Consider the following statements about a ‘Promissory Note’:
1. It is primarily governed by the provisions of the Negotiable Instruments Act.
2. A promissory note can be either negotiable or non-negotiable in nature.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question

Consider the following statements about a &lsquo;Promissory Note&rsquo;:
1. It is primarily governed by the provisions of the Negotiable Instruments Act.
2. A promissory note can be either negotiable or non-negotiable in nature.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

ONLiNE UPSC · Accepted Answer

Statement 1 is correct: A promissory note is governed by the Negotiable Instruments Act, 1881, under Section 4, which defines it as a written promise to pay a certain amount to a specific person or to the order of a person.

Statement 2 is correct: A promissory note can be negotiable or non-negotiable, depending on how it is written. If it satisfies the conditions for negotiability such as being payable to order or bearer (with exceptions noted below) it is treated as a negotiable instrument.

Negotiable Instruments Act

Promissory Note

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M Question 1	⏱ 0
Consider the following statements about a ‘Promissory Note’: 1. It is primarily governed by the provisions of the Negotiable Instruments Act. 2. A promissory note can be either negotiable or non-negotiable in nature. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2