Skip to content

CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Anil Textiles, Ludhiana, holds a promissory note made by Bhanu and endorsed to it by the payee for value. In a suit on the note, Bhanu says the note was made without consideration. Under the presumptions in the Negotiable Instruments Act, 1881, what is the legal position?

The court presumes that the note was made for consideration. This presumption is rebuttable, so the burden lies on Bhanu, the maker, to prove that no consideration existed. The holder need not prove consideration first, and the presumption does not depend on the note being payable on demand.

  1. AAnil Textiles must first prove that consideration was given
  2. BThe court presumes the note was made for consideration, and Bhanu must prove otherwiseCorrect
  3. CThe court presumes no consideration until the holder proves it
  4. DThe presumption applies only if the note is payable on demand

Explanation

The Act presumes that every negotiable instrument was made or drawn for consideration. This is a rebuttable presumption, so the burden is on the maker, Bhanu, to prove that there was no consideration. The option placing the burden on the holder reverses this rule.

Did you get it right without looking?

One question tells you little. A timed set on The Negotiable Instruments Act, 1881 shows your real accuracy, how long you take and where you lose marks.

Practise The Negotiable Instruments Act, 1881Free diagnostic mock

More The Negotiable Instruments Act, 1881 questions