Negotiable Instruments Act MCQs for Law Aspirants: Solved High-Quality MCQs for Judiciary Prelims

A ready compilation of 100 Negotiable Instrument Act MCQs for ease and regularity of practice to enhance students' general understanding of the subject and boost their preparation by familiarising them with questions similar to the exam pattern of popular law and judiciary exams.

Q.1) Which section of the Negotiable Instruments Act, 1881 defines Negotiable Instrument?

[A] Section 4

[B] Section 7

[C] Section 13

[D] Section 6

Q.2) Which of these is not a Negotiable Instrument according to Negotiable Instruments Act, 1881?

[A] Cheque

[B] Bill of Exchange

[C] Currency Note

[D] Promissory Note

Q.3) Section 4 of the Negotiable Instruments Act deals with:

[A] Cheque

[B] Promissory Note

[C] Bill of Exchange

[D] Hundis

Q.4) Parties to a bill of exchange are:

[A] Drawer

[B] Drawee

[C] Payee

[D] All of the above

Q.5) A Promissory Note is:

[A] Conditional order to pay

[B] Unconditional order to pay

[C] Conditional promise to pay

[D] Unconditional promise to pay

Q.6) Which section of the Negotiable Instruments Act deals with cheques?

[A] Section 6

[B] Section 5

[C] Section 118

[D] Section 7

Q.7) In case of a Promissory Note, there are:

[A] 3 Parties

[B] 2 Parties

[C] 4 Parties

[D] 5 Parties

Q.8) A Cheque:

[A] Is a type of bill of exchange

[B] Includes electronic image of a truncated cheque

[C] Is Payable on demand

[D] All of the above

Q.9) A Bill of Exchange is:

[A] Conditional order to pay

[B] Unconditional order to pay

[C] Conditional promise to pay

[D] Unconditional promise to pay

Q.10) In which section bill of exchange is dealt with in the Negotiable Instruments Act?

[A] Section 4

[B] Section 5

[C] Section 8

[D] Section 9

Q.11) Drawee is defined in which section of the Negotiable Instruments Act?

[A] Section 4

[B] Section 7

[C] Section 8

[D] Section 9

Q.12) Which section of the Negotiable Instruments Act deals with Dishonour by non-payment?

[A] 90

[B] 91

[C] 92

[D] 138

Q.13) Which section of the Negotiable Instruments Act deals with cheques crossed generally?

[A] 121

[B] 123

[C] 125

[D] 127

Q.14) Which section of the Negotiable Instruments Act deals with Presumptions as to Negotiable Instruments?

[A] 111

[B] 118

[C] 119

[D] 121

Q.15) Which section of the Negotiable Instruments Act deals with the Dishonouring of Cheques?

[A] 138

[B] 131

[C] 121

[D] 111

Q.16) What type of negotiable instrument is a currency note?

[A] Conditional order to pay

[B] Unconditional order to pay

[C] Conditional promise to pay

[D] Not a Promissory Note

Q.17) A bill of exchange drawn on a specified banker, and not expressed to be payable otherwise than on demand is called ____.

[A] Promissory Note

[B] Cheque

[C] Truncated Cheque

[D] Hundi

Q.18) How many types of cheques are there as per the Negotiable Instruments Act?

[A] 3

[B] 4

[C] 5

[D] 6

Q.19)The Negotiable Instruments (Amendment) Bill, 2017 inserted a provision allowing a court trying an offence related to cheque bouncing, to direct the drawer (person who writes the cheque) to pay interim compensation to the complainant. The interim compensation will not exceed ___% of the cheque amount.

[A] 15

[B] 20

[C] 25

[D] 30

Q.20) If the holder of a bill of exchange allows the drawee more than ___ hours, exclusive of public holidays, to consider whether he will accept the same, all previous parties not consenting to such allowance are thereby discharged from liability to such holder.

[A] 24

[B] 12

[C] 36

[D] 48

Q.21) If a Minor draws, indorses, delivers and negotiates Negotiable Instruments, it binds __

[A] All the parties except minor

[B] All the parties including minor

[C] Minor Only

[D] Minor and Drawer only

Q.22) As per the Negotiable Instruments Act 1882, the term 'negotiable' relates to which of the following?

[A] Money

[B] Transferable

[C] Bargainable

[D] None of these

Q.23) Which of the following is associated with the term Negotiable Instruments?

