Promissory Note

Negotiable Instruments Act, 1881 — Section 4

A written unconditional promise by one person (the maker) to pay a certain sum of money to another person (the payee) at a specified future date or on demand. Promissory notes are "negotiable instruments" under the Negotiable Instruments Act, 1881. Banks often require promissory notes for short-term credit facilities. Dishonour of a promissory note is actionable under civil law and under Section 25 of the NI Act.

In practice, a promissory note is the cleanest evidence of a debt — an unconditional written promise by the maker to pay a sum to the payee, governed by the Negotiable Instruments Act, 1881 (Section 4). Banks routinely take a demand promissory note alongside the loan agreement for short-term and working-capital facilities, because it lets the bank sue on the note itself without proving the whole transaction. On default, the creditor produces the note, and the burden shifts to the maker to show payment or absence of consideration. The two recurring failure points are stamping and limitation: an inadequately stamped note is inadmissible, and a demand note runs limitation from execution unless an acknowledgement or fresh note resets the clock. Borrowers defend by challenging blank or undated signatures, material alteration, or want of consideration. Dishonour of a note is actionable in civil recovery and under Section 25 of the NI Act. Well-advised creditors confirm proper stamping and live limitation before suing on the note.