PARTIES TO NEGOTIABLE INSTRUMENT

 PARTIES TO NEGOTIABLE INSTRUMENT 

1. MAKER

The person who promises to pay a certain sum of money to the other person, makes a promissory note, signs it and gives it to the other party. Because he makes it, therefore he is called as the Maker. In simple words, the maker is the debtor who promises to pay to his creditor.

2. PAYEE (Section 7)

Payee is the person who is entitled to receive the amount due on a negotiable instrument. He is the recipient of the amount due on a promissory note, bill of exchange and a cheque.

In a Promissory Note:

- Payee is the receiver of money, to whom the promise is being made.

In a Bill of Exchange:

- Drawer is the payee.

- When B/E is endorsed, the endorsee becomes the payee.

In a Cheque :

Drawer (i.e. the customer) is the Payee 

3. DRAWER (Section 7)

The person who draws (or makes) the bill of exchange is called as the drawer. In case of a cheque, drawer is the customer who draws the cheque on his bank (i.e., the drawee). 

4. DRAWEE (Section 6 & 7) 

The person who is directed to pay the amount of the bill of exchange, is the drawee in that bill. In case of a cheque, the drawee is always a specified banker.

5. Acceptor (Section 7)

 In a bill of exchange, the drawer orders a certain drawee to pay a certain sum of money mentioned in the bill. When the drawee signs his assent on the bill which he does generally by writing the word "accepted" on the bill, then signing the same, he is known as the "acceptor" of the bill of exchange. Acceptance by the drawee means that he now undertakes to pay the amount in accordance with the order of the drawer. According to Section 32, an acceptor of a bill of exchange is bound to pay the amount thereof at maturity.

It may be noted that a drawee as such is not liable on the bill, his liability arises only after he has accepted the same. According to Section 7, acceptance can only be in writing signed by the drawee, and there can be no oral acceptance, or acceptance by conduct. 

6. DRAWEE IN CASE OF NEED (Section 7) 

According to Section 7:

When in the bill or in any indorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a "drawee in the case of need". Normally the name of only one drawee is mentioned in a bill of exchange. But some times the names of more than one drawee may be mentioned in a bill of exchange. In such a case, if the first drawee does not honour the bill, the holder may have resort to the second drawee. Since the second drawee is to be resorted to in case of need, i.e., in case the first drawee does not honour the bill, the second drawee is known as drawee in case of need. 

7. ACCEPTOR FOR HONOUR (Section 7)

According to Section 7: Thus, when a bill of exchange has been noted or protested for non-acceptances or for better security, and any person accepts it supra protest for the honour of the drawer or of any one of the indorsers, such person is called an "acceptor for honour".

Sometimes the drawee may not accept the bill, i.c., he may dishonour the bill by non acceptance. It is also possible that after acceptance there may be no likelihood of payment on the due date because of factors like insolvency of the acceptor. In such a situation, if somebody wants to save the honour of the drawer or any indorser of the bill he, therefore, accepts such a bill of exchange. The person so accepting the bill of exchange is known as the "acceptor for honour". Acceptance for honour can be made only after the bill of exchange has been noted or protested for non-acceptance or for better security.

8. Indorser (Section 15)

When a person who is the holder of a negotiable instrument wants to transfer his rights to another person and with that object in view puts his signatures on the instrument (generally at the back) or on an attached sheet of paper, he is said to have indorsed the instrument and is called the "indorser".

For example. A cheque is made payable to X or order. With a view to transfer his rights to Y, X signs at the back of the instrument, his signatures are considered as an indorsement, and X is known as the indorser.

9. Indorsee

"Indorsee" is a person in whose favour the indorsement is made, i.e., it means that person in whose favour the negotiable instrument has been transferred by an indorsement.

10. HOLDER (Section 8) 

The "holder" u/s 8 of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.