Anil took a loan of ₹10 lakh from JF Financial Corporation (a registered financial company) for purchasing a one bed room flat on an agreed rate of interest of 16% per annum. Along with agreement papers, a promissory not

Promissory note is one of the negotiable instruments recognized under the Negotiable Instruments Act, 1881. A "promissory note" is defined by Section 4 of the Negotiable Instruments Act, 1881 as "an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument". To be a promissory note, an instrument must possess the following essentials: It must be in writing. An oral promise to pay will not do. It must contain an express promise or clear undertaking to pay. A promise to pay cannot be inferred. A mere acknowledgement of debt is not sufficient. If A writes to B "I owe you (I.O.U.) ₹500", there is no promise to pay and the instrument is not a promissory note. The promise or undertaking to pay must be unconditional. For example: A promise to pay "when able", or "as soon as possible", or "after your marriage to D", is conditional. But a promise to pay after a specific time or on the happening of an event which must happen, is not conditional, e.g. "I promise to pay ₹1,000 ten days after the death of B", is unconditional. The maker must sign the promissory note in token of an undertaking to pay to the payee or his order. The maker must be a certain person, i.e., the note must show clearly who is the person engaging himself to pay. The payee must be certain. The promissory note must contain a promise to pay to some person or persons ascertained by name or designation or to their order. The sum payable must be certain and the amount must not be capable of contingent additions or subtractions. If A promises to pay ₹100 and all other sums which shall become due to him, the instrument is not a promissory note. Payment must be in legal money of the country. Thus, a promise to pay ₹500 and deliver 10 quintals of rice is not a promissory note. It must be properly stamped in accordance with the provisions of the Indian Stamp Act. Each stamp must be duly cancelled by maker's signature or initials. It must contain the name of place, number and the date on which it is made. However, their omission will not render the instrument invalid, e.g. if it is undated, it is deemed to be dated on the date of delivery. A promissory note cannot be made payable or issued to bearer, no matter whether it is payable on demand or after a certain time (Section 31 of the RBI Act). In the light of the above, JF Financial Corporation ought to have taken the above precautions at the time of execution of Promissory note (P/N).