:
(1) A bill of exchange, hundi, or promissory note is deemed made/accepted/drawn or endorsed on behalf of a company if it is made/accepted/drawn or endorsed in the name of the company by any person acting under its authority.
(2) A company may appoint any person as its attorney to execute other deeds on its behalf anywhere by writing under its common seal.
(3) A deed signed on behalf of the company and under his seal by that attorney shall bind the company and have the same effect as if it were made under its common seal. When an attorney executes a deed on behalf of a company, it must be under his seal in order to bind the company, and such seal has the same effect as if the deed was executed by the company under its common seal. However, if the deed is signed by the attorney without bearing his seal, it will still bind the company; the only difference is that the deed will not have the same effect as if signed under the company’s common seal, i.e. under the signature of the company. It is therefore recommended that, in order to bind the company and have the same effect as if executed under the company’s common seal, the deed be executed by the attorney and bear his seal.
SCOPE OF THIS SECTION
This clause, which corresponds to Section 47 of the Companies Act of 1956, aims to provide for the execution of bills of exchange, hundi, promissory notes, and other deeds. A company may appoint any person as its attorney to execute deeds on its behalf by writing under its common seal. A deed signed on behalf of the company and under his seal by such an attorney shall bind the company and have the same effect as if it were made under its common seal. The mode of authentication is especially important in the case of legal persons, who cannot act on their own and must rely on representatives. The signature must be that of an authorized person, and the company name must be mentioned in such a way that the intention to bind the company is clear. Section 22 of the Companies Act of 2013 states:
A bill of exchange, hundi, or promissory note is deemed to have been made, accepted, drawn, or endorsed on behalf of a company if it is made, accepted, drawn, or endorsed in the name of, or on behalf of, or on account of, the company by any person acting under its express or implied authority. (Sub-s (1) (1).
WHO HAS THE AUTHORITY TO ISSUE BILLS OF EXCHANGE?
A company cannot issue promissory notes or other negotiable instruments unless its memorandum of association expressly or implicitly authorises it to do so. Only in the case of a trading concern is such a power implied. Kerr v. University Press Ltd., 2 DLR 948 (1923). (Canada).
The essential condition for the validity and enforceability of bills and promissory notes, as well as contracts in general (vides. 46 of the 1956 Act), is that they be made, accepted, etc., by a person acting under its express or implied authority.
It is critical to indicate that the person signing an instrument is acting as an agent or representative of the company. Otherwise, he will be personally liable. If a director signs a bill of exchange or promissory note, he is personally liable unless it states on the face of the document that he is signing on behalf of the company Elliot v. Bax Ironside, (1925) 2 KB 301; and merely describes him in the body of the instrument as a director or officer of the company is insufficient.
The mere fact that the company benefited from the borrowing will not bind the company. Mangal Bahu v. Jaitly & Co., 16 Com Cases 214 (1946).
The general rule in the case of negotiable instruments is that the name of the person or firm to be charged upon a negotiable document should be clearly stated on the face or back of the document so that the responsibility is made clear and can be instantly recognised as the document passes from hand to hand.
PARTIES INVOLVED IN A BILL OF EXCHANGE
- The issuer of the promissory note is indicated on the face of the bill.
- The draweree is the person who pays the bill in the drawer cover.
- The payee is the individual or legal entity named in the document to whom the bill’s amount is payable or the beneficiary of the bill.
- A bill holder is a person who owns the bill of exchange
- Issuers of the Bill banks and payment agencies that issue specific types of bonds.
- Endorser is the owner of the endorsement recovery.
- The Indosator is the person to whom the bill is presented. It could be a drawer or a drawee, and it could be any person or any bill of exchange.
- Avalist is a person who guarantees payment of the amount specified in the bill by signing the bill.
- Acceptor is the person who receives the bill obligation along with a payment statement. In the event of a need to accept or pay, a person designated by the drawer, endorser, or avalistot in the bill steps in.
- A copyist is someone who places an authorization copy of a bill while ensuring that the person who made the copy will hand over the original bill of exchange or pay the bill amount.
The bill of exchange is security – a means of payment in order based on a law that applies to all securities on order. It is required legal paper that always follows a certain amount. Because the economy in the commodity-money situation is not as important, this indicates an extremely legal interpretation of the bill of exchange. As a result, the bill of exchange serves primarily as a lending facility for securing the claim. Also, the bill of exchange is an important tool for ensuring not only commodity-money circulation but also among some payment institutions, particularly in foreign trade exchanges.
Company Law by Avtar Singh
The Companies Act, 2013
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