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

Ramesh holds a bearer cheque for Rs 20,000 drawn by Sheela. He hands it over to Tanmay in payment of a debt, without signing or writing anything on it. Under the Negotiable Instruments Act, 1881, what is the position?

A bearer cheque is negotiated by mere delivery. Since the cheque is payable to bearer, Ramesh needs no endorsement, and Tanmay becomes its holder as soon as it is delivered to him in payment of the debt.

  1. ANegotiation is complete by mere delivery, and Tanmay becomes the holderCorrect
  2. BNegotiation is not complete until Ramesh endorses it
  3. CNegotiation is not complete until Sheela confirms the transfer in writing
  4. DTanmay gets only an assignment, subject to all defects in Ramesh's title

Explanation

An instrument payable to bearer is negotiated by delivery alone. No endorsement is needed, so Tanmay becomes the holder on delivery. The option requiring Ramesh's endorsement applies to order instruments, not bearer ones.

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