Negotiable Instruments Act, 1881
MCQ (101-120)
Q101. Which section provides for the discharge of the maker, drawer, and acceptor from liability on a negotiable instrument?
a) Section 35
b) Section 82
c) Section 45
d) Section 50
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Answer: b) Section 82
Explanation: Section 82 states that the maker, acceptor, or indorser of a negotiable instrument is discharged from liability when the conditions for discharge, as prescribed, are fulfilled.
Q102. Under which section is an instrument considered a promissory note only if it contains an unconditional undertaking to pay?
a) Section 4
b) Section 6
c) Section 8
d) Section 7
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Answer: a) Section 4
Explanation: Section 4 defines a promissory note and emphasizes that the instrument must include an unconditional undertaking to pay a certain sum of money.
Q103. What is the maximum penalty under Section 138 for a cheque bounce?
a) Fine equal to the cheque amount
b) Twice the cheque amount or 2 years imprisonment
c) Fine of ₹50,000 or 1 year imprisonment
d) No prescribed maximum
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Answer: b) Twice the cheque amount or 2 years imprisonment
Explanation: Section 138 prescribes a fine up to twice the cheque amount, imprisonment up to 2 years, or both, as a penalty for cheque bounce.
Q104. Which section prescribes the duties of a banker in case of a negotiable instrument?
a) Section 31
b) Section 33
c) Section 35
d) Section 37
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Answer: a) Section 31
Explanation: Section 31 lays down the duty of the drawee banker to honour a cheque properly drawn if sufficient funds are available.
Q105. The legal presumption regarding the negotiability of an instrument is established under:
a) Section 9
b) Section 13
c) Section 20
d) Section 18
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Answer: b) Section 13
Explanation: Section 13 defines a negotiable instrument and creates a presumption in favour of its negotiability unless the contrary is proved.
Q106. Under Section 87, material alteration of a negotiable instrument:
a) Makes it void
b) Requires maker’s consent
c) Is allowed in case of correction
d) Is permitted without consent
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Answer: a) Makes it void
Explanation: Section 87 states that any material alteration to a negotiable instrument without the consent of all parties renders it void.
Q107. Section 138 applies to which type of cheque?
a) Post-dated cheque
b) Self-drawn cheque
c) Bearer cheque
d) All of the above
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Answer: a) Post-dated cheque
Explanation: A post-dated cheque, when dishonoured, falls under Section 138 as it is payable on demand after the date mentioned on the cheque.
Q108. Which section defines “Payment in Due Course”?
a) Section 10
b) Section 8
c) Section 15
d) Section 12
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Answer: a) Section 10
Explanation: Section 10 defines “Payment in Due Course” as payment made in good faith and without negligence, according to the tenor of the instrument.
Q109. Which Supreme Court case clarified that Section 138 applies even if the cheque is dishonoured due to “Account Closed”?
a) Rangappa v. Sri Mohan
b) Modi Cements Ltd. v. Kuchil Kumar Nandi
c) Kusum Ingots v. Pennar Peterson Securities
d) Laxmi Dyechem v. State of Gujarat
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Answer: b) Modi Cements Ltd. v. Kuchil Kumar Nandi
Explanation: In Modi Cements Ltd. v. Kuchil Kumar Nandi, the Supreme Court held that Section 138 is applicable even if the account is closed by the drawer, as this indicates insufficient funds.
Q110. Which section prescribes the liability of an acceptor of a bill of exchange?
a) Section 31
b) Section 32
c) Section 33
d) Section 34
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Answer: b) Section 32
Explanation: Section 32 states that the acceptor of a bill of exchange is liable to pay the amount according to the terms of acceptance.
Q111. A cheque with a forged drawer’s signature is:
a) Valid and enforceable
b) Void and unenforceable
c) Subject to holder’s discretion
d) Valid with court permission
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Answer: b) Void and unenforceable
Explanation: A cheque with a forged drawer’s signature is void ab initio as it lacks the drawer’s authorization, making it unenforceable under law.
Q112. Which section specifies penalties for issuing a cheque without sufficient funds?
a) Section 136
b) Section 138
c) Section 140
d) Section 142
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Answer: b) Section 138
Explanation: Section 138 explicitly deals with penalties for cheque dishonour due to insufficiency of funds or exceeding the arrangement.
Q113. A holder can sue on a lost cheque if they:
a) Find the cheque
b) Provide sufficient proof of entitlement
c) Get bank permission
d) None of the above
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Answer: b) Provide sufficient proof of entitlement
Explanation: As per the Act, a holder of a lost cheque can sue if they prove their entitlement and present evidence of the cheque’s content.
Q114. Under Section 139, the burden of proving the cheque was not issued for debt lies on:
a) The payee
b) The drawer
c) The bank
d) Both parties equally
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Answer: b) The drawer
Explanation: Section 139 creates a presumption that the cheque was issued for debt or liability, shifting the burden of proof to the drawer to rebut this presumption.
Q115. The term “not negotiable” restricts:
a) Further endorsement
b) Payment to bearer
c) Transfer with defect in title
d) Conversion to cash
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Answer: c) Transfer with defect in title
Explanation: “Not negotiable” restricts the transferee from acquiring better title than the transferor, protecting against defects in the instrument’s title.
Q116. Which section deals with the liability of an agent signing a negotiable instrument?
a) Section 25
b) Section 28
c) Section 30
d) Section 32
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Answer: b) Section 28
Explanation: Section 28 specifies that an agent signing a negotiable instrument without indicating that they act as an agent will be personally liable.
Q117. In a cheque bounce case, the appellate court’s power to review sentencing is under:
a) Section 143A
b) Section 147
c) Section 148
d) Section 150
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Answer: c) Section 148
Explanation: Section 148 empowers the appellate court to direct the drawer to deposit a percentage of the cheque amount pending appeal in a cheque bounce case.
Q118. Which section of the Act provides for summary trials for cheque bounce cases?
a) Section 141
b) Section 143
c) Section 145
d) Section 148
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Answer: b) Section 143
Explanation: Section 143 allows for summary trials to ensure the expeditious disposal of cheque bounce cases under Section 138.
Q119. The limitation period to present a cheque for payment is:
a) 2 months
b) 3 months
c) 6 months
d) No limitation
Show Answer
Answer: b) 3 months
Explanation: Section 138 mandates that a cheque must be presented within three months from the date it is drawn for it to be valid for payment.
Q120. The presumption of consideration under Section 118 applies to:
a) All negotiable instruments
b) Only promissory notes
c) Only cheques
d) Only bills of exchange
Show Answer
Answer: a) All negotiable instruments
Explanation: Section 118 creates a presumption that every negotiable instrument was made or drawn for consideration unless the contrary is proved.
