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

Under the Negotiable Instruments Act, 1881, where an instrument can be construed either as a promissory note or as a bill of exchange, who has the right to decide how it is to be treated?

The holder decides. When an instrument can be read as either a promissory note or a bill of exchange, Section 17 lets the holder elect to treat it as either, and it is thereafter treated accordingly. The maker, drawer, bank or court does not have this election.

  1. AThe holder, at his electionCorrect
  2. BThe drawer or maker, at his election
  3. CThe bank on which it is payable
  4. DThe court, in every case

Explanation

Section 17 provides that where an instrument may be construed either as a promissory note or a bill of exchange, the holder may at his election treat it as either. Once he elects, the instrument is treated accordingly from then on. The maker or drawer and the bank have no such power.

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