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CMA Intermediate · Business Laws and Ethics · Negotiable Instruments Act, 1881

A promissory note is originally payable to 'Meena Iyer'. She indorses it in blank by merely signing on the back and hands it to Karan. According to Section 13, the instrument is now:

The note becomes payable to bearer. Under Section 13, an instrument whose only or last indorsement is an indorsement in blank is payable to bearer, so a blank signature by Meena Iyer converts the note into a bearer instrument.

  1. APayable to order only, as it was originally made so
  2. BPayable to bearer, because its only indorsement is an indorsement in blankCorrect
  3. CNon-negotiable, because the indorsement does not name an indorsee
  4. DPayable to Meena Iyer alone, as the indorsement is incomplete

Explanation

Explanation (ii) to Section 13 says an instrument is payable to bearer if it is expressed so or if the only or last indorsement on it is an indorsement in blank. Meena's signature alone is the only indorsement and it is in blank, so the note is payable to bearer.

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