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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Meera Textiles issues a cheque 'payable to Rakesh Jain' with no words prohibiting transfer or showing that it must not be transferred. How is the cheque treated under the Act?

The cheque is payable to order. An instrument expressed to be payable to a particular person, with no words prohibiting transfer or showing an intention that it shall not be transferable, is treated as payable to order under the Act.

  1. APayable to order, because it names a particular person and has no words prohibiting transferCorrect
  2. BPayable to bearer, because no indorsement appears on it
  3. CNot negotiable, because the words 'or order' are missing
  4. DPayable only to Rakesh Jain personally and not transferable

Explanation

Explanation (i) to Section 13 says an instrument expressed to be payable to a particular person, without words prohibiting transfer, is payable to order. A bearer instrument needs express bearer wording or a last indorsement in blank, which is absent here. Missing 'or order' does not matter, as Explanation (iii) also shows.

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