[A] A written document that transfers the value in it from one person to another

[B] A written document entitled on an individual by delivery or endorsement

[C] A written document, entitled a person to receive money

[D] All of the above

Q.24) Which of the following are defined as Negotiable Instruments by Custom (Trade Practices)?

[A] Banker's Note

[B] Share certificate

[C] Share warrants

[D] All of the above

Q.25) In which of the following bills, the payment is to be made immediately using Bill of Exchange?

[A] Term Bill

[B] Faster Bill

[C] Sight Bill

[D] Ready Bill

Q.26) Which of the following are included/excluded in determining reasonable time for payment of a negotiable instrument?

[A] Public holidays are included

[B] Public holidays are excluded

[C] Only the holidays observed by the bank are excluded

[D] None of these

Q.27) Which of the following best defines 'At sight' under section 21 of the Negotiable Instrument Act, 1881?

[A] On Presentation

[B] On Demand

[C] On Coming into vision

[D] None of these

Q.28) Which of the following means 'indorsement in blank' of an instrument under section 16 of the Negotiable Instrument Act?

[A] where the indorser does not write anything on the instrument

[B] where the indorser only writes his name on the instrument

[C] where the indorser writes the name of the person who is directed to pay

[D] None of these

Q.29) What happens if in an instrument the amount undertaken or ordered to be paid is stated differently in figures and words?

[A] Amount stated in words will be taken

[B] Amount stated in figures will be taken

[C] Instrument becomes void due to uncertainty

[D] None of these

Q.30) The term "a cheque in the electronic form" is defined in the Negotiable Instruments Act, 1881 - under which of the following sections?

[A] Section 6

[B] Section 6A

[C] Section 6(I)

[D] None of these

Q.31) When did the Negotiable Instruments Act, 1881 come into force?

[A] 9 December 1881

[B] 19 December 1881

[C] 1st March 1882

[D] None of these

Q.32) As per section 147 of the Negotiable Instruments Act, 1881, every offence punishable under the Act is?

[A] Compoundable

[B] Non-Compoundable

[C] Cognizable

[D] None of these

Q.33) Which of the following relates to the notice of protest under section 102 of the Negotiable Instruments Act, 1881?

[A] May be given by the notary public who makes the protest

[B] must always be given by the notary public who makes the protest

[C] must be given by the holder

[D] None of these

Q.34) What is e-payment?

[A] Electronic payment for buying and selling through the internet

[B] Payment of Online Software

[C] Payment of Online services

[D] None of these

Q.35) Every instrument is presumed to be made, drawn, endorsed or negotiated for ________.

[A] Choice

[B] Consideration

[C] Debt

[D] None of these

Q.36) Drawer and payee in a Bill of exchange may be the same parties

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.37) A Cheque is a special kind of Bill of Exchange.

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.38) Cheque is always payable on demand

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.39) Validity of the Cheque is 6 months

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.40) Cheque doesn’t require any stamping

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.41) No one other than RBI and the Central Government can make a Promissory note payable to the bearer.

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.42) A Bill of exchange and Promissory Note is required to be made on stamp paper.

[A] True

[B] False

[C] Partly True

[D] Partly False

Q.43) The dishonour of a cheque is a punishable offence under section _____ of the Negotiable Instruments Act 1881.

[A] 137

[B] 141

[C] 138

[D] 190

Q.44) The dishonour of a Cheque is punishable for a maximum term of up to_____ years

[A] 1

[B] 5

[C] 2

[D] 4

Q.45) The dishonour of a cheque is punishable if it is dishonoured due to__________.

[A] Insufficient Balance in drawers account

[B] Account closed by drawer

[C] Stop payment by drawer

[D] All of the above

Q.46) The case for dishonour of cheque can be filled in the court of _________.

[A] Judicial Magistrate First Class

[B] Metropolitan Magistrate

[C] Both A & B

[D] Neither A nor B

Q.47) The Negotiation of the instrument to any person receiving it by paying consideration, before maturity & in good faith is termed as_______.

[A] Holder

[B] Holder in due course

[C] Both A & B

[D] Neither A nor B

Q.48) Which section defines Holder in due course?

[A] Section 7

[B] Section 9

[C] Section 11

[D] Section 13

Q.49) The notice of dishonour of the cheque is to be given within ______ of its knowledge to the receiver.

