The Negotiable Instruments Act, 1881

Question 1

138

Answer 1

Dishonor of cheque for insufficiency, etc. Of funds in the account.

Where any cheque drawn by a person on an account maintained by him with a banker’s payment is dishonored due to insufficiency of funds, he shall be punished with imprisonment for a term which may extend to two years or with fine which may extend to twice the amount of cheque or with both

Question 2

139

Answer 2

Presumption in favor of holder

Question 3

141

Answer 3

In case where a company committed an offense u/s 138, not only the company but also every person who at the time when the offense was committed, was in charge of and was responsible to the company shall be deemed to be guilty and was liable

Question 4

142(c)

Answer 4

Right of the court.

The payee has only one opportunity to file a complaint for its dishonor

Question 5

143

Answer 5

Power of the court for trial
- trial of offense
- speedy trial
- speedy and efficient disposal

Question 6

11

Answer 6

Inland instrument

Drawn in India, payable in India

Or

Draw on person resident in india

Question 7

12

Answer 7

Foreign instrument

Question 8

13

Answer 8

Bearer instrument

Question 9

17

Answer 9

Ambiguous instrument

Question 10

42

Answer 10

Fictitious instrument

Question 11

19

Answer 11

Demand instrument

Question 12

21

Answer 12

Time instrument

Question 13

22

Answer 13

Maturity of Bill & grace days

Question 14

23

Answer 14

Period of termination ( due )

Question 15

24

Answer 15

Time determined excluding the day from which the time begins to run

Question 16

25

Answer 16

If last day of grace falls on a public holiday due is the next preceeding business day

Question 17

9

Answer 17

Holder in due course

Means any person who for consideration becomes the possessor of a negotiable instrument

if payable to bearer or payee or indorsee thereof,

if payable to order, before the amount 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.

Question 18

20

Answer 18

An inchoate instrument is an incomplete instrument in some respect

Question 19

120

Answer 19

No drawer of a bill, shall in a suit thereon, by a holder in due course, be permitted to deny the validity of the instrument as originally drawn

Question 20

58

Answer 20

When an instrument is obtained by fraud / offence/ for unlawful consideration, possessor/ endorsee cannot receive the amount of instrument if he is not a holder in due course

Question 21

36

Answer 21

The liabilities of prior parties to the holder in due course. This section says that a holder in due course has a privilege to held every prior party to a Negotiable instrument liable on it until the instrument is duly satisfied

Question 22

53

Answer 22

A holder who derives title from holder in due course has all rights of a holder in due course. Provided the holder was himself not a party to the fraud/ illegality which affected the instrument in some stage of its journey

Question 23

40

Answer 23

Where the holder of Negotiable instrument, without the consent of the endorser, destroys/ impairs the endorsers remedy against the prior party , the endorser is discharged from liability to the holder same extent as if the instrument has been paid at maturity

Question 24

42

Answer 24

In case a bill of exchange is made payable to the drawers orders in fictitious name and is endorsed by the same hand as the drawers signature, it is not permissible for the acceptor to allege as against the holder in due course that such name is fictitious

Question 25

78

Answer 25

Discharge by payment

Question 26

82

Answer 26

Discharge by cancellation

Question 27

83

Answer 27

Holder allowing more than 48 hrs to accept the bill

Question 28

84

Answer 28

Drawer not duly presenting a cheque for payment

Question 29

86

Answer 29

Holder agreeing to qualified or limited acceptance of bill.

