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CA Foundation · Accounting · Bills of Exchange and Promissory Notes

Anil makes a promissory note for ₹80,000 in favour of Bhavna, payable after 3 months. Which of the following statements is correct about the liability on this note?

Anil, the maker, is primarily liable on the promissory note from the time he makes and delivers it. A note has no drawee, so no acceptance is required to create liability. Acceptance applies only to bills of exchange, where the drawee becomes liable on accepting.

  1. AAnil, as maker, is primarily liable and no acceptance is needed to create his liabilityCorrect
  2. BAnil becomes liable only after Bhavna presents the note for acceptance
  3. CBhavna, as payee, is primarily liable to pay the note on maturity
  4. DAnil's liability is only secondary, arising if Bhavna fails to pay

Explanation

The maker of a promissory note is the principal debtor and is primarily liable from the moment he makes and delivers the note. There is no drawee, so presentment for acceptance does not arise. Option 2 is wrong as it confuses the note with a bill, which must be accepted by the drawee. The payee is the creditor and has no liability to pay.

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