[A] 10 days

[B] 30 days

[C] 40 days

[D] 15 days

Q.50) The criminal complaint for the dishonour of cheque is to be filled in court within______ofthe Drawer failing to pay

[A] 30 days

[B] 45 days

[C] 90 days

[D] None of these

Q.51) By the notice for dishonour of cheque the Drawer is to be granted _____ time for payment.

[A] 10 days

[B] 30 days

[C] 7 days

[D] 15 days

Q.52) The undertaking contained in a promissory note, to pay a certain sum of money is

[A] Conditional

[B] Unconditional

[C] May be either depending on circumstances

[D] None of these

Q.53) To whom of the following, payment of the amount due on a promissory note, bill of exchange or cheque must be made to discharge the maker or acceptor

[A] holder of the instrument

[B] endorser of the instrument

[C] Both A & B

[D] None of these

Q.54) The term 'negotiation' in section 14 of the Negotiable Instruments Act, 1881 refers to

[A] The transfer of a bill of exchange, promissory note or cheque to any person, so as to constitute the person the holder thereof

[B] The payment by a bank on a negotiable instrument after due verification of the instrument

[C] The bargaining between the parties to a negotiable instrument

[D] All of the above

Q.55) If an instrument may be construed either as a promissory note or bill of exchange, it is

[A] Valid Instrument

[B] Ambiguous Instrument

[C] Returnable Instrument

[D] None of these

Q.56) Under section 16 of the Negotiable Instrument Act, 'endorsement in blank' of an instrument means

[A] Where the endorser does not write anything on the instrument

[B] Where the endorser only signs without writing any name on the instrument

[C] Where the endorser writes the name of the person who is directed to pay

[D] None of these

Q.57) A promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment, is at maturity

[A] On the 30th day after the day on which it is expressed to be payable

[B] On the 3rd day after the day on which it is expressed to be payable

[C] On the 5th day after the day on which it is expressed to be payable

[D] On the 4th day after the day on which it is expressed to be payable

Q.58) In a promissory note, the amount of money payable

[A] Must be certain

[B] May be certain or ambiguous

[C] Is usually uncertain

[D] None of these

Q.59) An authority to draw bills of exchange

[A] Itself implies an authority to endorse

[B] Does not imply an authority to endorse

[C] Sometimes implies an authority to endorse

[D] None of these

Q.60) The term 'legal representative' in section 29 of the Negotiable Instruments Act, 1881

[A] Includes legal heirs

[B] Includes Authorised agents

[C] Includes executors

[D] All of the above

Q.61) Can a drawer escape from his liability?

[A] No, a drawer can never escape from its liability

[B] Yes, a drawer can limit or exclude his liability by inserting in the bill an express stipulation to that effect

[C] In certain cases although he can escape from his liability but always he cannot so escape

[D] None of these

Q.62) The Drawer shall be held ______ under section 138 if he has stopped payment after issuing the cheque.

[A] Not Liable

[B] liable

[C] Either A or B

[D] Both A and B

Q.63) A bill is drawn payable to 'A' or order. 'A' indorses it to 'B', the endorsement not containing the words '"or order" or any equivalent words. Can 'B' negotiate the instrument?

Q.64) Where an endorser of an instrument excludes his liability and afterwards becomes the holder of the instrument, who is liable to him?

[A] No one is liable to him

[B] All intermediate indorsers are liable to him

[C] Only the immediate prior indorser is liable to him

[D] None of these

Q.65) Can the legal representative of a deceased person negotiate a promissory note, bill of exchange or cheque payable to order by delivery only which was endorsed by the deceased but not delivered by him?

[A] Yes, the legal representative can negotiate the instrument by delivery only

[B] No, the legal representative cannot negotiate an instrument by delivery only. He must re-indorse and deliver the instrument for negotiating it

[C] No, as endorsement was not completed by delivery.

[D] None of these

Q.66) Can the holder of a negotiable instrument endorsed in blank convert the endorsement into an endorsement in full?

[A] No

[B] Yes

[C] Maybe

[D] Insufficient information

Q.67) The indorsement of a negotiable instrument is followed by delivery

[A] No

[B] Yes

[C] Maybe

[D] Insufficient information

Q.68) When presentment for payment is to be made under section 65 of the Act?

