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CS Professional · Banking and Insurance - Laws and Practice · Payment and Collection of Cheques and Other Negotiable Instruments

Anita Exports draws a cheque payable to 'Sunil Rao or Pooja Nair'. The drawer's intention is that either payee may receive the money. Which statement correctly reflects Section 13(2) of the Negotiable Instruments Act, 1881?

The cheque is valid and payable to either Sunil or Pooja. Section 13(2) permits an instrument to be made payable jointly to two or more payees, or in the alternative to one of two or one or some of several payees.

  1. AAn instrument can name only one payee to be negotiable
  2. BAlternative payees are allowed, so the instrument may be payable to one of two payeesCorrect
  3. CTwo payees are allowed only if the instrument is payable jointly
  4. DThe cheque is payable to bearer because two names appear

Explanation

Section 13(2) allows a negotiable instrument to be made payable to two or more payees jointly, or in the alternative to one of two, or one or some of several payees. 'Sunil Rao or Pooja Nair' is an alternative payee form and is valid. Restricting to joint payees is wrong.

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