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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Under the Negotiable Instruments Act, 1881, a cheque is treated as payable to bearer when:

A cheque is payable to bearer if it is expressly made payable to bearer, or if its only or last indorsement is in blank. A cheque payable to a named person without transfer-prohibiting words is payable to order, not to bearer.

  1. Ait is drawn on a bank located in the same city as the payee
  2. Bit is expressed to be payable to a named person, with no words prohibiting transfer
  3. Cit is expressed to be payable to bearer, or its only or last indorsement is an indorsement in blankCorrect
  4. Dit carries a crossing with the words 'Account Payee'

Explanation

The Act says an instrument is payable to bearer if it is expressed so, or if its only or last indorsement is in blank. An instrument payable to a named person without words prohibiting transfer is payable to order, which is why the second option is wrong.

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