What is Ambiguous Instrument?

An Ambiguous instrument is essentially 0ne which can be a bill or a note for its holder. Such situations arise only in rare cases. for instance, sometimes the drawee could also be a fictitious person or he could also be incompetent to contract and such case falls under the Ambiguous instrument and bill or a note for its holder generated by the agent in such case is called Ambiguous document.

Under such circumstances, the owner of such instruments may treat them as exchange bonds or as bond notes. Section 17 of the Negotiable instruments Act, 1881 defines Ambiguous instruments dealing with such cases.

Ambiguous Instruments 

Section 17 of the Negotiable instruments Act, 1881 defines Ambiguous instruments. An ambiguous Instrument is an instrument, that in form is such it’s going to either be treated by the holder as a note or as a bill.

As per Act, wherein an exceedingly bill, the drawee and therefore the drawer are the identical people or where the drawee may be a fictitious person or someone inept to contract, the holder may treat the instrument, at his alternative, either as a note of hand or a bill of exchange.

An ambiguous instrument and bill or a note for its holder generated by an agent or by the order of an agent or a branch in such a case are called an Ambiguous document. A certificate of indebtedness addressed to a third person could also be thought to be a bill by such person by accepting it, whereas a bill not addressed to anyone could also be considered a note. However, where the payee and a drawer are identical e.g., where A draws a bill that’s payable to A’s order, it’s not an ambiguous instrument & can’t be treated as a debt instrument. Once an instrument has been regarded either as a bill or as a note, it can not be regarded in a very different way afterwards.

Meaning of Ambiguous Instruments 

Bills that are generated by an agent on the principal in any of the branches of the bank are ambiguous documents A person who accepted a hundi, purporting to him a debt instrument, was held liable as an acceptor although his name wasn’t indicated therein as a drawee. When a hundi is ambiguous i.e when it should be taken as a pronote or as a bill of exchange the holder is entitled to treat it as either. A hundi is typically a pronote and sometimes a bill of exchange. But once the election is created to treat the instrument as a bill of exchange the holder cannot subsequently elect to treat it as a pronote and contrariwise.

Illustration of Ambiguous Instruments 

An instrument which in form is specified it’s going to either be treated by the holder as a bill or as a note of hand, like when the drawer and the drawee are the identical people or where the drawee may be a fictitious person the holder can choose to treat the instrument either as a bill of exchange or a certificate of indebtedness. Once decided on the sort of instrument he’s bound by his decision.

Illustration

B himself negotiates when A draws a bill for B. ‘B’ could be a fictitious drawee. The holder

Could treat the bill as a promise note by ‘A’.

Inchoate or Incomplete Instrument

When one person signs and delivers to a different, It can be a either an incomplete or whole blank stamped instrument, he thereby gives a prima facie authority to the holder thereof to form or complete, because the case could also be, upon it an official document, for any amount specified therein, and not exceeding the amount, covered by the stamp. Such an instrument is termed an inchoate instrument. 

‘A’ owes ‘B’ Rs.5,000. ‘B’ gets a blank acceptance on a bill which is sufficiently stamped to hide any amount up to Rs.2,000. ‘B’ endorses the bill to ‘H’, a holder in Due course. ‘H’ who fills up the quantity as Rs.2,000 can recover the quantity.

Conclusion

When from the structure or the terms of an instrument it admits to being construed either as a pronote or as a bill of exchange it’s an ambiguous instrument and this section gives the holder of the ambiguous instrument the choice to treat it as either. Thus, wherein a bill, the drawer and therefore the drawee is the identical person or where the drawee could be a fictitious person or someone incapable of going into a contract or generally when the instrument is created in term or form so ambiguous that it’s doubtful whether it’s a bill or a note for its holder and the holder as an alternate, treat it as either.