Unit VI · Topic 7Negotiable Instruments Act, 1881 – Previous Year Questions

20 previous year questions on Negotiable Instruments Act, 1881 from UGC NET Law papers (2012–2026), including 2 assertion–reason, 5 match-the-list, 3 statement-based questions. The correct option is marked in green.

Questions

20 questions

2012Match the lists

Read the following passage, and match the column: A negotiable instrument contains a contract and therefore must be supported by consideration. In order to be a holder in due course, the holder must have obtained the instrument before its maturity. An instrument payable on demand is current at least as long as no demand for payment is made. To make a holder in due course, the instrument must be complete and regular. A postdated cheque may not be complete and regular. Column-P: A. Negotiable Instrument B. Holder in due course C. Currency of instrument D. Complete and regular Column-Q:

Before maturity

Demand for payment

Post dated cheque

Consideration Codes:

  1. (a)A-1, B-4, C-2, D-3
  2. (b)A-2, B-3, C-1, D-4
  3. (c)A-4, B-1, C-2, D-3✓
  4. (d)A-4, B-3, C-1, D-2
Answer & explanation

Ans. (c) : A negotiable instrument contains a contract and therefore must be supported by consideration. To be a holder in due course, the holder must have obtained the instrument before its maturity. An instrument payable on demand is payable on demand. To be a holder in due course, the instrument must be complete and regular. A postdated cheque is not complete and regular.

2012Match the lists

Match items in Columns-P with items in Column-Q, according to provisions of the Negotiable Instrument Act. Columns-P: A. Definition of promissory note B. Drawer of cheque C. Holder's right to duplicate D. Dishonour Columns-Q:

Section 30

Section 45-A

Section 135

Section 4 Codes:

  1. (a)A-2, B-4, C-1, D-3
  2. (b)A-4, B-2, C-3, D-1
  3. (c)A-4, B-1, C-3, D-2
  4. (d)A-4, B-1, C-2, D-3✓
Answer & explanation

Ans. (d) : The correct matching — (a) Promissory note — Section 4 (b) Drawer of cheque — Section 30 (c) Holder's right to duplicate — Section 45A (d) Dishonour — Section 135

2013

When a negotiable instrument is dishonoured, the party liable to pay, becomes bound to pay compensation to

  1. (a)The bank
  2. (b)The endorser
  3. (c)Holder or endorser✓
  4. (d)The Court
Answer & explanation

Ans. (c) : If a negotiable instrument is dishonoured, the party liable to pay becomes bound to pay compensation to the holder or endorser. .

2013Statements

Find correct legal principle from following statements:

While collecting a cheque for a banker, the customer is under an obligation to present it promptly so as to avoid any loss due to change of circumstances.

While collecting a cheque for a customer, the banker is under an obligation to present it properly so as to avoid any loss due to change of circumstances.

While collecting a cheque for a customer, the banker is under no obligation to present it properly so as to avoid any loss due to change of circumstances.

While collecting a cheque for a banker, the customer is under no obligation to present it promptly so as to avoid any loss due to change of circumstances.

Answer & explanation

Ans. (b) : Section 72 of the Negotiable Instruments Act deals with the presentation of a cheque. Under the sub-provisions of this section, it is the duty of the banker to present the cheque properly so as to avoid any loss due to change of circumstances.

2014Match the lists

Match List-I with List-II and select the correct answer using the codes given below: List-I A. Inchoate stamped instrument B. Liability of acceptor of a negotiable instrument C. Liability of an endorser D. Liability of the drawee of a chaque List-II

Union Bank of India v. Ankur Corp.

Section 31 of the Negotiable Instrument Act.

Section 35 of the Negotiable Instrument Act.

Section 20 of the Negotiable Instrument Act. Code:

  1. (a)A-1, B-4, C-3, D-2
  2. (b)A-4, B-1, C-3, D-2✓
  3. (c)A-4, B-1, C-2, D-3
  4. (d)A-3, B-2, C-1, D-4
Answer & explanation

Ans. (b) : Correct matching is — A — Inchoate stamped instrument — Negotiable Instrument Act Section 20 B — Liability of acceptor of a negotiable instrument — Union Bank of India v. Ankur Corporation C — Liability of an endorser — Negotiable Instrument Act Section 35 D — Liability of drawee of a cheque — Negotiable Instrument Act Section 31

2015

A negotiable instruments is presumed to be drawn for consideration

The statutory presumption envisaged under section 118(a) of the Negotiable Instrument Act is rebuttable Code:

  1. (a)A-2, B-1, C-4, D-3✓
  2. (b)A-1, B-2, C-3, D-4
  3. (c)A-4, B-1, C-2, D-3
  4. (d)A-1, B-3, C-2, D-4
Answer & explanation

Ans. (a) : Kundan Lal Rallaram v. Custodian

2016Assertion–Reason

Read Assertion (A) and Reason (R) and answer using codes given below: Assertion (A): Payer alone, whether a corporeal person or incorporeal person, shall be competent in case of dishonour of cheque. Reason (R): Because Section 138 of Negotiable Instrument Act mandates so. Codes:

  1. (a)Both (A) and (R) are right and (R) is correct explanation of (A)
  2. (b)Both (A) and (R) are wrong✓
  3. (c)(A) is wrong but (R) is right
  4. (d)(A) is right, but (R) is wrong
Answer & explanation

Ans. (b) : Both (A) and (R) are wrong Explanation: Section 138 of the Negotiable Instruments Act provides for the dishonour of cheque due to insufficiency of funds. Under this section, the liability in the case of dishonour of a cheque is on the Drawer, not on the Payer (Bhugtan karta). Therefore, both the assertion and reason are wrong.

