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

An instrument can be construed either as a promissory note or as a bill of exchange. Under the Negotiable Instruments Act, 1881, who decides how it is treated?

The holder decides. Where an instrument may be construed either as a promissory note or a bill of exchange, the holder may elect to treat it as either, and from then on it is treated accordingly.

  1. AThe holder, who may elect to treat it as eitherCorrect
  2. BThe maker, who must declare its character at issue
  3. CThe court, which must treat it as a bill of exchange
  4. DThe drawee, who chooses on acceptance

Explanation

Section 17 provides that where an instrument may be construed either as a promissory note or a bill of exchange, the holder may at his election treat it as either, and it is thenceforward treated accordingly. The maker, drawee or court have no such election.

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