A supply bill arises in relation to transaction with government and public sector under taking .A party might have taken a contract for execution and he is entitled for progress payment –based on work done , for which he ha to subit bills in accordance with the terms and conditions of the contract.similiarly , parties who have accepted tendors for supply of goods are entitles for payments on the supply of goods for which they submit bills in accordance with the term of contracts .These bills are known as supply bills.
Procedure to b e followed in respect of supply bills
The supplier sends the goods and then produces documents like railway receipt or bill of lading as evidence of the dispatch of goods .These goods must be inspected by an appropriate authority and the supplier should obtain an inspection note .In case of contracts ,obtaining an engineers certificate regarding the work done is required.
The supplier or the contractor as the case may be prepares the bill for obtaining payments ,Government departments take quite sometimes to verify the bills and pass them for payments .Therefore the suppliers or contractor submits these bills together with the inspection note or engineer’s certificate to the appropriate government department through the banker and requests the banker for a reqsite advance against such bills .The railway receipt is sent direct to the department ,but the number and other particulars of the railway receipt are entered in the supply bills.
It must be noted that these bills do not enjoy the status of negotiable instruments .They are in the nature of debts which can be assigned in favour of the banker for payment,after a revenue stamp for having received the amount .The banker should also obtain a letter from supplier or contractor requesting the appropriate department to make the payment direct to the banker.
Risks involved in advancing against bills
Although the advance is self liquidating in nature , in certain cases it can take quite a long time before the advance is realized because of the administrative and other governmental procedures.It is virtually a clean advance and the bank may not realize the full amount because of the possibility of counter claim or the right of set – off by the government departmet , as the charge os only by way of an unsatisfactory quality of goods or defective work done by the contactor or delay in completion of the work .
Precaution to be taken by the banker
Advance against supply bills can be made only to borrowers who have sufficient experience in government business and Government regulations
The contract between the supplier and government department should scrutinized by the banker so as to know the volume of transaction ,period of supply , rates agreed upon and other terms and conditions. The government will not pass the bills unless there is faithful adherence to the terms and conditions by the suppliers.
The banker should obtain an irrevocable power of attorney form the supplier favoring the banker to receive the money .The same should be registered with the appropriate government Department
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