Top – 100 _MCQ of Negotiable Instrument Act

Posted on February 6, 2026 by Admin

🔹 PART A: BASIC CONCEPTS (Q.1–25)

1. Which of the following is a negotiable instrument under the NI Act?
A. Promissory Note
B. Bill of Exchange
C. Cheque
D. All of the above
✅ Answer: D

2. A cheque is drawn on:
A. Any person
B. A banker
C. Government
D. Company
✅ Answer: B

3. Which section defines “Promissory Note”?
A. Section 4
B. Section 5
C. Section 6
D. Section 13
✅ Answer: A

4. Which section defines “Bill of Exchange”?
A. Section 4
B. Section 5
C. Section 6
D. Section 13
✅ Answer: B

5. Which section defines “Cheque”?
A. Section 4
B. Section 5
C. Section 6
D. Section 13
✅ Answer: C

6. A cheque is payable:
A. After acceptance
B. After endorsement
C. On demand
D. After maturity
✅ Answer: C

7. A minor can be a:
A. Drawer of cheque
B. Maker of promissory note
C. Holder of negotiable instrument
D. Acceptor of bill
✅ Answer: C

8. Negotiation means:
A. Transfer by agreement
B. Transfer by operation of law
C. Transfer to make transferee holder
D. Transfer by court order
✅ Answer: C

9. Endorsement must be made:
A. Orally
B. By registration
C. In writing on instrument
D. Before magistrate
✅ Answer: C

10. A cheque crossed generally means:
A. Payable in cash
B. Payable only through bank
C. Invalid cheque
D. Payable to bearer
✅ Answer: B

11. Holder in due course is defined under:
A. Section 8
B. Section 9
C. Section 10
D. Section 11
✅ Answer: B

12. A bearer cheque is negotiable by:
A. Endorsement
B. Assignment
C. Delivery
D. Registration
✅ Answer: C

13. A bill of exchange must be accepted by:
A. Drawer
B. Payee
C. Drawee
D. Endorser
✅ Answer: C

14. Who is the drawer of a cheque?
A. Bank
B. Payee
C. Customer
D. Endorser
✅ Answer: C

15. A cheque becomes stale after:
A. 1 month
B. 2 months
C. 3 months
D. 6 months
✅ Answer: C

16. Which is NOT a negotiable instrument?
A. Cheque
B. Promissory note
C. Bill of exchange
D. Share certificate
✅ Answer: D

17. Which crossing prohibits further negotiation?
A. General crossing
B. Special crossing
C. Account payee crossing
D. Bearer crossing
✅ Answer: C

18. Acceptance of a bill must be:
A. Oral
B. Written
C. Registered
D. Not required
✅ Answer: B

19. A negotiable instrument payable to order can be transferred by:
A. Delivery only
B. Endorsement only
C. Endorsement and delivery
D. Assignment
✅ Answer: C

20. Which presumption relates to consideration?
A. Section 118(a)
B. Section 119
C. Section 120
D. Section 139
✅ Answer: A

21. Who is drawee in case of cheque?
A. Drawer
B. Payee
C. Banker
D. Endorser
✅ Answer: C

22. A promissory note cannot be made payable to:
A. Order
B. Specific person
C. Bearer on demand
D. Legal representative
✅ Answer: C

23. Instrument payable to bearer is negotiable by:
A. Endorsement
B. Delivery
C. Acceptance
D. Assignment
✅ Answer: B

24. Which section deals with inchoate stamped instruments?
A. Section 20
B. Section 18
C. Section 16
D. Section 22
✅ Answer: A

25. Cheque payable to a fictitious person is treated as:
A. Invalid
B. Bearer cheque
C. Order cheque
D. Cancelled cheque
✅ Answer: B

🔹 PART B: DISHONOUR & SECTION 138 (Q.26–75)

26. Section 138 relates to:
A. Forgery
B. Dishonour of cheque
C. Endorsement
D. Acceptance
✅ Answer: B

27. Dishonour must be due to:
A. Insufficiency of funds
B. Exceeds arrangement
C. Account closed
D. All of the above
✅ Answer: D

28. Notice must be issued within how many days of dishonour?
A. 15 days
B. 30 days
C. 45 days
D. 60 days
✅ Answer: B

29. Time given to drawer to make payment after notice:
A. 7 days
B. 10 days
C. 15 days
D. 30 days
✅ Answer: C

30. Cause of action arises after:
A. Dishonour
B. Notice issuance
C. Expiry of 15 days
D. Filing complaint
✅ Answer: C

31. Complaint must be filed within:
A. 15 days
B. 30 days
C. 45 days
D. 60 days
✅ Answer: B

32. Section 138 offence is:
A. Civil
B. Criminal
C. Quasi-criminal
D. Administrative
✅ Answer: C

33. Maximum punishment under Section 138:
A. 6 months
B. 1 year
C. 2 years
D. 3 years
✅ Answer: C

34. Maximum fine under Section 138:
A. Cheque amount
B. Twice cheque amount
C. ₹10,000
D. No fine
✅ Answer: B

35. Stop payment instruction attracts Section 138?
A. Yes
B. No
C. Depends
D. Only civil liability
✅ Answer: A

36. Presumption of debt is under:
A. Section 118
B. Section 119
C. Section 139
D. Section 142
✅ Answer: C

37. Presumption under Section 139 is:
A. Mandatory
B. Discretionary
C. Conclusive
D. Irrebuttable
✅ Answer: A

38. Standard of proof for accused to rebut presumption:
A. Beyond reasonable doubt
B. Balance of probabilities
C. Proof beyond doubt
D. Absolute proof
✅ Answer: B

