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

Neelam draws a bill of exchange on Mohan for Rs 60,000 payable to Sanjay. Mohan signs across the bill the words 'accepted' and returns it to Sanjay. Under the Negotiable Instruments Act, 1881, what does Mohan become by this act?

Mohan becomes the acceptor. A drawee who signs his assent on a bill and delivers it becomes the acceptor and the principal debtor, bound to pay it at maturity. Neelam stays the drawer and Sanjay stays the payee.

  1. AThe drawer, who is primarily liable
  2. BThe acceptor, who is the principal debtor on the billCorrect
  3. CThe payee, who is entitled to receive payment
  4. DThe endorser, who is liable only if the drawer defaults

Explanation

The drawee becomes the acceptor when he signs his assent on the bill and delivers it. The acceptor is the principal debtor who must pay at maturity. The drawer is Neelam, and the payee is Sanjay. Mohan is not an endorser, as he is not transferring the bill.

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