Promissory note

A promissory note (pronote) is an unconditional written promise by the maker to pay a certain sum of money to a particular person, or to that person's order. It is simple proof that money was borrowed and must be repaid.

The law behind it

Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note. It must be in writing, contain an unconditional undertaking to pay, be signed by the maker, and name a certain sum and a certain payee. Stamp duty is payable under the stamp law, and an unstamped or understamped note may not be admissible in evidence. Under the Reserve Bank of India Act, 1934, only the RBI and the Central government can issue notes payable to bearer on demand, so private notes must name the payee.

Using it as loan proof

• Write the amount in words and figures, the date, the place, and the interest rate if any.
• The borrower signs across the revenue or adhesive stamp where the State law requires it.
• Get it witnessed, and keep the original safely.
• A suit to recover money on a promissory note payable on demand must generally be filed within three years from the date of the note (Article 35 of the Limitation Act, 1963).

Draft a promissory note or a personal loan agreement.