Important MCQs- Part 3

(Negotiable Instruments Act, 1881)

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1. Which of the following instrument signed by the maker is a promissory
note?
(a) Mr B, I owe you Rs 1000
(b) Mr B, I will pay you Rs 1000 after my marriage
(c) Mr B, I will pay you money on demand
(d) Mr B, I will pay you Rs 1000 on demand
(e) None of the above

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1. Which of the following instrument signed by the maker is a promissory
note?
(a) Mr B, I owe you Rs 1000
(b) Mr B, I will pay you Rs 1000 after my marriage
(c) Mr B, I will pay you money on demand
(d) Mr B, I will pay you Rs 1000 on demand
(e) None of the above
A “Promissory note” is an instrument in writing (not being a bank-note or a currency-note) 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
Option a is acknowledgement of debt but not undertaking to pay
Option b has condition involved
Option c does not specify certain amount
Option d fulfils all criteria of definition of promissory note

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2. Under Section 138 of the Negotiable Instrument Act, territorial jurisdiction
does not arise on the following places :

a. Where the payee maintains account in a bank

b. In the local limit where the cheque is presented in the bank
c. Where the cheque is dishonoured by the bank
d. From where the notice to pay the amount is issued
e. Territorial jurisdiction arises from all the places above

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2. Under Section 138 of the Negotiable Instrument Act, territorial jurisdiction
does not arise on the following places :

a. Where the payee maintains account in a bank

b. In the local limit where the cheque is presented in the bank
c. Where the cheque is dishonoured by the bank
d. From where the notice to pay the amount is issued
e. Territorial jurisdiction arises from all the places above

Section 142(2)- The offence under section 138 shall be inquired into and tried only by a court
within whose local jurisdiction,— (a) 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; or (b) 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.

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3. If the indorser signs his name and adds a direction to pay the amount
mentioned in the instrument to a specified person, the indorsement is said
to be
a) Indorsement in blanc
b) Partial indorsement
c) Indorsement in full
d) Specific endorsement
e) None of the above

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3. If the indorser signs his name and adds a direction to pay the amount
mentioned in the instrument to a specified person, the indorsement is said
to be
a) Indorsement in blanc
b) Partial indorsement
c) Indorsement in full
d) Specific endorsement
e) None of the above

Section 16 of Negotiable Instrument Act - Indorsement “in blank” and “in full”.—(1) If the
indorser signs his name only, the indorsement is said to be “in blank,” and if he adds a
direction to pay the amount mentioned in the instrument to, or to the order of, a specified
person, the indorsement is said to be “in full”; and the person so specified “Indorsee”.—is
called the “indorsee” of the instrument

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4. A complaint against an offence under Section 138 of the Negotiable
Instrument Act

a) Must be in writing
b) May be in oral or in writing
c) Must be in writing and followed by affidavit
d) May be oral statement before notary
e) None of the above

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4. A complaint against an offence under Section 138 of the Negotiable
Instrument Act

a) Must be in writing
b) May be in oral or in writing
c) Must be in writing and followed by affidavit
d) May be oral statement before notary
e) None of the above

Section 142 of Negotiable Instrument Act 1881 – 1(a)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; (b) such complaint is made
within one month of the date on which the cause of action arises under clause (c) of the
proviso to section 138

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5. Which of the following is not a negotiable instrument?
a) Cheque
b) Pronote
c) Hundis
d) Bill of Exchange
e) All are negotiable instrument

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5. Which of the following is not a negotiable instrument?
a) Cheque
b) Pronote
c) Hundis
d) Bill of Exchange
e) All are negotiable instrument

Pronote means promissory note. According to NI Act- promissory note, cheque, bill
of exchange are negotiable instruments.

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6. Which of the following is true about a bank draft?
a) It is a promissory note
b) It is not a negotiable instrument
c) It is similar to a cheque
d) It is a bill of exchange
e) None of the above

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6. Which of the following is true about a bank draft?
a) It is a promissory note
b) It is not a negotiable instrument
c) It is similar to a cheque
d) It is a bill of exchange
e) None of the above

Section 131A. Application of Chapter to drafts.—The provisions of this Chapter shall apply to
any draft, as defined in section 85A, as if the draft were a cheque.

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7. When a promissory note or bill of exchange has been dishonoured by
non-acceptance or non-payment, the holder may cause such dishonour to
be noted by a notary public and certified thereupon. This certificate is
called-
a) Noting
b) Notice
c) Protest
d) Discharge
e) Protest for better security

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7. When a promissory note or bill of exchange has been dishonoured by
non-acceptance or non-payment, the holder may cause such dishonour to
be noted by a notary public and certified thereupon. This certificate is
called-
a) Noting
b) Notice
c) Protest
d) Discharge
e) Protest for better security

Section 100 Negotiable Instrument Act,1881 - Protest

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8. 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) 25%
c) 20%
d) 22%
e) 28%

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8. 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) 25%
c) 20%
d) 22%
e) 28%
The Bill inserted a provision-Section 143A 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. This interim compensation may be paid under certain circumstances,
including where the drawer pleads not guilty of the accusation. The interim compensation will
not exceed 20% of the cheque amount, and will have to be paid by the drawer within 60 days
of the trial court’s order to pay such a compensation.

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9. The offence of dishonor of the cheque excludes

a) Strict liability
b) Absolute liability
c) Mens rea
d) Both b and c
e) All a,b,c

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9. The offence of dishonor of the cheque excludes

a) Strict liability
b) Absolute liability
c) Mens rea
d) Both b and c
e) All a,b,c

In Mayuri Pulse Mills and Ors. v. Union of India and Ors. the High Court of Bombay had said
that the element of men rea is not a necessary element to constitute a crime under Section
138 of the Negotiable Instruments Act, 1881. The court under the case pronounced that in
some cases it is not necessary for the element of mens rea to be present in the commission of
the crime. In such situations, the legislature can impose either strict or absolute liability on the
offender of the crime.

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10. Where a cheque is crossed specially to more than one banker, except
when crossed to an agent for the purpose of collection,……

a. The banker on whom it is drawn shall pay to the last mentioned banker
b. The banker on whom it is drawn shall pay equally to all the bankers mentioned
c. The banker to whom it is drawn shall refuse payment.
d. The banker on whom it is drawn shall pay to any one of the mentioned banker
e. None of the above.

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10. Where a cheque is crossed specially to more than one banker, except
when crossed to an agent for the purpose of collection,……

a. The banker on whom it is drawn shall pay to the last mentioned banker
b. The banker on whom it is drawn shall pay equally to all the bankers mentioned
c. The banker to whom it is drawn shall refuse payment.
d. The banker on whom it is drawn shall pay to any one of the mentioned banker
e. None of the above.

Section 127 of Negotiable Instrument Act,1881. Payment of cheque crossed specially more than once.—Where
a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of
collection, the banker on whom it is drawn shall refuse payment thereof.

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