Chapter II - Of Notes, Bills and Cheques
Section 13
Section 13: Negotiable instrument, order and bearer
Section 13 defines negotiable instruments through notes, bills and cheques payable to order or bearer and explains those payment forms.
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Need advice on Section 13?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.
Explanation (i)—A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.
Explanation (ii)—A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last indorsement is an indorsement in blank.
Explanation (iii)—Where a promissory note, bill of exchange or cheque, either originally or by indorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.
(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.
Key rule and applicability
A named-person instrument can be payable to order without an express order formula if its words do not prohibit transfer or indicate non-transferability. Bearer status can arise from express bearer wording or the only or last indorsement being in blank. The section also permits the stated joint or alternative payee arrangements.
Limits and related provisions
Read every restrictive word on the instrument and the relevant indorsement chain. Classification as order or bearer does not, by itself, establish lawful issuance, a clean title or that all separate banking and payment requirements have been satisfied.
Hypothetical business example
Hypothetical: a bill names a payee but omits the phrase or order. The business checks for transfer-prohibiting wording under Explanation (i), instead of assuming that the missing phrase alone settles negotiability.
Practical decision flow
Identify whether the document is a note, bill or cheque within the relevant definition.
Read payment directions, restrictions and the last relevant indorsement.
Record whether payees are joint or alternative and apply the appropriate transfer requirements.
Practical checklist
Do
- Identify whether the document is a note, bill or cheque within the relevant definition.
- Read payment directions, restrictions and the last relevant indorsement.
- Record whether payees are joint or alternative and apply the appropriate transfer requirements.
Avoid
- Read every restrictive word on the instrument and the relevant indorsement chain. Classification as order or bearer does not, by itself, establish lawful issuance, a clean title or that all separate banking and payment requirements have been satisfied.
Glossary
- Order instrument
- The payment form explained in the section’s order provisions.
- Bearer instrument
- The payment form arising from the stated bearer wording or blank-indorsement condition.
Frequently asked questions
Must every order instrument literally contain the words or order?
Explanation (i) also addresses instruments payable to a particular person without transfer-prohibiting words.
Can a blank indorsement affect bearer status?
Yes. Explanation (ii) refers to the only or last indorsement being in blank.
Can more than one payee be specified?
Subsection (2) permits the stated joint and alternative payee arrangements.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026