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Sunday, December 12, 2010

Legal due date of Bills of exchange

Legal Due Date of a bill of exchange:

         The Legal Due Date of Bill of Exchange is that date when the amount of the bill is payable by the drawee. The calculation of due date of a bill of exchange is dependent on the nature of the bill.A bill of exchange is of two types:
                         (a) A bill payable on demand or at sight (Presentation) e.g., Cheque,
                         (b) Term bill.
        A term bill may be payable after:
                        (a) A certain period after date, or
                        (b) A certain period after sight.

       A cheque which is drawn on a banker is payable of demand. The banker is liable to pay as and when a cheque is presented to him for payment provided there is sufficient balance in drawer’s account and cheque is properly drawn.
       In case of a Bill Payable after date, the legal due date is calculated from the date of drawing of the bill.For Example, On 1.1.2009 Mr. A draws a bill on Mr.B for Rs. 20,000 for 3 months payable after date. In this case the due date will be:

Date of Drawing of Bill                                                                           1.1.2009
Add: Period (Months)                                                                                3        
Maturity Date                                                                                         1.4.2009
Add: Days of Grace (3 days Added in case of every B/E)                            3            
Due Date                                                                                                4.4.2009 


       In case of a Bill Payable after sight, the legal due date is calculated from the date of acceptance of the bill. For Example, on 1.1.2009 Mr. A draws a bill on Mr.B for Rs. 20,000 for 3 months payable after sight. The bill was accepted on 7.1.2009. In this case the due date will be:

Date of Drawing of Bill                                                                           7.1.2009
Add: Period (Months)                                                                                3        
Maturity Date                                                                                         7.4.2009
Add: Days of Grace (3 days Added in case of every B/E)                            3            
Due Date                                                                                                10.4.2009 
    
         If the due date falls on a day which is a public holiday, the due date the due date shall be the preceding business day and if the preceding day is a public holiday, if will due on the day preceding the previous day.          
          For Example, if the due date of a bill is 26th January, it falls due on 25th January, if 25th January is also a public holiday (Sunday), it will fall due on 24th January.
      
         Again, if the due date falls on a day which is a Sudden holiday, the due date the due date shall be the following business day.
         For Example, on 1.1.2009 Mr. A draws a bill on Mr.B for Rs. 20,000 for 3 months payable after sight. The bill was accepted on 7.1.2009. 10th April was a sudden holiday. In this case the due date will be 11th April.

         If the period of bill is stated in days, the calculation of the due date will be in days which include the date of payment but exclude the date of transaction.
        For example, On 1.8.2009 Mr. A draws a bill on Mr.B for Rs. 20,000 for 30 days payable after sight. The date of acceptance is 8.8.2009. In this case the due date will be:

Date of Drawing of Bill                                                                           8.8.2009
Add: Period (days)                                                                                  30          
Maturity Date                                                                                         7.9.2009
Add: Days of Grace (3 days Added in case of every B/E)                            3            
Due Date                                                                                               10.9.2009 


        If the period of the bill is given in months, the calculation will be made in terms of month, ignoring the number the number of days in a month (as calculated above) If the bill is payable on demand, no days of grace is allowed.