Mock Test on Negotiable Instruments Act, 1881

 

Mock Test on Negotiable Instruments Act, 1881

(For Judicial Services Examination – Objective & Scenario-Based MCQs)

Instructions:

• Each question carries 1 mark.

• No negative marking.

• Time: 30 minutes.

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Part 1: Objective-Based MCQs

1. Which of the following is NOT a negotiable instrument under the Negotiable Instruments Act, 1881?
   a) Promissory Note
   b) Bill of Exchange
   c) Fixed Deposit Receipt
   d) Cheque

2. A negotiable instrument must be signed by:
   a) The bearer
   b) The holder
   c) The maker, drawer, or endorser
   d) The notary public

3. What is the time limit to present a cheque for payment from the date it is drawn?
   a) 30 days
   b) 90 days
   c) 3 months
   d) 6 months

4. The presumption under Section 139 of the Negotiable Instruments Act, 1881 states that:
   a) The cheque was issued without consideration
   b) The cheque was issued for a legally enforceable debt
   c) The cheque was issued as a gift
   d) The cheque was issued for illegal purposes

5. Under Section 138, the payee must send a legal notice to the drawer within:
   a) 7 days
   b) 15 days
   c) 30 days
   d) 45 days

6. The liability of a minor in a negotiable instrument is:
   a) Limited to the value of the instrument
   b) Non-existent; a minor cannot be held liable
   c) The same as that of an adult
   d) Dependent on the guardian’s approval

7. Which section deals with "Dishonor of a cheque for insufficiency of funds"?
   a) Section 131
   b) Section 138
   c) Section 142
   d) Section 147

8. A cheque crossed with two parallel lines on the top left indicates:
   a) The cheque can be cashed immediately
   b) The cheque is "Not Negotiable"
   c) The cheque must be deposited into a bank account
   d) The cheque is an electronic cheque

9. A "Holder in Due Course" means:
   a) The payee of the cheque
   b) A person who obtained a negotiable instrument in good faith for consideration
   c) A person who issues a cheque
   d) A person who dishonors the cheque

10. The punishment for cheque dishonor under Section 138 may include:
    a) Imprisonment up to 2 years
    b) Fine up to twice the cheque amount
    c) Both (a) and (b)
    d) Only a civil liability

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Part 2: Scenario-Based MCQs

11. A draws a cheque in favor of B, but before B can present it, A stops payment through the bank. Can B file a complaint under Section 138?
    a) Yes, as stopping payment is not a defense
    b) No, because the cheque was not dishonored due to insufficient funds
    c) Yes, but only if A does not give another cheque
    d) No, because A has the right to stop payment

12. X gives Y a post-dated cheque as security for a loan. Before the due date, Y presents the cheque, and it is dishonored due to insufficient funds. Can Y file a complaint under Section 138?
    a) Yes, because the cheque was dishonored
    b) No, because post-dated cheques given as security are not covered under Section 138
    c) Yes, but only if Y proves that the loan was unpaid
    d) No, because the cheque was given under a verbal agreement

13. A, an agent, signs a cheque on behalf of B without disclosing his agency. If the cheque bounces, who is liable?
    a) A alone
    b) B alone
    c) Both A and B
    d) Neither A nor B

14. If a cheque is dishonored, within how many days should the payee file a complaint in court after the drawer fails to pay within 15 days?
    a) 15 days
    b) 30 days
    c) 60 days
    d) 90 days

15. Z issues a cheque for ₹5 lakh to Y for repayment of a loan. However, Z later claims that the cheque was given as a "gift." What is the legal presumption?
    a) The cheque was given for a legally enforceable debt
    b) The cheque was a gift, and Y must prove otherwise
    c) The cheque is void due to lack of consideration
    d) The court will not entertain the case

16. A cheque is dishonored, and the payee files a complaint in court. During the trial, the drawer agrees to pay the cheque amount. Can the case be settled?
    a) No, since dishonor cases are criminal in nature
    b) Yes, because cheque dishonor cases are compoundable under Section 147
    c) No, unless the bank intervenes
    d) Yes, but only if the court orders it

17. A cheque is issued without a date and later dishonored when presented. Is it valid?
    a) Yes, if the drawer had signed it
    b) No, a cheque without a date is void
    c) Yes, but only if the bank allows it
    d) No, unless the payee gets the drawer’s approval for adding a date

18. P issues a cheque to Q, which is dishonored. P claims that Q "forced" him to issue the cheque. Can this be used as a defense under Section 138?
    a) Yes, if P proves coercion
    b) No, because coercion is not a defense under Section 138
    c) Yes, if the cheque was signed under pressure in front of witnesses
    d) No, unless P files a separate case for coercion

19. An undated cheque is presented and dishonored. The payee later adds a date and represents it. What is the legal consequence?
    a) The cheque becomes void due to material alteration
    b) The cheque is valid if the drawer does not object
    c) The payee can be prosecuted for forgery
    d) The cheque can still be legally enforced

20. A cheque is issued by a partnership firm, and it is dishonored. Who can be held liable under Section 138?
    a) Only the person who signed the cheque
    b) The firm and all partners
    c) The managing partner only
    d) No one, as firms cannot be prosecuted

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Answer Key

1. (c)

2. (c)

3. (c)

4. (b)

5. (c)

6. (b)

7. (b)

8. (c)

9. (b)

10. (c)

11. (b)

12. (b)

13. (a)

14. (b)

15. (a)

16. (b)

17. (a)

18. (b)

19. (a)

20. (b)

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This mock test covers basic principles, key provisions, exceptions, procedural aspects, and scenario-based applications of the Negotiable Instruments Act, 1881, essential for the Judicial Services Examination