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Use of Demand Promissory note if service extended on deffered payment
19-Dec-2023 (In Startup Law)
Sir,
We are start up private limited company into making water and sanitation accessible to low income families in Bihar. We build toilet and cost of building toilet recovered on either in cash payment or instalment depend on economic condition of the house.
My question is "can we use demand promissory note for payment to be received on installment" from clients. So far my understanding was this used for if finance company extend loan to client and payment received in instalment along with interest.
Hi..
You can very well use a promissory note as an instrument for securing your payment on demand. Promissory Note being a negotiable instrument is equivalent to a cheque and/or demand draft. Thus, in case the promisor fails to make the payment on your demand, you can initiate a criminal action under negotiable instruments act so as to secure your payment. Further, the action under this act being of a criminal nature is more persuasive as compared to a civil action.
Having said that, please ensure that the essentials of a promissory note are adhered to when creating one.
Hope the above is helpful.
You can very well use a promissory note as an instrument for securing your payment on demand. Promissory Note being a negotiable instrument is equivalent to a cheque and/or demand draft. Thus, in case the promisor fails to make the payment on your demand, you can initiate a criminal action under negotiable instruments act so as to secure your payment. Further, the action under this act being of a criminal nature is more persuasive as compared to a civil action.
Having said that, please ensure that the essentials of a promissory note are adhered to when creating one.
Hope the above is helpful.
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Adv. Tushar A John
Delhi | 25+ Answers
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No, PNs can be used in pribat deal Bugs also. Ensure that they are duly stamped and the content of the notes doesn't carry any condition; basically your customer must be making an unconditional acknowledgment to pay the sum/ instalment. Yes, in case of instalment you can get more than one PN issued in your name. But, the question is how feasible wd it be for you to ensure that the payments are really been made to you as promised. Dragging these customers to court may not be cost effective for you and will also be time consuming. Have you thought about how to check if the parties default in making payments??
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Adv. Mansi Airi Gambhir
Delhi | 25+ Answers
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It is true that primarily promissory notes, hundi and Bill of exchange are used by organizations like NBFC and BFSI however it is not like that others cannot use promissory note in terms of their business.
All you have to do is to get a legal document signed by the payee in your favour that they owe you a sum of rupees in lieu of the work undertaken by you and they intend to pay the same in future in installment. You can further get it defined that by what time you will be receiving the sum and in how many installments.
That legal note signed as promissory note shall be properly stamped as per the Indian Stamp Act.
All you have to do is to get a legal document signed by the payee in your favour that they owe you a sum of rupees in lieu of the work undertaken by you and they intend to pay the same in future in installment. You can further get it defined that by what time you will be receiving the sum and in how many installments.
That legal note signed as promissory note shall be properly stamped as per the Indian Stamp Act.
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Adv. Pulkit Prakash
Delhi | 400+ Answers
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