[A] Presentment for payment can be made at any reasonable time.

[B] Presentment for payment must be made during the usual hours of business and, if at a banker's, within banking hours.

[C] There is no such stipulation on the time for presentment.

[D] None of these

Q.69) Under section 118 of the Negotiable Instruments Act, 1881, it is presumed, until the contrary is proved, that every transfer of a negotiable instrument was made

[A] After its maturity

[B] Before its Maturity

[C] At its maturity

[D] None of these

Q.70) Which of the following is not a justified ground for dishonouring of cheque by a banker?

[A] The cheque is post-dated and presented before the ostensible date

[B] The banker had sufficient funds, but the funds are not properly applicable towards the payment of the cheque

[C] If the cheque is altered in parts

[D] If the cheque is duly presented.

Q.71) The Court shall not take cognizance of any offence punishable under section 138 of the Negotiable Instruments Act unless a complaint is made within

[A] 1 month

[B] 15 days

[C] 2 months

[D] 3 months

Q.72) Under section 97, of the Negotiable Instruments Act when the party to whom notice of dishonour is dispatched is dead, but the party despatching the notice is ignorant of his death, the notice is

Q.73) As per section 147 of the Negotiable Instruments Act, 1881, every offence punishable under the Act are

[A] Compoundable

[B] Non-Compoundable

[C] Cognizable

[D] Both B and C

Q.74) Dishonour by non-acceptance takes place

[A] drawee is not found

[B] drawee is incompetent

[C] Drawee is insolvent

[D] All of the above

Q.75) The presumption as to the date of a negotiable instrument under section 118 is that, every negotiable instrument bearing a date was made or drawn

[A] Prior to such date

[B] On such date

[C] Within 3 days after such date

[D] None of these

Q.76) When a cheque has become invalid because of the expiry of the stipulated period, can it be re-validated by the drawer by alteration of dates?

[A] Yes, the drawer can re-validate the cheque by alteration of dates

[B] No, the drawer cannot be re-validated by so alteration of dates

[C] Although the drawer cannot revalidate the cheque, the drawee can at his discretion revalidated it

[D] None of these

Q.77) Cognizance of an offence under section 138 can be taken by a court only on a/an

[A] Police report

[B] Complaint

[C] Application to the district judge

[D] None of these

Q.78) Who should make a complaint to a court to take cognizance of an offence under section 138?

[A] The holder in due course of the cheque

[B] Any person who is entitled to payment

[C] The Payee

[D] All of the above

Q.79) A complaint against an offence under section 138 of the Negotiable Instrument Act, 1881

[A] Must be in writing (section 142) -

[B] May be oral or in writing (section 142)

[C] Must be in writing containing a declaration by the drawee that he consents to such filing of the complaint (section 142)

[D] None of these

Q.80) The liability under section 138 of the Negotiable Instruments Act, 1881, is

[A] Civil Liability

[B] Criminal Liability

[C] Both A & B

[D] Neither A nor B

Q.81) A post-dated cheque remains only a bill of exchange till the date on its face and only from that date it becomes a cheque being payable on demand. The statement is-

Q.82) Which section of the Negotiable Instruments Act provides that the offences under the Act are compoundable?

[A] Section 137

[B] Section 141

[C] Section 147

[D] Section 149

Q.83) M drew a cheque amounting to Rs. 2 lakh payable to N and subsequently delivered to him. After receipt of the cheque N indorsed the same to C but kept it in his safe locker. After some time, N died, and P found the cheque in N’s safe locker. State the nature of the Instrument as amounting to indorsement under the NI Act,1881.

Q.84) While drawing a bill of exchange, a person whose name is given in addition to the drawee who can be resorted in case of need, is called

[A] Acceptor

[B] Acceptor for honour

[C] Drawee in case of need

[D] Drawer

Q.85) Days of grace provided to the Instruments at maturity is (as per the provisions of the Negotiable Instruments Act, 1881)

[A] 1

[B] 2

[C] 3

[D] 5

Q.86) For Section 141 Negotiable Instruments Act a company does not mean or include

[A] A body corporate

[B] A firm

[C] A proprietary concern

[D] An association of individuals

Q.87) A draws a bill on B. B accepts the bill without any consideration. The bill is transferred to C without consideration. C transferred it to D for value. Decide as per the provisions of the Negotiable Instruments Act, 1881

[A] D can sue only A

[B] D can sue A or B only

[C] D can sue any of the parties A, B or C

[D] D cannot sue any of the parties A, B or C

Q.88) As per the Negotiable Instruments Act, 1881, when the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the.