2017

Which of the following are presumptions as to a negotiable instrument under section 118 of the Negotiable Instruments Act? Answer using codes given below:

presumption of contractual capacity

Presumption of consideration

Presumption of maturity of instrument

Presumption of date Codes:

  1. (a)only 1 and 3
  2. (b)only 2 and 4✓
  3. (c)only 1 and 4
  4. (d)only 1 and 2
Answer & explanation

Ans. (b) : only 2 and 4 Explanation: According to Section 118 of the Negotiable Instruments Act 1881, there are 7 sub-presumptions — (1) As to consideration, (2) As to date, (3) As to time of acceptance, (4) As to time of transfer, (5) As to order of endorsements, (6) As to stamp, (7) That the holder is the holder in due course.

2017Assertion–Reason

Read Assertion (A) and Reason (R) and answer using the codes given below: Assertion (A): Where a bill is unintentionally cancelled by the holder or his agent and the cancellation is not apparent thereon, the bill is discharged. Reason (R): Above principle is laid down in Section 82 of the Negotiable Instruments Act. Codes:

  1. (a)Both (A) and (R) are correct
  2. (b)Both (A) and (R) are wrong✓
  3. (c)(A) is right and (R) is wrong
  4. (d)(A) is wrong and (R) is right
Answer & explanation

Ans. (b) : Both (A) and (R) are wrong Explanation: Section 82(a) of the Negotiable Instruments Act 1881 provides that if the holder intentionally cancels the bill, the bill is discharged. Therefore, both the assertion and reason are wrong.

2019

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

  1. (a)compoundable✓
  2. (b)non-compoundable
  3. (c)cognizable
  4. (d)both (b) and (c) above
Answer & explanation

Ans. (a) : compoundable Explanation: According to Section 147 of the Negotiable Instruments Act 1881, notwithstanding anything contained in the Code of Criminal Procedure, every offence punishable under this Act shall be compoundable.

2019

A Bill of Exchange or draft is a written order by the drawer or drawee to pay money to the payee

Bill of Exchange are primarily used in the International trade and are written orders by one person to his Bank to pay the bearer a specific sum on a specific date

Definition of Bill of Exchange is mentioned in the Section 6 of the Negotiable Instrument Act Choose the most appropriate option:

  1. (a)1 and 4
  2. (b)1, 2 and 4
  3. (c)2 and 3✓
  4. (d)3 and 4
Answer & explanation

Ans. (c) : 2 and 3 Explanation: Section 5 of the Negotiable Instruments Act 1881 defines a Bill of Exchange. According to it, the following are correct options — (1) A Bill of Exchange or draft is a written order by the drawer to the drawee to pay money to the payee, (2) A Bill of Exchange is primarily used in international trade and is a written order by one person to his bank to pay the bearer a specific sum on a specific date.

2021-2022Statements

Given below are two statements: Statement I: A 'negotiable instrument' means a promissory note, bill of exchange or cheque payable either to order or to bearer. Statement II: Holder 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 endorsee. In light of the above statements, choose the most appropriate answer from the options given below:

  1. (a)Both Statement I and Statement II are correct
  2. (b)Both Statement I and Statement II are incorrect
  3. (c)Statement I is correct but Statement II is incorrect✓
  4. (d)Statement I is incorrect but Statement II is correct
Answer & explanation

Ans. (c) : According to Section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer. According to Section 8, the 'holder' of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

2021-2022

When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the Instrument is said to be:

  1. (a)Negotiated✓
  2. (b)Indorsed
  3. (c)Accepted
  4. (d)Transferred
Answer & explanation

Ans. (a) : According to Section 14 of the Negotiable Instruments Act, 1881, when a promissory note, bill of exchange or cheque is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated.

Dec 2021/June 2022 · Q15Match the lists

Match List – I with List -II

I -II

List-I/I List-II

A. Application of the Act to electronic cheque and truncated cheque I. Sec.3A

B. Electronic Signature II. Sec. 81A -81 S

C. Secure electronic record

D. Validity of contracts formed through electronic means IV. Sec. 10A 10 S

Choose the correct answer from the options given below

  1. (a)A - I, B – II, C - III, D - IV
  2. (b)A - II, B - I, C- III, D - IV✓
  3. (c)A - II, B - I, C- IV, D - III
  4. (d)A - IV, B - III, C - II, D - I
Answer & explanation

Answer: (b) A - II, B - I, C- III, D - IV

December 2023 · Q87Statements

Non-obstnate Clause in section 145 of the Negotiable Instrument Act, 1881 provides for which of the following

