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

Karan, aged 16, draws a bill of exchange on Lalit and makes it payable to Mohan. Mohan endorses it to Nisha for value, and Nisha is a holder in due course. Lalit accepts it. Karan's liability on the bill is best described as:

Karan, as a minor drawer, is not liable on the bill, but the other parties remain bound. The Act lets a minor draw and negotiate an instrument so as to bind everyone except himself, so Lalit and Mohan stay liable by their own signatures.

  1. AKaran is liable to Mohan because he is the drawer
  2. BKaran is not liable on the bill, but Mohan, Lalit and Nisha are bound by their own signaturesCorrect
  3. CKaran is liable to Nisha because she is a holder in due course
  4. DThe bill is wholly void and no party is liable on it

Explanation

A minor may draw, endorse, deliver and negotiate an instrument so as to bind all parties except himself. Karan cannot be made liable, but the remaining parties like the acceptor Lalit and the endorser Mohan remain bound by their own signatures. Holder in due course status does not make a minor liable.

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