Acceptance must be general acceptance and therefore, the holder is at liberty to refuse to take a qualified acceptance. Where, he refused to take it , the bill shall be dishonored by non acceptance. But if he accepts the qualified acceptance, even then it binds only him and the acceptor and not other parties who do not consent thereto

Question 30

87

Answer 30

Discharge by material attention

Question 31

90

Answer 31

Bill coming to acceptors hand after maturity

Question 32

84(3)

Answer 32

Cheque not presented by holder for payment within reasonable time of its issue and drawer suffers actual damage through the delay because of the failure of the bank, he is discharged from liability to the extent of such damage

Question 33

49

Answer 33

Conversion of a blank endorsement into an endorsement in full

Question 34

125

Answer 34

Crossing of cheque

Question 35

89

Answer 35

Apparent alteration

Question 36

91

Answer 36

Dishonor by non acceptance

Question 37

92

Answer 37

Dishonor by non payment- party primarily liable making default in payment

Question 38

76

Answer 38

Dishonor for non payment- when presentment for payment excused and when overdue, remains unpaid

Question 39

87

Answer 39

Any material alteration of Negotiable instrument renders the same void as against anyone who is partly there to at the time of making such alteration and doesn’t consent thereto. However, an alteration made in order to carry out the common intention of the original parties doesnot affect the validity of the instrument and the parties remain liable.

Question 40

93

Answer 40

Notice of dishonor must be given by the holder to all parties other than the maker/ acceptor/ drawer whom the holder seeks to make liable

Question 41

94

Answer 41

If the notice is duly directed and sent by post and miscarries, such miscarriage doesnot render the notice invalid

Question 42

98

Answer 42

Exceptions for giving notice of dishonor

Question 43

13

Answer 43

A bearer instrument which can change hands by mere delivery of the instrument. It should be expressed to be so payable or on which the last endorsement is blank

Question 44

15

Answer 44

When the maker/holder of Negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face therefore or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as Negotiable instrument, he is said to endorse the same and is called the endorser

Question 45

16

Answer 45

Blank indorsement

Indorsor just puts his signature without specifying the name of indorsee .

Indorsement is full, signature of indorser and name of endorsee specified

Question 46

54

Answer 46

Sec 16 renders payable to the bearer eventhough originally payable to order

Question 47

48

Answer 47

The purpose of an instrument gets fulfilled by its delivery

Question 48

47,58

Answer 48

A promissory note , Bill of exchange/ cheque payable to bearer is negotiable by delivery thereof

Question 49

46

Answer 49

The instrument payable to bearer is transferable merely by delivery I.e. without any further endorsement thereon.

Question 50

52

Answer 50

Sans recourse & if the endorser Excludes his liability and afterwards becomes the holder of the instrument, all intermediate endorsers are liable to him, further negotiation is not prohibited

Question 51

55

Answer 51

If an endorsement in blank is followed by an endorsement in full, the instrument still remains payable to bearer and negotiable by delivery as against all parties prior to the endorsement in full, though the endorser in full is only liable to a holder who made title directly through his endorsement and the person deriving title through such holder

Question 52

56

Answer 52

Partial endorsement is invalid under law and invalid for negotiation

Question 53

130

Answer 53

A person taking a cheque crossed ‘not negotiable’ can’t get a better title than the transferor. If title of transferor is defective, so will be the transferee’s

Question 54

128 & 130

Answer 54

Both collection and paying bankers will be protected under this act, provided the payment & collection made in good faith and without negligence

Question 55

85

Answer 55

Drawee banker discharged as soon as payment in due course was made

Question 56

85(2)

Answer 56

The original character of the cheque is not altered so far as the paying bank is concerned, provided the payment is made in due course

Question 57

47

Answer 57

If a negotiable instrument is delivered to a person ,upon condition I.e. it will be effective on the happening of a certain event , such negotiable instrument cannot be further negotiated unless such event happens. However, if it is transferred to a holder in due course, his rights will not be affected by such condition

Question 58

59

Answer 58

The holder of a negotiable instrument who has acquired it after dishonor whether by non acceptance or non payment with notice thereof, or after maturity, has only, as against other parties, the rights thereon of his transferor

Question 59

85

Answer 59

The banker cannot be held liable for forged endorse if they make payment in good faith & without negligence but the banker will not be protected where the payment of a cheque is made on which the drawers signature is forged