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Negotiable Instrument Act - 2 (UGC/ NET)

Description: Negotiable Instrument Act - 2
Number of Questions: 15
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Tags: Negotiable Instrument Act - 2 Negotiable Instrument Act
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A ‘holder in due course’ is a person

  1. entitled to possess the negotiable instrument in his own name and to recover the amount

  2. who becomes a possessor of the negotiable instrument for consideration

  3. who holds the instrument as an agent of the payee

  4. who possesses the instrument only for the purpose of presentation for payment


Correct Option: B
Explanation:

A ‘holder in due course’ is a person who has received a negotiable instrument in good faith and without notice that it is overdue, that there is any prior claim, or that there is a defect in the title of the person who negotiated it.

A protest must contain

  1. the name of the person for whom the instrument has been protested

  2. the name of the person against whom the instrument has been protested

  3. the instrument itself or its literal transcript

  4. All of the above


Correct Option: D
Explanation:

A protest must contain all the above information.

‘Payment in due course’ requires the payment to be made

  1. in accordance with the apparent tenor of the instrument

  2. in good faith

  3. without negligence

  4. All of the above


Correct Option: D
Explanation:

‘Payment in due course’ requires the payment to be made in good faith without negligence in accordance with the apparent tenor of the instrument.

As per the provisions of Section 93, when a cheque is dishoroured by non-acceptance or non-payment, the holder

  1. may or may not give notice to the parties whom the holder seeks to make liable thereon

  2. must give notice to the parties whom the holder seeks to make liable

  3. must give notice to the parties whom the holder seeks to make liable, but after noting

  4. must not give any notice to anyone


Correct Option: B
Explanation:

As per the provisions of Section 93 of the Negotiable Instrument Act, when a cheque is dishoroured by non-acceptance or non-payment, the holder must give notice to the parties whom the holder seeks to make liable.

Court can take cognizance of any offence punishable under Section 138 of the Negotiable Instrument Act

  1. suo motu

  2. upon a complaint in writing made by the payee

  3. upon a police report

  4. None of these


Correct Option: B
Explanation:

Court can take cognizance of any offence punishable under Section 138 of the Negotiable Instrument Act upon a complaint in writing made by the payee.

Which of the following presumptions regarding negotiable instruments is not correct?

  1. Every negotiable instrument bearing a date was made or drawn on such date.

  2. Every transfer of a negotiable instrument was made before its maturity.

  3. A lost promissory note, bill of exchange or cheque was not duly stamped.

  4. Every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity.


Correct Option: C
Explanation:

Presumptions regarding negotiable instruments are a lost promissory note, bill of exchange or cheque was duly stamped.

Which of the following defences is/are available against proceedings under Section 138 of Negotiable Instruments Act?

  1. Absence of a legally enforceable debt or liability

  2. Absence of legal notice of 15 days

  3. Lack of jurisdiction

  4. All of the above


Correct Option: D
Explanation:

All the above defences are available against proceedings under Section 138 of Negotiable Instruments Act. 

Which of the following courts is empowered to try an offence relating to dishonor of cheque for insufficiency?

  1. Judicial Magistrate Second Class

  2. Judicial Magistrate First Class

  3. Banking Ombudsman

  4. None of these


Correct Option: B
Explanation:

Judicial Magistrate First Class is empowered to try offence relating to dishonor of cheque for insufficiency of the funds.  

No notice of dishonour is necessary

  1. when it is dispensed with by the party entitled thereto

  2. in order to charge the drawer when he has countermanded payment

  3. when the party charged could not suffer damage for want of notice

  4. All of the above


Correct Option: D
Explanation:

Section 138 of the Negotiable Instrument Act deals with the dishonour of cheque for insufficiency, etc. of funds in the account. 

Under Section 138 of the NI Act, territorial jurisdiction does not arise

  1. where the cheque is issued

  2. in the local limit where the cheque is presented in the bank

  3. where the cheque is dishonoured by the bank

  4. from where the notice to pay the amount is issued


Correct Option: D
Explanation:

Section 138 of the Negotiable Instrument Act deals with the dishonour of cheque for insufficiency, etc. of funds in the account.

In which court does a complainant has to file an appeal against the order of acquittal under Section 138 of the NI Act?

  1. Court of session

  2. High Court

  3. Chief Judicial Magistrate

  4. Either Court of Session or High Court


Correct Option: D
Explanation:

In the Court of Session or High court, the complainant can file an appeal against the order of acquittal under Section 138 of the NI Act. 

Section 141 of the Negotiable Instrument Act deals with the offences caused by the

  1. government servants

  2. individuals and companies both

  3. individual alone

  4. companies


Correct Option: D
Explanation:

Section 141 of the Negotiable Instrument Act deals with the offences caused by the companies.

The Magistrate may send summons to accused under NI Act

  1. by speed post or by such courier services as are approved by a Court of Session

  2. by speed post only

  3. by messenger

  4. by police


Correct Option: A
Explanation:

The Magistrate may send summons to accused under NI Act by speed post or by such courier services as are approved by a Court of Session.

Every offence punishable under NI Act shall be

  1. non-compoundable

  2. compoundable

  3. non-bailable

  4. All of the above


Correct Option: B
Explanation:

Every offence punishable under NI Act shall be compoundable. Compounding of offence means certain offences of less serious nature. 

Which of the following cheques is/are paid only through a bank account?

  1. Uncrossed cheque

  2. Crossed cheque

  3. Both crossed and uncrossed cheques

  4. None of these


Correct Option: B
Explanation:

A crossed cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter.

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