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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Which of the following is a correct statement under the Negotiable Instruments Act, 1881 about an instrument that is payable to bearer? I. It is payable to bearer if it is expressed to be so payable. II. It is payable to bearer if the only or last indorsement on it is an indorsement in blank. III. It can never be payable to bearer once any indorsement appears on it.

Only statements I and II are correct. Under Section 13, an instrument is payable to bearer if it is expressed to be so payable or if its only or last indorsement is in blank. An indorsement therefore does not always prevent it from being a bearer instrument.

  1. AI and III only
  2. BI and II onlyCorrect
  3. CII and III only
  4. DI, II and III

Explanation

Under Section 13, Explanation (ii), an instrument is payable to bearer if expressed so, or if its only or last indorsement is in blank. Statement III is wrong because a blank last indorsement makes it payable to bearer, so indorsement does not prevent bearer status.

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