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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

Under the Negotiable Instruments Act, 1881, a cheque is a bill of exchange drawn on a specified banker and, in terms of when it is payable, it must be:

A cheque must be drawn on a specified banker and must not be expressed to be payable otherwise than on demand. Section 6 uses this test, so a fixed-period or contingent payment term would stop the instrument from being a cheque. It may be payable to order or to bearer.

  1. APayable after a fixed period of 90 days from the date of issue
  2. BNot expressed to be payable otherwise than on demandCorrect
  3. CPayable only on the happening of a stated contingency
  4. DPayable only to a named person and never to bearer

Explanation

Section 6 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. A fixed-period or contingent payment term would take the instrument outside the definition. Cheques can be payable to bearer or order under Section 13, so the last option is wrong.

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