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Which section of the Negotiable Instruments Act, 1881 discharges a bank on payment in due course of a…

Section 85A discharges the bank on payment in due course where the draft is drawn by one office of the bank on another, is payable to order on demand, and purports to be…

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Which section of the Negotiable Instruments Act, 1881 discharges a bank on payment in due course of a draft drawn by one of its offices on another, payable to order on demand and apparently endorsed by or for the payee?

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Answer and explanation

Correct answer C

Section 85A discharges the bank on payment in due course where the draft is drawn by one office of the bank on another, is payable to order on demand, and purports to be endorsed by or on behalf of the payee. Section 17 concerns ambiguous instruments, section 18 concerns amounts stated differently in words and figures, and section 7 defines parties such as the drawer, drawee and payee.

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Option A

Incorrect. Section 17 of the Negotiable Instruments Act, 1881 deals with ambiguous instruments (which may be treated as either a promissory note or a bill of exchange).

Option B

Incorrect. There is no Section 18(B) in the Negotiable Instruments Act, 1881; Section 18 deals with discrepancy between the amount stated in words and figures.

Option C

Section 85A governs discharge by payment in due course of the inter-office draft described in the question.

Option D

Incorrect. Section 7 of the Negotiable Instruments Act, 1881 defines 'Drawer', 'Drawee', 'Drawee in case of need', 'Acceptor', 'Acceptor for honour', and 'Payee'.

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