CA Foundation · Business Laws · The Negotiable Instruments Act, 1881
Rohit Mehra, a trader in Surat, draws a bill of exchange on Sunil Traders, Jaipur, payable '30 days after sight'. Sunil Traders sees the bill and writes 'accepted' with his signature on 1 March but does not deliver it to Rohit; he keeps it on his desk. On 5 March, Sunil Traders tears up the bill, saying no acceptance was ever given. Which statement is correct under the Negotiable Instruments Act, 1881?
Sunil Traders is not bound as acceptor yet. Under the Negotiable Instruments Act, a drawee's acceptance is complete only when he signs the bill and also delivers it to the holder or notifies that he has signed. Mere signing and keeping the bill does not create liability.
- AAcceptance is complete on signing, so Sunil Traders is bound as acceptor from 1 March even without delivery
- BAcceptance is complete only when the drawee signs and delivers the instrument or gives notice of the signing, so Sunil Traders is not yet boundCorrect
- CAcceptance is complete only when the bill is presented a second time for payment on maturity
- DAcceptance is valid only if the drawee writes the amount in words along with his signature
Explanation
Under the Act, a drawee becomes an acceptor only when he signs the acceptance and delivers it to the holder, or gives notice that he has signed it. Here Sunil Traders signed but neither delivered the bill nor gave notice, so the acceptance is incomplete and he can still cancel it. The option saying signing alone suffices ignores the delivery requirement.
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