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MCQs on The Negotiable Instruments Act, 1881 Part 2

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Q.1:- the Court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant, which shall:

  • Not exceed ten per cent of the amount of the cheque
  • Not exceed fifteen per cent of the amount of the cheque
  • Not exceed twenty per cent of the amount of the cheque
  • Not exceed twenty five per cent of the amount of the cheque
Check Answer

Correct Option: C

Q.2:- In the case of any conviction in a summary trial under section 143, it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term:

  • not exceeding two year and an amount of fine exceeding five thousand rupees.
  • not exceeding one year and an amount of fine exceeding five thousand rupees:
  • not exceeding six month and an amount of fine exceeding five thousand rupees:
  • not exceeding one month and an amount of fine exceeding five thousand rupees.
Check Answer

Correct Option: B

Q.3:- With respect to multicity cheque dishonor the offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction:

  • if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.
  • if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated.
  • Both the options A and B are correct.
  • None of the above.
Check Answer

Correct Option: C

Q.4:- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque and such complaint is made of the date on which the cause of action arises under clause(c) of the proviso to section 138:

  • Within three months
  • Within two months
  • Within one month
  • Within fifteen day
Check Answer

Correct Option: C

Q.5:- For invoking section 138 of NI Act, the payee or the holder in due course of the cheque, as the case may be, shall have to make a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, of the receipt of information by him from the bank regarding the return of the cheque as unpaid:

  • Within five days
  • Within ten day
  • Within fifteen days
  • Within twenty days.
Check Answer

Correct Option: C

Q.6:- What are the conditions for availing statutory protections available to a banker under section 131:

  • The payment is received for a customer of the Bank.
  • Cheque is crossed generally or specially before it is presented to the paying bank.
  • Banker has in good faith and without negligence received payment.
  • All of the above.
Check Answer

Correct Option: D

Q.7:- The protection to paying bank for crossed cheque is covered under which section of N I Act:

  • Section 138
  • Sectionl31
  • Section 128
  • Section 85
Check Answer

Correct Option: C

Q.8:- Section 118 of the N I Act deals with the presumptions as to negotiable instruments until the contrary is proved. Which among the following is NOT such presumption:

  • As to stamps-that a lost promissory note, bill of exchange or cheque was not duly stamped.
  • As to date-that every negotiable instrument bearing a date was made or drawn on such date.
  • As to time of acceptance-that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity.
  • As to time of transfer-that every transfer of a negotiable instrument was made before its maturity
Check Answer

Correct Option: A

Q.9:- When no rate of interest is specified in the instrument, interest on the amount due thereon shall, notwithstanding any agreement relating to interest between any parties to the instrument, be calculated from the date at which the same ought to have been paid by the party charged, until tender or realization of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs:

  • at the rate of six per centum per annum
  • at the rate of twelve per centum per annum
  • at the rate of eighteen per centum per annum
  • at the rate of twenty four per centum per annum
Check Answer

Correct Option: C

Q.10:- What is the liability of a banker when a cheque has been materially altered but does not appear to have been so altered, and payment thereof has been made according to the apparent tenor thereof at the time of payment and otherwise in due course:

  • The Banker shall be liable to make good the loss suffered by the customer.
  • The Banker shall discharge from all liability thereon, and such payment shall not be questioned by reason of the instrument having been altered.
  • The concerned official of the bank will be charge sheeted.
  • The Banker shall be liable for such wrong payment of the cheque which has been so altered.
Check Answer

Correct Option: B

Q.11:- Under which section a paying banker is protected where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee bank is discharged by payment in due course:

  • Section 131
  • Section 86
  • Section 85A
  • Section 85
Check Answer

Correct Option: D

Q.12:- Who can make negotiation of a negotiable instrument:Which is not the right of a holder:

  • All of several joint makers, drawers, payees or indorsees.
  • Sole maker, drawer, payee or indorsee.
  • Both A and B are correct.
  • None of the above.
Check Answer

Correct Option: C

Q.13:- Where an endorsement by express words, restrict or exclude the right of further negotiability of the instrument, it is called:

  • Blank endorsement
  • Partial endorsement
  • Conditional endorsement
  • Restrictive endorsement
Check Answer

Correct Option: D

Q.14:- The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default. This is governed by which section of the N I Act:

  • Section 131
  • Section 85
  • Section 31
  • Section 30
Check Answer

Correct Option: C

Q.15:- A promissory note or bill of exchange, dated 31st August, 2017 is made payable three months after date. What will be the maturity date:

  • The instrument is at maturity on the
  • The instrument is at maturity on the 1 December, 2017.
  • The instrument is at maturity on the 2 December, 2017.
  • The instrument is at maturity on the 3rd December, 2017.
Check Answer

Correct Option: D

Q.16:- A negotiable instrument dated 29 January, 2018, is made payable at one month after date. What will be its maturity date:

  • The instrument is at maturity on the 28 February, 2018.
  • The instrument is at maturity on the second day after the 28th February, 2018.
  • The instrument is at maturity on the third day after the 28 February, 2018.
  • The instrument is at maturity on the fourth day after the 28 February, 2018.
Check Answer

Correct Option: C

Q.17:- The days of grace of maturity of promissory note or bill of exchange is:

  • A. The maturity day after the day on which it is expressed to be payable.
  • B. The second day after the day on which it is expressed to be payable.
  • C. The third day after the day on which it is expressed to be payable.
  • D. The fourth day after the day on which it is expressed to be payable.
Check Answer

Correct Option: C

Q.18:- Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. What is this called under the N.I. Act:

  • Complete instrument
  • Indorsement
  • Inchoate stamped instrument
  • None of the above.
Check Answer

Correct Option: C

Q.19:- Where the amount mentioned on the cheque differs in words and figures, which amount should be considered:

  • The amount stated in figures.
  • The amount stated in words1
  • Both A and B the options are not correct and cheque is required to be returned.
  • It depends upon the discretion of the banker.
Check Answer

Correct Option: B

Q.20:- When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to indorse the same. This activity is called as:

  • Selling of instrument
  • Endorsement
  • Transfer of instrument
  • None of the above.
Check Answer

Correct Option: B

Q.21:- Who is called as Drawee in case of need:

  • When the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a “drawee in case of need”.
  • When the bill or in any endorsement thereon the name of any person is given is called a “drawee in case of need”.
  • When the drawee have the need of the bills of exchange.
  • When the bill or in any endorsement thereon the names of more than one person is given in addition to the drawee to be resorted to in case of need, such person is called a “drawee in case of need”.
Check Answer

Correct Option: A

Q.22:- Define Cheque:

  • A “cheque” is a bill of exchange drawn on any banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
  • A “cheque” is a bill of exchange and expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
  • A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
  • A “cheque” is a bill of exchange drawn on a specified banker and it includes the electronic image of a truncated cheque and a cheque in the electronic form.
Check Answer

Correct Option: C

Q.23:- What is ‘bills of exchange’:

  • A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person 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 “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing any person 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 “bill of exchange” is an instrument in writing containing a conditional order, signed by the maker, directing a certain person 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 “bill of exchange” is an instrument containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
Check Answer

Correct Option: A

Q.24:- A promissory note, bill of exchange or cheque payable to bearer is negotiable:

  • By blank indorsement
  • By indorsement
  • By delivery thereof
  • By restrictive indorsement
Check Answer

Correct Option: C