Legal & Regulatory Aspects of Banking - Law Relating to Bill Finance Unit - 14 : Law Relating to Bill Finance Bill Finance is one of the modes of lending by a banker. It offers bankers an easy mode of lending . From banker's point of view, it involes discounting or purchase of commercial bills arising out of sale of goods .
CLASS OF BILLS AND LAWS GOVERNING BILLS : CLASS OF BILLS : 1) Clean bills 2) Documentary bills 3) Bills drawn under Credit
CLASSIFICATION OF BILLS : PLACE 1. INLAND BILLS 2. FOREIGN BILLS
PERIOD 3. DEMAND BILLS 4. USANCE BILLS
NATURE 5. CLEAN BILLS 6. DOCUMENTARY BILLS
VARIOUS TYPES OF BILL FINANCE : A. BILL PURCHASED B. BILL DISCOUNTING C. ADVANCED AGAINST BILLS FOR COLLECTION
Classification of Bills Inland Bills : Bills drawn or made in India and made payable in, or drawn upon any person resident in India. It may be made payable in a foreign country. Foreign Bills:Bills drawn outside India and made payable in or drawn upon any person resident in any country outside India / resident in India Demand Bills: Section 19 : It is an instrument payable on demand and no time for payment is specified therein. Demand Bill is otherwise called sight bill. Usance Bills: Bill Payable after sight : a bill payable otherwise than on demand. It specifies normally a time for payment of the value it represents. Clean Bills: is a bill of exchange drawn as per requirements of NI Act and is not supported by documents of title of goods. Documentary Bills: A bill of exchange accompanying documents of title of goods. These bills are drawn to claim price of goods supplied.Bills drawn with an instruction to deliver against payment/D.P. Bills - In a transaction of supply of goods, a seller draws a bill on the buyer and sends the same to his banker along with document of title of goods like bill of lading etc. The seller instructs the banker to deliver the bill and documents of title of goods only when buyer pays the price of goods.Bills drawn with instruction to deliver against acceptance / D.A.Bills – An usuance bill supported by document of title of goods bearing an instruction that the documents can be delivered, if the buyer accept the bill of exchange Various Categories Of Bill Finance Bill Purchase facility is granted in the case of demand bills Bill Discount is granted in the case of usance bills Advance against Bills for Collection: When the bank advances against the bills, which are in course of collection, the facility is known as advance against bills for collection. NI Act 1881SectionDescription 5 Bill of exchange is defined as “ instrument in writing containing an unconditional order signed by maker directing a certain person to pay certain sum of money only to, or to the order of a certain person or to the bearer thereof 7 Drawer, Drawee and Payee 8 Holder of Bill of exchange means a person entitled in his name to possess the bill and recover the amount presented by Bill. 9 Holder in Due Course means any person who for consideration become the possessor of the bill 10 Payment in Due Course means payment in accordance with tenor of the bill of exchange to the holder or holder in due course in good faith and without negligence 11 Inland bills 12 Foreign Bills 14 Negotiation : When a bill is transferred to any person so as to entitle him to claim the amount represented by bill, then such transfer is called Negotiation 15 Endorsement: If the holder of instrument signs the bill of exchange for the purpose of transferring it, such signing is called Endorsement. 19 Demand Bills 30 Liability of Drawer 32 Liability of Acceptor/Drawee of Bill 35 Liability of Endorser 79 Interest rate specified 80 Interest when no rate is specified