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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Ramesh Traders holds a promissory note stating 'Pay to Suresh Gupta or order'. Another note states 'Pay to Mahesh Rao only, not transferable'. Considering the explanation to Section 13, which statement is correct?

Only the first note is payable to order. An instrument payable to a named person is order paper unless it contains words prohibiting transfer or showing intention that it is not transferable, and the second note contains such words.

  1. ABoth notes are payable to order
  2. BOnly the first note is payable to orderCorrect
  3. COnly the second note is payable to order
  4. DNeither note is payable to order

Explanation

An instrument is payable to order if it is expressed so or is payable to a particular person and has no words prohibiting transfer. The first note is payable to order. The second contains words prohibiting transfer, so it is not payable to order.

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