[A] said public holiday

[B] 5 days succeeding public holiday

[C] next succeeding business day

[D] next preceding business day

Q.89) A draws a cheque in favour of M, a minor. M endorses the same in favour of X. The cheque is dishonoured by the bank on grounds of inadequate funds. As per the provisions of the Negotiable Instruments Act, 1881

[A] M is liable to X

[B] X can proceed against A

[C] No one is liable in this case

[D] M can proceed against A

Q.90) ______ means ‘ a written document by which some legal rights are created in favour of some person’

[A] Instrument

[B] Negotiable

[C] Negotiable Instrument

[D] None of these

Q.91) A negotiable instrument is freely transferable, by delivery if it is a/an ______________ instrument.

[A] Order

[B] Bearer

[C] Holder

[D] None of these

Q.92) A negotiable instrument is freely transferable, by endorsement if it is a/an ____________ instrument.

[A] Order

[B] Bearer

[C] Holder

[D] None of these

Q.93) _________ an instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument

[A] Promissory Note

[B] Bill of Exchange

[C] Cheque

[D] None of these

Q.94) __________________ cannot be a bearer instrument

[A] Promissory Note

[B] Bill of Exchange

[C] Cheque

[D] None of these

Q.95) Drawer is both debtor to one and creditor to another in case of ________________

[A] Promissory Note

[B] Bill of Exchange

[C] Cheque

[D] None of these

Q.96) Liability of maker is __________ in case of a bill of exchange

[A] Primary

[B] Secondary

[C] Unconditional

[D] Unlimited

Q.97) A Promissory Note or Bill of Exchange can be made payable

[A] On Demand

[B] On a specific date

[C] After a specified date

[D] All of the above

Q.98) To calculate the maturity date of a negotiable instrument the drawing date to be ___for counting

[A] Included

[B] Excluded

[C] Option of the person

[D] None of these

Q.99) If the instrument is not ‘on demand’ ___________ days of grace is granted.

[A] 7

[B] 5

[C] 3

[D] 4

Q.100) When the cheque is crossed with Two parallel lines or with the word ‘& Co.’ etc. this crossing is known as

[A] General Crossing

[B] Special Crossing

[C] Restrictive Crossing

[D] None of these

Answers

Q.1) C

Q.2) C

Q.3) B

Q.4) D

Q.5) D

Q.6) A

Q.7) B

Q.8) D

Q.9) B

Q.10) B

Q.11) B

Q.12) C

Q.13) B

Q.14) B

Q.15) A

Q.16) D

Q.17) B

Q.18) B

Q.19) B

Q.20) D

Q.21) A

Q.22) B

Q.23) D

Q.24) D

Q.25) C

Q.26) B

Q.27) A

Q.28) B

Q.29) A

Q.30) A

Q.31) C

Q.32) A

Q.33) A

Q.34) A

Q.35) B

Q.36) A

Q.37) A

Q.38) A

Q.39) B

Q.40) A

Q.41) A

Q.42) A

Q.43) C

Q.44) C

Q.45) D

Q.46) C

Q.47) B

Q.48) B

Q.49) B

Q.50) A

Q.51) D

Q.52) B

Q.53) A

Q.54) A

Q.55) B

Q.56) B

Q.57) B

Q.58) A

Q.59) B

Q.60) D

Q.61) B

Q.62) B

Q.63) A

Q.64) B

Q.65) C

Q.66) B

Q.67) B

Q.68) B

Q.69) B

Q.70) D

Q.71) A

Q.72) A

Q.73) A

Q.74) D

Q.75) B

Q.76) B

Q.77) B

Q.78) D

Q.79) A

Q.80) B

Q.81) B

Q.82) C

Q.83) B

Q.84) C

Q.85) C

Q.86) C

Q.87) C

Q.88) D

Q.89) B

Q.90) A

Q.91) B

Q.92) A

Q.93) A

Q.94) C

Q.95) B

Q.96) B

Q.97) D

Q.98) B

Q.99) C

Q.100) A