CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881
Under the Negotiable Instruments Act, 1881, how is a promissory note, bill of exchange or cheque that is payable to bearer negotiated?
A negotiable instrument payable to bearer is negotiated simply by delivering it to the transferee. No indorsement is required, because the right to payment passes with possession of the instrument, as stated in Section 47 of the Act.
- ABy delivery of the instrumentCorrect
- BBy indorsement alone, without delivery
- CBy indorsement and registration with a bank
- DBy a written notice to the drawee
Explanation
Section 47 provides that an instrument payable to bearer is negotiable by delivery. Indorsement is required for instruments payable to order, not for bearer instruments. Registration or notice to the drawee is not required.
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