Negotiable Instruments Act, 1881 MCQ Quiz - Objective Question with Answer for Negotiable Instruments Act, 1881 - Download Free PDF

Latest Negotiable Instruments Act, 1881 MCQ Objective Questions

Negotiable Instruments Act, 1881 Question 1:

Who has jurisdiction to try the offenses specified in Chapter XVII of the Negotiable Instruments Act, 1881?

1. High Court Judge
2. Judicial magistrate first class
3. Metropolitan magistrate
4. Both 2 and 3

Answer (Detailed Solution Below)

Negotiable Instruments Act, 1881 Question 1 Detailed Solution

The correct answer is Option 4.

Key Points

• Chapter XVI of the Negotiable Instrument Act deals with penalties in case of dishonour of cheques for insufficiency of funds in the accounts.
• Section 142(1)(c) of the act says no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.
• In simple words, if the bank refuses to pay the amount mentioned in the cheque due to the lack of funds in the account, it is called dishonour of cheque.
• Section 138 of the act makes the dishonour of a cheque an offence.

Negotiable Instruments Act, 1881 Question 2:

1. Compoundable
2. Non- compundable
3. Either 1 or 2
4. None of the above

Answer (Detailed Solution Below)

Negotiable Instruments Act, 1881 Question 2 Detailed Solution

The correct answer is Option 1.

Key Points

• As per section 147 of the Negotiable Instrument Act 1881, every offence punishable under this act is considered compoundable.
• Compoundable offences are those where there is a scope for compromise. Here, the person who files the case agrees to drop charges against the accused.
• Section 320 of CrPc deals with compoundable offences. These offences are characterised as less severe in nature and if both the parties reached a compromise then the charges can be withdrawn. It is a settlement between the parties.

Negotiable Instruments Act, 1881 Question 3:

1. Judicial Magistrate second class
2. Judicial magistrate first class
3. Metropolitan magistrate
4. Both 2 and 3

Answer (Detailed Solution Below)

Negotiable Instruments Act, 1881 Question 3 Detailed Solution

The correct answer is Option 4.

Key Points

• Chapter XVI of the Negotiable Instrument Act deals with penalties in case of dishonour of cheques for insufficiency of funds in the accounts.
• Section 142(1)(c) of the act says no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.
• In simple words, if the bank refuses to pay the amount mentioned in the cheque due to the lack of funds in the account, it is called dishonour of cheque.
• Section 138 of the act makes the dishonour of a cheque an offence.

Negotiable Instruments Act, 1881 Question 4:

Answer (Detailed Solution Below)

Negotiable Instruments Act, 1881 Question 4 Detailed Solution

The correct answer is Option 2.

Key Points

• Section 4 of the Negotiable Instrument Act 1881 defines Promissory Note.
• It is a financial instrument that contains a promise in writing by the issuer or maker of the promissory note to pay the determinate amount to the payee.
• The specified amount can be paid either on demand or on the specified date.
• Promissory note does not include bank-note or currency-note.
• A promissory note can be secured or unsecured. A secured promissory note involves collateral whereas an unsecured promissory note does not involve collateral.

Negotiable Instruments Act, 1881 Question 5:

1. a promissory note
2. Bill of exchange
3. Payable Cheque
4. All of them

Answer (Detailed Solution Below)

Negotiable Instruments Act, 1881 Question 5 Detailed Solution

The correct answer is Option 4.

Key Points

• Section 13 of the Negotiable Instrument Act 1881 defines a Negotiable instrument.
• Negotiable instrument means-
  • a promissory note
  • Bill of exchange
  • Cheque payable either to order or to bearer
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  Top Negotiable Instruments Act, 1881 MCQ Objective Questions

  Negotiable Instruments Act, 1881 Question 6:

  Which of the following section of Negotiable Instrument Act, 1881 describes about "Cheque"?
  1. Section 4
  2. Section 5
  3. Section 7
  4. Section 6
  5. Section 8

  Answer (Detailed Solution Below)

  Option 4 : Section 6

  Negotiable Instruments Act, 1881 Question 6 Detailed Solution

  The correct answer is option 4, i.e. Section 6.

  • Negotiability means transfer of an instrument from a person / entity to another person / entity.
  • Negotiable instruments are documents meant for making payments, the ownership of which can be transferred from one person to another many times before the final payment is made.
  • According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means “promissory note, bill of exchange, or cheque, payable either to order or to bearer”
  • According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque.
  • However many other documents are also recognized as negotiable instruments on the basis of custom and usage, like hundis, treasury bills, share warrants, etc., provided they possess the features of negotiability.
  • There are 147 different sections in this act.
  • Key sections of this act are as follows:
    • Section 4 deals with Promissory notes
    • Section 5 deals with Bill of Exchange
    • Section 6 deals with Cheque
    • Section 15 deals with Endorsements
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    Negotiable Instruments Act, 1881 Question 7:

    Which of the following is not considered as "Negotiable Instrument" as per the Negotiable Instruments Act, 1881?

    1. Promissory note
    2. Demand Drafts
    3. Bills of exchange
    4. Cheques
    5. Currency notes

    Answer (Detailed Solution Below)

    Option 5 : Currency notes

    Negotiable Instruments Act, 1881 Question 7 Detailed Solution

    The correct answer is option 5, i.e. Currency notes.

    • ​Negotiability means transfer of an instrument from a person / entity to another person / entity.
    • Negotiable instruments are documents meant for making payments, the ownership of which can be transferred from one person to another many times before the final payment is made.
    • According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means “promissory note, bill of exchange, or cheque, payable either to order or to bearer”
    • According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque.
    • However many other documents are also recognized as negotiable instruments on the basis of custom and usage, like hundis, treasury bills, share warrants, etc., provided they possess the features of negotiability.
    • Currency Note is not a negotiable instrument as per section 21 of the Indian Currency Act
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    Negotiable Instruments Act, 1881 Question 8:

    How many chapters and sections do the Negotiable Instruments (NI) Act have?
    1. 25, 178
    2. 13, 121
    3. 17, 148
    4. 121, 19

    Answer (Detailed Solution Below)

    Option 3 : 17, 148

    Negotiable Instruments Act, 1881 Question 8 Detailed Solution

    

    The correct answer is 17, 148.Key Points

    • Originally promulgated in 1881, the Negotiable Instruments Act has undergone several amendments by the Parliament of India to modernize and enhance its relevance. This legislative piece aims to define and modify the existing laws pertaining to promissory notes, bills of exchange, and cheques. The Act is structured into seventeen chapters, housing a total of 148 sections.
    • Each chapter of the Act focuses on specific areas. For instance, there are chapters on the concept of notes, bills, and cheques, the roles of various parties involved, and the process of negotiation. There are also chapters on how parties can be discharged from liability on notes, bills, and cheques, along with details on the protocols surrounding notice of dishonour.
    • The Act includes crucial provisions relating to the dishonour of cheques due to insufficient funds, legal defences that may not be allowed in any prosecution under section 138, and the consideration of a bank’s slip as prima facie evidence of certain facts. These provide a robust framework for the efficient and fair handling of financial instruments and transactions.

    Hence, the Negotiable Instruments (NI) Act has 17 chapters and 148 sections.