What is Promissory Note - Demand vs Usance PN
What is Promissory Note - Demand vs Usance PN

Promissory Note and Its Types – Demand Promissory Note and Usance Promissory Note : Promissory Note or PN is an instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money to the payee or bearer of the instrument at a specified future date or on demand. In other words, it is a written promise to pay a debt.

A Promissory note should have the following features :-

  • An unconditional undertaking to pay
  • Must be in writing
  • Amount to be paid should be specified or certain
  • Promissory Note must be payable to or order of a certain person or to bearer
  • Must be signed by the maker
  • Must be stamped as per Indian Stamp Act

Who is Promisor and Promisee in Promissory Note ?

There are two parties to a promissory notes – Maker and Payee. Relationship is of Promisor and Promisee. The person (maker of PN) who promise to pay the money is called the promisor (debtor) and person who is entitled to receive the money is called promise (creditor).

Promissory Note Format
Promissory Note Format

Promissory Note should contrain the date, place of execution, amount, promisor and promisee detail, signature of promissor across the stamp. PN does note require witness or attestation.

Types of Promissory Note

Demand Promissory Note :

Promissory Notes which are payable immediately on demand are called Demand Promissory Notes. There is no specification of a fixed period for repayment. It must be paid when demanded.

Demand promissory note is governed by the Negotiable Instruments Act, 1881 and attracts stamp duty as per the Indian Stamps Act.

If a demand promissory note is unstamped or is under stamped it cannot be rectified even by paying a penalty. It even cannot be admitted as evidence in a court of law. Hence it must be ensured that the demand promissory note is duly filled in and sufficiently stamped before the borrower signs it.

Usance Promissory Note :

Promissory Notes which are payable after a predecided definite period are called Usance Promissory Note. Usance PN also need be stamped.

Is Bank Note / Currency Notes a Promissory Note ?

No, Currency Note or Bank Note is not a promissory note. Because they itself are money and don’t fulfill the conditions of the Promissory Note.

The currency is governed by Indian Currency Act. so currency note is not a promissory note.


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