Renewal Of A Bill

                  Renewal Of A Bill

Sometimes, the acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill  before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will, of course, have to pay interest for extended period. Thus the cancellation of the old before maturity in return for a new bill (which includes interest) for an extended period is called "Renewal Of Bill". 

There are two new ways to renewal of a bill of exchange:

(a)The acceptor pays interest in cash and a new bill is accepted equal to the amount of the old bill.

(b)The  acceptor pays a part of the amount of the bill in cash and accepts a new bill for the balance plus interest.

The renewal of the bill under different conditions is explained with the help of following examples:

(1) On 1st January, 2005 A (the creditor) draws a bill for Rs.1,000 on his debtor B at 3 months. The due date of the bill is 4th April. On  31st March, the acceptor (B) approaches the drawer (A) and shows his inability to meet the bill. He request the drawer to cancel the old bill and on him a new bill for extended period. A agree on the condition that he will charge 20 as interest. Thus a new bill is drawn for Rs. 1,000+20 = 1020. The bill is accepted by the B.

(2) On 31st March, before the due date of the same bill, B the acceptor , approaches the drawer and shows his inability to meet the bill. He request the drawer to cancel the old bill and on him a new bill for extended period. A agree on the condition that he will charge 20 as interest. B pays Rs.20 for interest at the same time and accepts a new bill at two months for Rs. 1,000

(3)On 31st March the acceptor (B) requests the drawer for the cancellation of the old bill. A agrees. B pays 500 in cash as a part of the amount of the old bill and accepts a fresh bill for Rs. 510 (including Rs. 10 for interest) at two months (for an extended period).

Difference between Dishonour and Renewal of a bill

When a bill is duly presented by the holder to the acceptor on the due date and the acceptor refuses to meet the bill, this is a case of dishonour of the bill.

On the other hand, if the acceptor approaches the drawer himself and shows his inability to meet the bill and request the drawer to cancel the old bill and to draw on him a new bill for an extended period, it will be a case of renewal of the bill.