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Ambiguous Instruments

05-DEC-2014 17:55

    Ambiguous Instruments is defined in Section 17 of Negotiable instruments Act, 1881. Ambiguous Instrument is an instrument, which in form is such that it may either be treated by holder as a note or as a bill.

    As per section 5(2) of English Bills of Exchange Act, where in a bill, the drawee and the drawer are the same people or where the drawee is a fictitious person or a person inept to contract, the holder may treat the instrument, at his alternative, either as a promissory note or a bill of exchange.

    Bill drawn to or to the order of the drawee or by an agent on his principal or by one branch of a bank on another or by the direction of company or their cashier are also ambiguous instruments. A promissory note addressed to a 3rd person may be regarded as a bill by such person by accepting it, whereas a bill not addressed to anyone may be regarded as a note. However where the payee and a drawer are the same e.g., where A draws a bill that is payable to A's order, it is not an ambiguous instrument & cannot be treated as promissory note. Once an instrument has been regarded either as a bill or as note, it cannot be regarded in a different way afterwards.

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