(A) dispenses with the procedure under section 200 of CrPC

(B) procedure of examination of complainant and witness on oath is done away

(C) affidavit of complainant and witness can be accepted

(D) sworn statement recording by the magistrate is dispensed with

Choose the correct answer from the options given below

  1. (a)(A), (B) Only
  2. (b)(A), (C) Only
  3. (c)(B), (C), (D) Only
  4. (d)(A), (B), (C), (D)✓
Answer & explanation

Answer: (d) (A), (B), (C), (D)

December 2023 · Q95

Which of the following are characteristics of a government promissory note

(A) It is a promise of President of India or Governor of a state

(B) It is regulated by the Indian Securities Act, 1886

(C) They are not negotiable instrument

(D) They can be assigned without endorsement

Choose the correct answer from the options given below

  1. (a)(A), (B) Only✓
  2. (b)(B), (C) Only
  3. (c)(B), (D) Only
  4. (d)(C), (D) Only
Answer & explanation

Answer: (a) (A), (B) Only

December 2024 · Q119Match the lists

Match List - I with List - II

List- I (Provision/Concept)

(A) Dishonour of cheque for insufficiency of funds

List - II (Sections under the Negotiable Instrument Act, 1881) Section 9

(B) Holder in due course (II) Section 5

(C) Promissory Note (IIΙ) Section 138

(D) Bill of Exchange (IV) Section 4

Choose the correct answer from the options given below

  1. (a)(A)-(III), (B)-(1), (C)-(IV), (D)-(II)✓
  2. (b)(A)-(1), (B)-(II), (C)-(III), (D)-(IV)
  3. (c)(А)-(IV), (B)-(IIШ), (C)-(II), (D)-(I)
  4. (d)(A)-(II), (B)-(IV), (C)-(I), (D)-(III)
Answer & explanation

Answer: (a) (A)-(III), (B)-(1), (C)-(IV), (D)-(II)

June 2025 · Q22

Which of the following is not true in the context of a promissory note?

  1. (a)It must be in writing and signed by the maker
  2. (b)There must be an undertaking or promise to pay
  3. (c)Such a promise must be conditional✓
  4. (d)The promise must be in respect of payment of money only
Answer & explanation

Answer: (c) Such a promise must be conditional

Explanation: A promissory note must contain an unconditional promise to pay a certain sum of money. A conditional promise invalidates the promissory nature of the note.

June 2026 · Q72

Which of the following notes are considered to be "Promissory Note" under the Negotiable Instrument Act, 1881?

A. I promise to pay B ₹500/seven days after my marriage to C

B. I promise to pay B or order ₹500

C. I promise to pay B ₹500/first deducting thereout any money which he may owe me

D. I acknowledge myself to be indebted to B in ₹1,000/to be paid on demand, for value received

Choose the correct answer from the options given below

  1. (a)A and C only
  2. (b)A and B only
  3. (c)B and D only✓
  4. (d)C and D only
Answer & explanation

Answer: (c) B and D only

Explanation: Under Section 4 of the Negotiable Instruments Act, 1881, a Promissory Note is an instrument in writing 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. Statutory illustrations under Section 4 evaluate the given statements:

• A. "I promise to pay B ₹500/- seven days after my marriage to C." NOT a Promissory Note o Reason: The payment is conditional upon marriage, which may or may not happen. A promissory note must contain an unconditional promise.

• B. "I promise to pay B or order ₹500/-." IS a Promissory Note o Reason: Fits illustration (b) of Section 4. It contains an unconditional promise to pay a certain sum of money to a specified person or his order.

• C. "I promise to pay B ₹500/- first deducting thereout any money which he may owe me." NOT a Promissory Note o Reason: Fits illustration (e) of Section 4. The sum payable is uncertain because the amount owed by B is indefinite.

• D. "I acknowledge myself to be indebted to B in ₹1,000/- to be paid on demand, for value received." IS a Promissory Note o Reason: Fits illustration (b) of Section 4. Although framed as an acknowledgment of debt, the addition of the phrase "to be paid on demand" creates an express promise/undertaking to pay a certain sum of money. Therefore, only B and D qualify as valid Promissory Notes.

June 2026 · Q111

Which of the following is not a negotiable instrument?

  1. (a)Promissory Note
  2. (b)Bill of Exchange
  3. (c)A cheque
  4. (d)Fixed Deposit Receipt✓
Answer & explanation

Answer: (d) Fixed Deposit Receipt

Explanation: Under Section 13(1) of the Negotiable Instruments Act, 1881, a negotiable instrument is defined as a:

1. Promissory Note (defined under Section 4)

2. Bill of Exchange (defined under Section 5)

3. Cheque (defined under Section 6) payable either to order or to bearer. A Fixed Deposit Receipt (FDR) is an acknowledgment issued by a bank certifying that a specific sum of money has been deposited for a fixed period at a set interest rate. It is not a negotiable instrument because:

• It is non-transferable by simple delivery or endorsement to a third party to give a valid legal title.

• It does not contain an unconditional promise or order to pay money to bearer or order in the manner prescribed under the Negotiable Instruments Act.

← Back to all units All topics of Unit VI