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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

A cheque is drawn "Pay to Sunil Traders" with no words prohibiting transfer. Another cheque is drawn "Pay to Sunil only, not transferable". As to being payable to order under Section 13 of the Negotiable Instruments Act, 1881:

Only the first cheque is payable to order. An instrument payable to a particular person is payable to order unless it contains words prohibiting transfer or indicating it is not transferable, and the second cheque expressly says it is not transferable.

  1. ABoth are payable to order, since each names a particular person
  2. BNeither is payable to order, because a cheque is always payable to bearer
  3. CThe first is payable to order; the second is not, as it contains words prohibiting transferCorrect
  4. DThe second is payable to order; the first is not, as it lacks the words 'or order'

Explanation

Explanation (i) to Section 13 says an instrument expressed payable to a particular person is payable to order unless it contains words prohibiting transfer or showing an intention that it shall not be transferable. The first has no such words, so it is to order. The second prohibits transfer, so it is not a negotiable instrument payable to order.

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