DoE) Negotiable Instruments Questions eee aera Ee icltay - PS la Orel el Clune eh) eR Renate ca} Dai ibe as) CO ciey Coreen prot Download App MCQ Question 1 View this Question Online > In 2012, Reserve Bank of India (RBI), Reduced the validity period of Cheques, Demand Drafts, Pay Orders and Banker's Cheques from 6 months to 3 months, from the date of issue of the instrument. Which section in the Negotiable Instruments Act, 1881, deals with Cheques? 1. Section 6 2. Section 5 3. Section 4 4. Section 7 5. None of the above Answer (Detailed Solution Below) Option 1 : Section 6 Get proficient with the Banking and Financial Awareness concepts with detailed lessons on the topic Negotiable Instruments among many others. Negotiable Instruments MCQ Question 1 Detailed Solution ‘The correct answer is Section 6.© Key Pi is + In 2012, the Reserve Bank of India (RBI), Reduced the validity period of Cheques, Demand Drafts, Pay Orders, and Banker's Cheques from 6 months to 3 months, from the date of issue of the instrument + The Negotiable Instrument Act, 1881 was enacted on 9 December 1881 and came into force on 1 March 1882. + Section 6 of The Negotiable Instruments Act, 1881 defines cheque as- "A 'cheque''is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form. + Transactions through cheques are quite common these days. * Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money. + Itis a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. * The person writing the cheque is known as a drawer. + The amount is transferred only to the person to whom a cheque is addressed, ©; Additional Information heque" is a bill of exchange drawn ona specified banker and not expressed to be payable otherwise than on Gemang and it includes the electronic image of a truncated cheque and a cheque in the electronic form * Section 6(a)- A cheque in the electronic form means 2 cheque that contains the exact mirror image of a paper cheque and is generated, written, and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric cryptosystem. * Section 6(b)- A truncated cheque means a cheque which is truncated curing the course of a clearing cycle, either by the clearinghouse or by the bank whether paying or receiving payment immediately on the generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing Ca eee ec ene PS Ela merle Lila) ORO arc PO ere MCQ Question 2 View this Question Online >Who are the parties to a cheque? a) Drawer b) Payee c) Acceptor d) Holder Choose the correct answer from the following options: 1. a) and b) only 2. a), b) and ¢) only 3. a) and c) only 4, Allof these - a), b), c) and d) Answer (Detailed Solution Below) Option 2 : a), b) and d) only Negotiable Instruments MCQ Question 2 Detailed Solution ‘Cheque: Cheque refers to @ negotiable instrument that contains an unconditional order to the bank to pay a certain sum mentioned in the instrument, from the drawer’s account, to the person to whom it is issued, or to the order of the specified person or the bearer. C9 key-Points Parties to Cheque: Basically, there are three parties to ¢ cheque: 1. Drawer: The person who draws the cheque, ie. signs and orders the bank to pay the sum, 2. Drawee: The bank on which the cheque is drawn or who is directed to pay the specified sum written on the cheque. 3. Payee: The beneficiary, i.e. to whom the amount is to be paid. Apart from these three, there are two more patties to a cheque: 1. Endorser: When a party transfers his right to take the payment to another party, he/she is called an endorser. 2. Endorse: The party in whose favor, the right is transferred, is called endorsee \y BL Important Point 1. Sometimes, the drawer and payee can be the same person, when the drawer writes a self- echaniis2. If it is a bearer cheque, the person in whose name it is made is a holder. If it is damaged the payee or the last endorse is the holder. Therefore, Option 2 is the correct option. ee eo arc Start Complete Exam Preparation oa Rost ORO Ware Sera DOS Cierny eresteucud Download App Exot MCQ Question 3 View this Question Online > Which of the following is NOT a presumption about a negotiable instrument? 1. Date 2. Consideration 3. Stamp 4. Absolute and good title to the transferee Answer (Detailed Solution Below) Option 4:4 Negotiable Instruments MCQ Question 3 Detailed Solution ‘The Negotiable Instruments Act, 1881 provides for various kinds of presumptions and estoppel (Estoppel is 2 legal principle that prevents someone from arguing something or asserting a right that contradicts what they previously said or agreed to by law).A presumptions a rule of law that is used by courts or juries from whete they obtain a particular inference from particular fact or evidence, unless and until the truth of such an aisha itn tk sik adPresumptions as to negotiable instruments (sec. 118) : Until the contrary is proved, the following presumptions shall be made— 1. of consideration:~ that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; . as to date:~ that every negotiable