Negotiable Instruments Act 1881 MCQ

By Arundhati / April 4, 2025

Negotiable Instruments Act 1881 MCQ. These 28 crucial multiple-choice questions cover key definitions, types of negotiable instruments (cheques, promissory notes, bills of exchange), important sections like Section 138 (dishonor of cheques), the concept of “holder in due course,” “payment in due course,” and much more.

Negotiable Instruments Act 1881 MCQ – Attempt Now!

Question 1: What type of instrument is a cheque?

A. Promissory noteB. Bill of exchangeC. BondD. Money order

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Correct Answer: B. Bill of exchange

Question 2: Under which section of the Negotiable Instruments Act, 1881, is the term “a cheque in the electronic form” defined?

A. Section 4B. Section 5C. Explanation 1(a) of Section 6D. Section 13

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Correct Answer: C. Explanation 1(a) of Section 6

Question 3: Where is the term “Negotiable Instrument” defined in the Negotiable Instruments Act, 1881?

A. Section 4B. Section 5C. Section 6D. Section 13

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Correct Answer: D. Section 13

Question 4: Under which section of the Negotiable Instruments Act, 1881, is the term “Bill of Exchange” defined?

A. Section 4B. Section 5C. Section 6D. Section 13

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Correct Answer: B. Section 5

Question 5: Where is the term “Promissory Note” defined in the Negotiable Instruments Act, 1881?

A. Section 4B. Section 5C. Section 6D. Section 13

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Correct Answer: A. Section 4

Question 6: Which section defines “Holder in due course”?

A. Section 7B. Section 9C. Section 10D. Section 12

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Correct Answer: B. Section 9

Question 7: Which section defines “Payment in due course”?

A. Section 7B. Section 9C. Section 10D. Section 12

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Correct Answer: C. Section 10

Question 8: Which section defines “Foreign Instrument”?

A. Section 7B. Section 9C. Section 10D. Section 12

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Correct Answer: D. Section 12

Question 9: Which of the following is not considered a negotiable instrument?

A. ChequeB. PronoteC. HundiesD. None of the above

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Correct Answer: C. Hundies is not a negotiable instrument

Question 10: Is the statement “All cheques are Bills of Exchange, but all Bills of Exchange are not cheques” true or false?

A. TRUEB. FALSEC. Partially TrueD. Partially False

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Correct Answer: A. TRUE

Question 11: Under which section are “Drawer” and “Drawee” defined?

A. Section 5B. Section 6C. Section 7D. Section 11

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Correct Answer: C. Section 7

Question 12: Which section defines “Inland Instrument”?

A. Section 7B. Section 9C. Section 10D. Section 11

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Correct Answer: D. Section 11

Question 13: What is an instrument called if it can be construed as either a promissory note or bill of exchange?

A. A valid instrumentB. An invalid instrumentC. An Ambiguous InstrumentD. A foreign instrument

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Correct Answer: C. An Ambiguous Instrument (as per Section 17)

Question 14: What happens when the amount in an instrument is stated differently in figures and words?

A. The amount stated in figures shall prevail.B. The amount stated in words shall be the amount undertaken or ordered to be paid.C. The instrument is voiD.

D. The instrument is valid only for the minimum amount.

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Correct Answer: B. The amount stated in words shall be the amount undertaken or ordered to be paid. (Section 18)

Question 15: What does “At sight” mean under Section 21 of the Negotiable Instruments Act, 1881?

A. After a period of timeB. On demandC. After a specific dateD. After a notice

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Correct Answer: B. On demand

Question 16: How does an instrument bind parties if a minor draws, indorses, delivers, or negotiates it?

A. All parties to the instrument including the minorB. Only the minor and not the other parties to the instrumentC. All parties to the instrument except the minorD. None of the above

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Correct Answer: C. All parties to the instrument except the minor

Question 17: What characteristic must the amount of money payable have in a promissory note?

A. EstimatedB. CertainC. VariableD. Negotiable

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Correct Answer: B. Certain

Question 18: Can a drawer limit their liability in a bill?

A. NoB. Yes, a drawer can limit or exclude his liability by inserting in the bill an express stipulation to that effectC. Only in case of fraudD. Only with court order

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Correct Answer: B. Yes, a drawer can limit or exclude his liability by inserting in the bill an express stipulation to that effect

Question 19: What is the indorsement called when an indorser signs their name and adds a direction to pay to a specified person?

A. Indorsement in blankB. Conditional indorsementC. Indorsement in full.D. Restrictive indorsement

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Correct Answer: C. Indorsement in full.

Question 20: What does “Inchoate instrument” mean?

