There are some certain disadvantages of supply bills which are described below in detail:
Disadvantages of supply bills
- The collection of supply bills takes time and their mains the possibility of the undue delay in getting payment form the government department due to procedural matter.
- Supply bills are not bills of exchange. They do not, therefore, enjoy the legal status of negotiable instruments; being not unconditional in character and neither the amount nor the date of payment is certain. The security available to the bank in the case of advance against supply bills is by way of assignment of debts represented by the supply bills. Here the drawback is that despite the assignment of the debt of the bank, the department still has a right of set-off against the supply bill amount for any amount due to it.
- The debtor, usually the Government, in this case, could pay the amount directly to the creditor unless the assignment is registered with the debtor and the debtor undertakes to pay the amount to the assignee only.
- Since the goods are already supplied, the bank has no other security other than the supply bill furnished by the contractor.
- The amount claimed by the supplier/contractor may be reduced by the drawee for short supply or defective supply or defective work.
- The payment may be refused if there be any defect or default on the part of the drawer in observing the terms and conditions of the contract.
In case the sanctioning authority refuses, for any reason, to make payment of the bill the bank will have no security except the personal security of the borrower.
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