Page 85 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 6. In case of a bill or cheque, the drawee must be named or described with reasonable certainty.
7. The instrument must be such or in such a state that it can be transferred like cash by mere
delivery (as in the case of a bearer instrument) or by delivery and endorsement (as in the
case of an order instrument).

Did u know? The forms in which an Instrument must be Payable so as to Constitute a
Negotiable Instrument
(i) Pay A; (ii) Pay A or order; (iii) Pay to the order of A;
(iv) Pay A and B; (v) Pay A or B; (vi) Pay A or bearer;
(vii) Pay bearer.

4.1.2 Certain Important Concepts and Explanations of Certain Terms

Ambiguous Instrument (S.17)

An ambiguous instrument is one which may be construed either as a promissory note or as a bill
of exchange. Regarding such instruments, s.17 provides that the holder may, at this election treat
it as either and the instrument shall be thenceforward treated accordingly. Thus, a bill of exchange
drawn by a person upon himself may be construed as a promissory note.

Amount Stated Differently in Figures and Words (S.18)

If the amount undertaken or ordered to be paid is stated differently in figures and in words, the
amount stated in words shall be the amount undertaken or ordered to be paid.

Inchoate Stamped Instruments (S.20)

An inchoate instrument means an instrument that is incomplete in certain respects. Where one
person signs and delivers to another a paper stamped in accordance with the law relating to
negotiable instruments then in force in India and either wholly blank or having written thereon
an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof
to make or complete, as the case may be, upon it a negotiable instrument, for any amount
specified therein but not exceeding the amount covered by the stamp. The person so signing
shall be liable upon the instrument in the capacity in which he signed the same, to any holder in
due course for such amount. But a person other than a holder in due course cannot recover from
the person delivering the instrument anything in excess of the amount intended by him to be
paid thereunder.

Parties Standing in Immediate Relationship

The drawer of a bill stands in immediate relation with the acceptor. The maker of a note, bill or
cheque stands in immediate relation with the payee, and the endorser with his endorsee. Other
signors may by agreement stand in immediate relation with a holder.

Presumptions as to Negotiable Instruments

Sections 118-119 enlist the following presumptions as to negotiable instruments:

1. As to consideration: Every negotiable instrument is deemed to have been made, drawn,
accepted, endorsed, negotiated or transferred for consideration. In Marimuthu Kounder v.

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