Meaning of Bill of Exchange

According to the Negotiable Instruments Act 1881, a bill of exchange is defined as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”.

Parties Of Bill of Exchange

(1) Drawer:

• The drawer is the maker of a bill of exchange.
• The bill is signed by Drawer.
• A creditor who is entitled to receive payment from the debtor can draw a bill of exchange.

(2) Drawee:

• Drawee is the person upon whom the bill of exchange is drawn.
• Drawee is the debtor who has to pay the money to the drawer.
• He is also known as ‘Acceptor’.

(3) Payee:

• The payee is the person to whom payment has to be made.
• The payee may be the drawer himself or a third party.

Therefore, now it is clear that the bill of exchange is drawn by the creditor and not a debtor.

Hence, the false statement is Option 4 i.e. Bill of exchange is drawn by the debtor.