Negotiable Instruments Act, 1881
MCQ (61-80)
Q61. Under which section can the payee or holder demand compensation for delayed payment after dishonour?
a) Section 138
b) Section 80
c) Section 117
d) Section 145
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Answer: b) Section 80
Explanation: Section 80 provides for interest compensation in case of delayed payment following dishonour, calculated at the rate of 6% per annum unless otherwise specified in the contract.
Q62. What is the status of a cheque issued post-dated but dishonoured on presentation?
a) Not covered under Section 138
b) Covered under Section 138
c) Void instrument
d) Treated as a promissory note
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Answer: b) Covered under Section 138
Explanation: The Supreme Court in PDC Financial Services v. State of Maharashtra (2008) clarified that even a post-dated cheque falls under Section 138 if it is dishonoured on presentation.
Q63. Which section addresses the validity of a negotiable instrument written in different languages?
a) Section 13
b) Section 15
c) Section 22
d) Section 22A
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Answer: a) Section 13
Explanation: Section 13 defines negotiable instruments and recognizes their validity regardless of the language, provided they meet the requirements of the Act.
Q64. What is the maximum punishment under Section 138 for cheque dishonour?
a) 1 year imprisonment or fine
b) 2 years imprisonment or fine double the cheque amount
c) 5 years imprisonment or fine
d) No imprisonment, only fine
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Answer: b) 2 years imprisonment or fine double the cheque amount
Explanation: Section 138 prescribes imprisonment up to 2 years or a fine up to twice the cheque amount for the dishonour offence.
Q65. A cheque drawn in favour of a minor:
a) Is invalid
b) Is valid and enforceable
c) Cannot be endorsed
d) Requires court approval
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Answer: b) Is valid and enforceable
Explanation: Section 26 states that a cheque drawn in favour of a minor is valid, as minors can be beneficiaries but not liable as drawers or endorsers.
Q66. Under which section is the presumption of consideration for a cheque established?
a) Section 139
b) Section 142
c) Section 118
d) Section 134
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Answer: a) Section 139
Explanation: Section 139 creates a statutory presumption that every cheque is issued for a debt or liability unless proven otherwise by the drawer.
Q67. Which Supreme Court case clarified the liability of a director in cheque dishonour cases?
a) S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla
b) M.S. Narayana Menon v. State of Kerala
c) Pawan Kumar v. State of Punjab
d) Mohd. Shahabuddin v. State of Bihar
Show Answer
Answer: a) S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla
Explanation: In this case, the Supreme Court held that directors can be held vicariously liable under Section 141 if they are responsible for the company’s conduct.
Q68. A cheque dishonour complaint can be filed only in the court of:
a) The place of issuance
b) The place where the drawee bank is located
c) The place where the cheque was presented
d) Any of the above
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Answer: c) The place where the cheque was presented
Explanation: Section 142(2) specifies that jurisdiction lies in the court where the drawee bank, where the cheque was presented for payment, is located.
Q69. If a cheque is dishonoured due to a mismatch in signature, it:
a) Does not attract Section 138
b) Attracts Section 138
c) Is void ab initio
d) Requires re-issuance by the drawer
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Answer: b) Attracts Section 138
Explanation: In Laxmi Dyechem v. State of Gujarat (2012), the Supreme Court held that even a signature mismatch constitutes dishonour under Section 138.
Q70. Under which section is the liability of a bank for wrongful dishonour explained?
a) Section 31
b) Section 32
c) Section 34
d) Section 38
Show Answer
Answer: a) Section 31
Explanation: Section 31 makes the bank liable to the drawer for damages if a cheque is dishonoured wrongfully despite sufficient funds in the account.
Q71. Which section provides that no civil court has jurisdiction over certain cheque dishonour cases?
a) Section 140
b) Section 144
c) Section 147
d) Section 142(2)
Show Answer
Answer: d) Section 142(2)
Explanation: Section 142(2) clarifies that once criminal proceedings under Section 138 are initiated, civil courts have no jurisdiction on the same issue.
Q72. If the drawer stops payment after issuing the cheque, it:
a) Does not attract Section 138
b) Attracts Section 138 if there is debt/liability
c) Only attracts civil liability
d) Leads to cancellation of the cheque
Show Answer
Answer: b) Attracts Section 138 if there is debt/liability
Explanation: The Supreme Court in M.M.T.C. Ltd. v. Medchl Chemicals (2002) held that even a stop-payment instruction attracts liability under Section 138 if the debt or liability exists.
Q73. A cheque is payable to bearer when:
a) The payee’s name is endorsed
b) It is crossed
c) It does not contain any endorsement
d) It is made payable to bearer explicitly
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Answer: d) It is made payable to bearer explicitly
Explanation: Section 13 explains bearer cheques as payable to whoever holds them, without requiring endorsement.
Q74. Which section allows for compounding of offences under Section 138?
a) Section 147
b) Section 145
c) Section 143
d) Section 144
Show Answer
Answer: a) Section 147
Explanation: Section 147 permits compounding of offences under Section 138, encouraging amicable resolution between parties.
Q75. The term “negotiation” is defined under:
a) Section 14
b) Section 16
c) Section 18
d) Section 20
Show Answer
Answer: a) Section 14
Explanation: Section 14 defines “negotiation” as the transfer of an instrument to another person in a manner that entitles the transferee to sue in their own name.
Q76. A cheque presented after its expiry date is:
a) Valid
b) Void
c) Irregular
d) Stale
Show Answer
Answer: d) Stale
Explanation: As per banking practice and Section 138, a cheque becomes stale if not presented within three months from the date mentioned.
Q77. Under which section does a cheque dishonour case become time-barred if not filed within the prescribed period?
a) Section 138
b) Section 142
c) Section 141
d) Section 144
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Answer: b) Section 142
Explanation: Section 142 prescribes a limitation period of 30 days from the cause of action for filing a complaint under Section 138.
Q78. The liability of the drawer ceases if:
a) The cheque is dishonoured
b) The payee endorses the cheque to another party
c) The cheque is paid in due course
d) The payee delays presenting the cheque
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Answer: c) The cheque is paid in due course
Explanation: As per Section 31, the drawer’s liability ends when the cheque is paid in due course by the drawee bank.
Q79. The drawer of a cheque is discharged from liability when:
a) The cheque is dishonoured
b) The cheque is accepted for payment by the drawee
c) The cheque is presented beyond the validity period
d) The cheque is endorsed to another person
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Answer: c) The cheque is presented beyond the validity period
Explanation: A stale cheque (presented beyond three months) discharges the drawer from liability under Section 138.
Q80. Which section mandates that a cheque must be presented to the drawee bank within its validity period?
a) Section 64
b) Section 138
c) Section 84
d) Section 129
Show Answer
Answer: b) Section 138
Explanation: Section 138 mandates that a cheque must be presented to the drawee bank within its validity period, i.e., within three months from the date of issuance. Failure to do so absolves the drawer from liability.
