Negotiable Instruments Act, 1881
MCQ (121-140)
Q121. Under which section is a cheque defined?
a) Section 4
b) Section 5
c) Section 6
d) Section 8
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Answer: c) Section 6
Explanation: Section 6 of the Negotiable Instruments Act, 1881, defines a cheque as a bill of exchange drawn on a specified banker and payable on demand.
Q122. The dishonour of a cheque due to insufficient funds is addressed under which section?
a) Section 139
b) Section 138
c) Section 141
d) Section 142
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Answer: b) Section 138
Explanation: Section 138 deals with the dishonour of cheques due to insufficient funds or if it exceeds the arrangement made with the banker.
Q123. What is the period of limitation for filing a complaint under Section 138 after receiving a cheque bounce notice?
a) 15 days
b) 30 days
c) 45 days
d) 60 days
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Answer: b) 30 days
Explanation: As per Section 142(b), a complaint under Section 138 must be filed within 30 days from the date on which the cause of action arises.
Q124. Which section of the Act provides for the presumption in favour of the holder of a cheque?
a) Section 118
b) Section 119
c) Section 139
d) Section 141
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Answer: c) Section 139
Explanation: Section 139 creates a presumption that a cheque was issued for the discharge of a debt or liability unless the contrary is proved by the drawer.
Q125. Which section provides for the protection of bankers collecting cheques?
a) Section 80
b) Section 85
c) Section 89
d) Section 131
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Answer: d) Section 131
Explanation: Section 131 provides protection to bankers acting in good faith and without negligence when collecting cheques for their customers.
Q126. When does the liability of a guarantor under a cheque arise?
a) When the principal debtor defaults
b) After notice is issued
c) After the cheque bounces
d) When the drawer refuses to pay
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Answer: a) When the principal debtor defaults
Explanation: As per the Supreme Court in Anita Malhotra v. Apparel Export Promotion Council, the liability of a guarantor arises only after the principal debtor defaults.
Q127. Which section empowers the payee to recover compensation for dishonour?
a) Section 117
b) Section 138
c) Section 143A
d) Section 147
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Answer: c) Section 143A
Explanation: Section 143A allows the court to direct payment of interim compensation to the complainant in cases of cheque dishonour.
Q128. The term “holder in due course” is defined under which section?
a) Section 8
b) Section 9
c) Section 11
d) Section 13
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Answer: b) Section 9
Explanation: Section 9 defines a “holder in due course” as someone who has obtained the instrument for consideration and in good faith before its maturity.
Q129. A negotiable instrument can be transferred by:
a) Delivery
b) Indorsement and delivery
c) Assignment
d) Both a and b
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Answer: d) Both a and b
Explanation: As per the Act, a bearer instrument is transferred by delivery, and an order instrument is transferred by indorsement and delivery.
Q130. Which section deals with the notice of dishonour?
a) Section 91
b) Section 92
c) Section 93
d) Section 94
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Answer: d) Section 94
Explanation: Section 94 specifies the requirements and methods of giving notice of dishonour to all parties liable on the instrument.
Q131. A cheque is valid for:
a) 2 months
b) 3 months
c) 6 months
d) 12 months
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Answer: b) 3 months
Explanation: As per banking regulations, a cheque is valid for 3 months from the date of issuance unless otherwise stated.
Q132. Which Supreme Court case emphasized the need for strict compliance with notice requirements under Section 138?
a) Kusum Ingots v. Pennar Peterson Securities
b) Dalmia Cement v. Galaxy Traders
c) MSR Leathers v. Palaniappan
d) Central Bank of India v. Saxena
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Answer: a) Kusum Ingots v. Pennar Peterson Securities
Explanation: The Supreme Court in this case highlighted that the notice issued must strictly comply with the statutory requirements of Section 138.
Q133. Which section governs the liability of the drawer in case of dishonour?
a) Section 30
b) Section 32
c) Section 35
d) Section 38
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Answer: a) Section 30
Explanation: Section 30 states that the drawer of a cheque is liable to compensate the holder in case of dishonour, provided due notice is given.
Q134. The negotiability of an instrument ceases upon:
a) Material alteration
b) Payment in due course
c) Forgery
d) Both a and c
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Answer: d) Both a and c
Explanation: Material alteration or forgery destroys the negotiability of an instrument, making it unenforceable under the Act.
Q135. Under which section can a minor act as a party to a negotiable instrument?
a) Section 22
b) Section 26
c) Section 28
d) Section 30
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Answer: b) Section 26
Explanation: Section 26 permits a minor to act as a party to a negotiable instrument, but they are not personally liable.
Q136. A cheque drawn in favour of a specific person is called:
a) Bearer cheque
b) Order cheque
c) Crossed cheque
d) Promissory cheque
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Answer: b) Order cheque
Explanation: An order cheque is payable to the person named in the cheque or to their order.
Q137. The liability of an indorser ceases when:
a) The instrument is dishonoured
b) It is paid in due course
c) The holder delays presentment
d) Both b and c
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Answer: d) Both b and c
Explanation: The indorser’s liability ceases if the instrument is paid in due course or the holder delays presentment without a valid reason.
Q138. A blank indorsement is:
a) Indorsement without restricting further negotiation
b) Indorsement specifying the indorsee
c) Indorsement with payment terms
d) Indorsement that cancels liability
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Answer: a) Indorsement without restricting further negotiation
Explanation: A blank indorsement is made by merely signing the back of the instrument, allowing further negotiation by delivery.
Q139. The crossing of a cheque can be of the following types:
a) General and Special
b) Blank and Restrictive
c) Promissory and Conditional
d) None of the above
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Answer: a) General and Special
Explanation: Cheque crossing can be general, indicating payment through a bank, or special, specifying a particular bank.
Q140. Which section governs the presentment of a cheque for payment?
a) Section 61
b) Section 63
c) Section 64
d) Section 65
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Answer: c) Section 64
Explanation: Section 64 prescribes that presentment for payment must be made during the usual business hours of the banker.
