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CA Foundation · Accounting · Bills of Exchange and Promissory Notes

Seema drew a 3-month bill of ₹90,000 on Tarun on 1 April. Tarun accepted it. On 1 May, Seema endorsed the bill to Uday. On the due date, Tarun failed to pay and the bill was dishonoured. Who is primarily liable to pay the bill to Uday, as per the features of a bill of exchange?

Tarun, the acceptor, is primarily liable to pay the bill to Uday at maturity. Seema, as drawer and endorser, is only secondarily liable and must pay if Tarun defaults and due notice of dishonour is given to her.

  1. ASeema, as the endorser, since she transferred it
  2. BTarun, as the acceptorCorrect
  3. CUday, as the holder
  4. DBoth Seema and Tarun equally as the primary parties

Explanation

The acceptor of a bill is the person primarily liable to pay it at maturity. The drawer and endorsers are only secondarily liable, meaning they pay if the acceptor defaults and notice of dishonour is duly given. Hence Tarun is primarily liable, and Seema's liability arises only if he fails to pay, so she is not equally liable.

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