A. Fully filled negotiable instrumentB. Incomplete or blank negotiable instrumentC. A forged instrumentD. A foreign instrument

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Correct Answer: B. Incomplete or blank negotiable instrument as per (Section 20)

Question 21: Which section of the Negotiable Instrument Act explains “Public Holidays”?

A. Section 23B. Section 24C. Section 25D. Section 26

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Correct Answer: C. Section 25

Question 22: What type of liability is established under Section 138 of Negotiable Instruments Act, 1881?

A. Civil liabilityB. Strict liabilityC. Contractual liabilityD. Limited liability

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Correct Answer: B. Strict liability (Fine -Twice either/or Imprisonment – 2 years)

Question 23: What does Section 138 of Negotiable Instruments Act, 1881 deal with?

A. Dishonor of bill of exchangeB. Punishment for dishonor of cheque due to insufficient fundC. Promissory note dishonorD. Forged instruments

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Correct Answer: B. Punishment for dishonor of cheque due to insufficient fund (Fine -Twice either/or Imprisonment – 2 years)

Question 24: By which court are offenses under Negotiable Instruments Act, 1881 triable?

A. High CourtB. Session’s CourtC. Judicial Magistrate First ClassD. Civil Court

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Correct Answer: C. Judicial Magistrate First Class

Question 25: On what date did the Negotiable Instruments Act, 1881 come into force?

A. March 01, 1880B. March 01, 1881C. March 01, 1882D. March 01, 1883

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Correct Answer: C. March 01, 1882

Question 26: To which geographical area does the Negotiable Instruments Act, 1881 apply?

A. Some parts of IndiaB. Whole of India excluding J&KC. Whole of India including J&KD. Some Union territories

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Correct Answer: C. Whole of India including J&K

Question 27: Which of the following is not a negotiable requirement for a promissory note?

A. Notice of dishonour is compulsoryB. No notice of dishonour is compulsoryC. NI Act is silent on this aspectD. Endorsement is necessary

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Correct Answer: B. No notice of dishonour is compulsory

Question 28: What is the minimum time period for which a promissory note can be drawn under the Negotiable Instruments Act, 1881?

A. 1 monthB. 3 monthsC. 6 monthsD. No time is fixed

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Correct Answer: D. No time is fixed

Negotiable Instruments Act 1881 MCQ – Attempt Now!

Question 1: What type of instrument is a cheque?

Question 2: Under which section of the Negotiable Instruments Act, 1881, is the term “a cheque in the electronic form” defined?

Question 3: Where is the term “Negotiable Instrument” defined in the Negotiable Instruments Act, 1881?

Question 4: Under which section of the Negotiable Instruments Act, 1881, is the term “Bill of Exchange” defined?

Question 5: Where is the term “Promissory Note” defined in the Negotiable Instruments Act, 1881?

Question 6: Which section defines “Holder in due course”?

Question 7: Which section defines “Payment in due course”?

Question 8: Which section defines “Foreign Instrument”?

Question 9: Which of the following is not considered a negotiable instrument?

Question 10: Is the statement “All cheques are Bills of Exchange, but all Bills of Exchange are not cheques” true or false?

Question 11: Under which section are “Drawer” and “Drawee” defined?

Question 12: Which section defines “Inland Instrument”?

Question 13: What is an instrument called if it can be construed as either a promissory note or bill of exchange?

Question 14: What happens when the amount in an instrument is stated differently in figures and words?

Question 15: What does “At sight” mean under Section 21 of the Negotiable Instruments Act, 1881?

Question 16: How does an instrument bind parties if a minor draws, indorses, delivers, or negotiates it?

Question 17: What characteristic must the amount of money payable have in a promissory note?

Question 18: Can a drawer limit their liability in a bill?

Question 19: What is the indorsement called when an indorser signs their name and adds a direction to pay to a specified person?

Question 20: What does “Inchoate instrument” mean?

Question 21: Which section of the Negotiable Instrument Act explains “Public Holidays”?

Question 22: What type of liability is established under Section 138 of Negotiable Instruments Act, 1881?

Question 23: What does Section 138 of Negotiable Instruments Act, 1881 deal with?

Question 24: By which court are offenses under Negotiable Instruments Act, 1881 triable?

Question 25: On what date did the Negotiable Instruments Act, 1881 come into force?

Question 26: To which geographical area does the Negotiable Instruments Act, 1881 apply?

Question 27: Which of the following is not a negotiable requirement for a promissory note?

Question 28: What is the minimum time period for which a promissory note can be drawn under the Negotiable Instruments Act, 1881?

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