Negotiable Instruments MCQ Quiz in తెలుగు - Objective Question with Answer for Negotiable Instruments - ముఫ్త్ [PDF] డౌన్‌లోడ్ కరెన్

The correct answer is option 2.Key Points

•  Section 9 of Negotiable  Instruement Act 1881 deals with “Holder in due course”.
• “Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

The correct answer is Section 14 of the NI Act, 1881

Key Points

• Negotiation in the NI Act, 1881:
  • The term 'negotiation' is defined under Section 14 of the Negotiable Instruments Act, 1881.
  • Negotiation refers to the process by which a negotiable instrument is transferred from one person to another in such a manner that the transferee becomes the holder of the instrument.
  • This process is crucial in the functioning of negotiable instruments like cheques, promissory notes, and bills of exchange.

Additional Information

• Incorrect Options Overview:
  • Option 1: Section 12
    • Section 12 does not define 'negotiation'; it pertains to the definition of a 'holder' of a negotiable instrument.
  • Option 2: Section 13
    • Section 13 defines Negotiable instrument.
  • Option 4: Section 15
    • Section 15 defines 'indorsement,' which is related to negotiation but not the same.
• Importance of Negotiation:
  • Negotiation ensures that the instrument can be transferred freely, providing liquidity and flexibility in financial transactions.
  • It allows the holder in due course to have better rights than the original holder, which is essential for the smooth functioning of trade and commerce.

The correct answer is 'Bank draft'

Key Points

• Negotiable Instruments under Section 13 of NI Act, 1881:
  • The Negotiable Instruments Act, 1881, defines and governs the usage of negotiable instruments in India.
  • Section 13 specifically refers to three types of negotiable instruments: Promissory Note, Cheque, and Bill of Exchange.
• Promissory Note:
  • A promissory note is a written promise to pay a specified sum of money to a specified person or the bearer at a specified date or on demand.
  • It is a negotiable instrument as per Section 13 of the NI Act, 1881.
• Cheque:
  • A cheque is a bill of exchange drawn on a specified banker and is payable on demand.
  • It is also considered a negotiable instrument under Section 13 of the NI Act, 1881.
• Bill 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.
  • This is another negotiable instrument as per Section 13 of the NI Act, 1881.

Additional Information

• Bank Draft:
  • A bank draft is a payment instrument issued by a bank, guaranteeing the payment of a specified amount of money to the payee.
  • Although widely used in financial transactions, it is not classified as a negotiable instrument under Section 13 of the NI Act, 1881.

The correct answer is 'Bill of Exchange'

Key Points

• Days of grace under NI Act, 1881:
  • The Negotiable Instruments Act, 1881 provides for "days of grace" which are an additional three days allowed for the payment of certain types of negotiable instruments.
  • This concept is applied to instruments like Bills of Exchange and Promissory Notes but not to Cheques and Bank Drafts.
  • The purpose of these days of grace is to provide the drawee or maker an additional period to make the payment.

Additional Information

• Promissory Note:
  • A Promissory Note is a financial instrument containing a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
  • While days of grace are applicable to Promissory Notes, they are not the correct answer in this context as the question specifically asks for the instrument to which the days of grace are applicable under the NI Act, 1881.
• Bank Draft:
  • A Bank Draft is a type of payment instrument issued by a bank guaranteeing the payment of a specified amount of money to the payee.
  • Days of grace are not applicable to Bank Drafts.
• Cheque:
  • A Cheque is a negotiable instrument instructing a bank to pay a specific amount from a person's account to the person in whose name the cheque has been issued.
  • Days of grace are not applicable to Cheques.

The correct answer is Option 3.
The term ‘Allonge’ under Negotiable Act, 1881 means : 'a piece of paper attached to the negotiable instrument for the purpose of further negotiation and a paper attached with negotiable instrument when it was with full negotiations'

Key Points

• Allonge under the Negotiable Instruments Act, 1881:
  • An 'Allonge' is a piece of paper attached to a negotiable instrument, such as a bill of exchange or promissory note, for the purpose of further negotiation.
  • It becomes part of the negotiable instrument and is used when there is no space left on the instrument itself to write endorsements or signatures.
  • The term covers both situations: attaching a paper for further negotiation and when the instrument was with full negotiations.

Additional Information

• Option 1:
  • This option is correct as it describes an 'Allonge' as a piece of paper attached to the negotiable instrument for further negotiation.
• Option 2:
  • This option is also correct as it describes an 'Allonge' as a paper attached with the negotiable instrument when it was with full negotiations.
• Option 4:
  • This option is incorrect as it suggests that either of the definitions could be correct individually, which does not cover the comprehensive definition of 'Allonge'.

Every offence punishable under Section 147 of the Negotiable Instruments Act, 1881 is 'compoundable'

Key Points

• Compoundable offences:
  • Compoundable offences are those where the complainant (the person who has filed the case) can enter into a compromise, and agree to have the charges dropped against the accused, leading to the conclusion of the case.
  • Section 147 of the Negotiable Instruments Act, 1881, makes offences punishable under it compoundable, providing a mechanism for parties to settle disputes, often involving dishonored cheques, out of court.
  • This provision helps in the faster resolution of disputes and reduces the burden on courts.

Additional Information

• Non-compoundable offences:
  • Non-compoundable offences are more serious in nature, where the complainant cannot enter into a compromise to drop the charges against the accused.
  • These offences require a judicial magistrate's intervention for resolution and cannot be settled out of court.
• Cognizable offences:
  • Cognizable offences are those where a police officer can arrest without warrant. However, offences under the Negotiable Instruments Act, including those under Section 147, require a different procedural approach, focusing on civil liability and financial restitution rather than immediate criminal proceedings.
• Distinction between compoundable and non-compoundable, cognizable, and non-cognizable offences:
  • The distinction lies in the nature of the offence, the process of resolution, and the involvement of law enforcement agencies. Compoundable offences under laws like the Negotiable Instruments Act are designed to facilitate quicker resolutions and are less about penal action and more about ensuring compliance and restitution.

The correct option is  3).

Key Points

• A Bill of Exchange is indeed a written order by the drawer to the drawee to pay money to the payee, making option (b) correct.
• Bill of Exchange are extensively used in International trade to order a bank to pay a specific sum to the bearer on a specified date, validating option (c).
• Contrary to option (a), a Bill of Exchange involves three parties: the drawer, the drawee, and the payee.
• The accurate legal definition of a Bill of Exchange is indeed mentioned in Section 5 of the Negotiable Instruments Act, not Section 6, making option (d) incorrect.

Additional Information

• The use of Bills of Exchange facilitates trade by providing a secure method of payment, particularly in international transactions where the parties may not have established mutual trust.
• Understanding the roles of the drawer, drawee, and payee is crucial for anyone involved in trade and finance.

The correct answer is option 4.Key PointsSection 13 of the concerned act defines “Negotiable instrument” as

 A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer.
Explanation (i)—A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.
Explanation (ii)—A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last indorsement is an indorsement in blank.
Explanation (iii)—Where a promissory note, bill of exchange or cheque, either originally or by indorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.

Additional Information

Section 4. “Promissory note.”—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.

Section5. “Bill 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.

Section 6. “Cheque”.—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.