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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

A promissory note is made at Dubai in accordance with the law of India, but the agreement it evidences is invalid under the law of the UAE. It is later indorsed within India. As per the Act, the position is that:

The invalidity of the agreement under UAE law does not invalidate the later indorsement made within India. The Act provides that an instrument made outside India in accordance with Indian law keeps its subsequent acceptances and indorsements made in India valid despite foreign invalidity.

  1. AThe invalidity under UAE law does not invalidate the subsequent indorsement made within IndiaCorrect
  2. BThe indorsement in India is invalid because the note was made outside India
  3. CThe note becomes void for all purposes
  4. DThe Act does not apply as the note was made outside India

Explanation

Where an instrument is made outside India but in accordance with the law of India, the invalidity of the agreement under the foreign law does not invalidate any subsequent acceptance or indorsement made within India. So the indorsement stands.

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