39. Cheque issued as donation attracts Section 138?
A. Yes
B. No
C. Sometimes
D. Only partly
✅ Answer: B

40. Cheque issued for time-barred debt is:
A. Invalid
B. Enforceable
C. Void
D. Illegal
✅ Answer: B

41. Dishonour due to “account closed” attracts Section 138?
A. Yes
B. No
C. Only civil
D. Depends
✅ Answer: A

42. Notice refused by drawer is:
A. Invalid
B. No service
C. Deemed service
D. Optional
✅ Answer: C

43. Section 142 deals with:
A. Cognizance
B. Jurisdiction
C. Limitation
D. All of the above
✅ Answer: D

44. Jurisdiction lies where:
A. Drawer bank located
B. Payee bank located
C. Drawer residence
D. Anywhere
✅ Answer: B

45. Complaint under Section 138 can be filed by:
A. Drawer
B. Payee
C. Witness
D. Bank
✅ Answer: B

46. Cheque issued as security attracts Section 138?
A. Never
B. Always
C. If liability exists
D. Only civil
✅ Answer: C

47. Mens rea is required for Section 138?
A. Yes
B. No
C. Partly
D. Only intention
✅ Answer: B

48. Evidence by affidavit is allowed under:
A. Section 145
B. Section 146
C. Section 147
D. Section 143
✅ Answer: A

49. Interim compensation is under:
A. Section 138
B. Section 143A
C. Section 147
D. Section 148
✅ Answer: B

50. Maximum interim compensation:
A. 10%
B. 15%
C. 20%
D. 25%
✅ Answer: C

🔹 PART C: COMPANY, COMPOUNDING & MISC (Q.76–100)

76. Offence by company is covered under:
A. Section 138
B. Section 139
C. Section 141
D. Section 142
✅ Answer: C

77. Company must be made accused for prosecuting directors?
A. Yes
B. No
C. Optional
D. Only sometimes
✅ Answer: A

78. Section 138 offence is compoundable under:
A. Section 320 CrPC
B. Section 147 NI Act
C. Section 360 CrPC
D. Section 482 CrPC
✅ Answer: B

79. Appeal deposit requirement is under:
A. Section 143
B. Section 147
C. Section 148
D. Section 149
✅ Answer: C

80. Minimum deposit in appeal:
A. 10%
B. 15%
C. 20%
D. 25%
✅ Answer: C

81. Cheque presented multiple times is valid as per:
A. MSR Leathers case
B. Rangappa case
C. Aneeta Hada case
D. Alavi Haji case
✅ Answer: A

82. Presumption includes legally enforceable debt as per:
A. Kumar Exports
B. Rangappa
C. ICDS Ltd.
D. Modi Cements
✅ Answer: B

83. Dishonour due to signature mismatch attracts Section 138?
A. Yes
B. No
C. Only civil
D. Depends
✅ Answer: B

84. Section 138 applies to:
A. Cheque only
B. Bill only
C. Promissory note
D. All instruments
✅ Answer: A

85. Cheque issued for illegal consideration:
A. Enforceable
B. Void
C. Section 138 applies
D. Only fine
✅ Answer: B

86. Burden of proof initially lies on:
A. Accused
B. Complainant
C. Court
D. Bank
✅ Answer: B

87. Holder in due course gets title even if:
A. Instrument defective
B. Previous title defective
C. No endorsement
D. No consideration
✅ Answer: B

88. A cheque without signature is:
A. Valid
B. Negotiable
C. Invalid
D. Endorsable
✅ Answer: C

89. Section 138 is primarily:
A. Punitive
B. Compensatory
C. Preventive
D. Administrative
✅ Answer: B

90. Cognizance can be taken by:
A. Police
B. Magistrate
C. Sessions Court
D. High Court
✅ Answer: B

91. Delay in filing complaint can be condoned under:
A. Section 138
B. Section 141
C. Section 142(b)
D. Section 147
✅ Answer: C

92. Dishonour memo is:
A. Mandatory evidence
B. Conclusive proof
C. Prima facie proof
D. Optional
✅ Answer: C

93. Cheque payable to bearer on demand is:
A. Valid
B. Invalid
C. Illegal
D. Void
✅ Answer: B

94. Cheque crossed “not negotiable” means:
A. Cannot be transferred
B. No better title
C. Void cheque
D. Illegal cheque
✅ Answer: B

95. Liability under Section 138 is:
A. Joint
B. Several
C. Absolute
D. Strict
✅ Answer: D

96. Section 138 applies to post-dated cheque?
A. Yes
B. No
C. Only sometimes
D. Depends
✅ Answer: A

97. Object of NI Act is to:
A. Punish offenders
B. Ensure credibility of transactions
C. Control banks
D. Regulate currency
✅ Answer: B

98. Cheque issued under coercion:
A. Always valid
B. Always invalid
C. Accused must prove
D. Section 138 applies automatically
✅ Answer: C

99. A blank signed cheque given voluntarily is:
A. Invalid
B. Valid
C. Illegal
D. Void
✅ Answer: B