Question

To restrain negotiability, addition of word/s ________ is/are necessary.
(i) Not negotiable
(ii) Account payee only
Select the correct answer from the options given below-

• A. (i) only
• B. (ii) only
• C. Either (i) or (ii)
• D. (i) but not (ii)

Answer 1

The correct option is C Either (i) or (ii)

It would be safer for the drawer to cross a cheque ‘not negotiable’ with the words ‘account payee’ added to it. The effect of the words ‘not negotiable’ on a crossed cheque is that the title of the transferee of such a cheque cannot be better than that of its transferor as per Section 130 of Negotiable Instrument Act. The object of crossing a cheque ‘not negotiable’ is to afford protection to the drawee or holder of the cheque against miscarriage or dishonesty in the course of transit by making it difficult to get the cheque so crossed cashed, until it reaches its destination.