instrument bearing a date was made or drawn on such date; . as to the time of acceptance: that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity; 4. as to the time of transfer: that every transfer of a negotiable instrument was made before its maturity; 5. as to order of indorsements:— that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; 6. as to stamp:~ that a lost promissory note, bill of exchange or cheque was duly stamped; 7. that holder is a holder in due course:~ that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obiained from its lawful over, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him. oN 5 iE ra eee are beet) Start Complete Exam Preparation CBee DR cess ae Shee aca ss Download App Paonia MCQ Question 4 View this Question Online > Which among the following is NOT included in negotiable instrument? 1. Cheque 2. Demand Draft 3. Promissiory Note 4. Mutual FundAnswer (Detailed Solution Below) Option 4: Mutual Fund Negotiable Instruments MCQ Question 4 Detailed Solution Negotiable instruments 1. Negotiable instruments are freely transferable commercial documents, and each type of negotiable instrument has unique functions and features. 2. Negotiable instruments are is a commercial document that satisfies certain conditions and transferable either by the application of law as by the custom of bleed concerned 3. This instrument can be transferred freely from hand to hand and has a legal life that can be transferred by more delivery or endorsement, @Pxey-Points Most Common Types of Negotiable Instruments are; + Promissory notes. + Bill of exchange. + Cheque + Demand Draft + Government promissory notes. + Delivery orders. + Customs Receipts. Most negotiable instruments fall under the following two categories; the Negotiable instrument by statute and Negotiable instruments by custom or usages. |B important Point Non-negotiable securities and products are those that cannot be transferred from one party to the next. An example of a non-negotiable instrument also referred to as a non-marketable instrument, would be a Mutual Fund. India's #1 Learning Platform ee ee BST la merely) a TL) 8) OT Pen ey cect DCS tier cy Question Bank Download App eerste esView this Question Online > How many types of cheques are there as per the Negotiable Instruments Act,1881? None of the above Answer (Detailed Solution Below) Option 1:4 Negotiable Instruments MCQ Question 5 Detailed Solution ‘The correct answer is 4. + There are four types of cheques as per the Negotiable Instruments Act,1881. > Open cheque > Crossed cheque > Bearer cheque » Order cheque © Key Points * Acchequeis an order to a bank to pay a stated sum from the drawer's account, written on a specially printed form. + There are three parties- > Drawer > Drawee > Payee * Allthe cheques are bills of exchange but all the bills of exchange are not cheques. © Additional Information * Open cheque- + When two lines on the left-hand upper comer of the cheque are not drawn, the cheque is known as an open cheque. = Its Payment can be made at the counter of the bank. + Bearer cheque- > In such a cheque, the words ‘bearer’ is written with the name of the person. > The bank makes the payment to a person who presents the cheque at the counter of the bank. Bearer cheques are negotiated only by delivery of possession.> Its endorsement is not required. + Order cheque- * In such a cheque, the word “order” is written with the name of the specified person > The bank makes the payment to such a specified person whose name is mentioned on the cheque. “Sena person may make a further endorsement on such cheque. + Endorsement and delivery of possession, both have required for the negotiation of such a cheque. * Crossed cheque- > A crossed cheque is one on which two parallel transverse lines with or without the words "& Co." are drawn, > The payment of such a cheque can be obtained only through a banker. > Thus crossing is a direction to the drawee banker to pay the amount of money on a crossed cheque through a banker so that the party who obtains the payment of the cheque can be easily traced. Oe x ean Retin) PS ela merle le CMe Telco) Cee cone Cape es) eemccs & Quizzes Download App MCQ Question 6: View this Question Online > Participatory Notes or P-Notes stands for 1, Alternative Stock instrument 2. Alternative Derivative instruments 3. Primary Equity 4. Investment derivative instrument 5. None of these Answer (Detailed Solution Below) Option 4: Investment derivative instrumentNegotiable Instruments MCQ Question 6 Detailed Solution P-Notes or Participatory Notes are Overseas Derivative Instruments that have Indian stocks as their underlying assets. They allow foreign Investors to buy stocks listed on Indian exchanges without being registered. This instrument gained popularity as Fils, to avoid the formalities of registering and to remain anonymous, started betting on stocks through this route. & India's #1 Learning Platform Start Complete Exam Preparation resinous & Quizzes ca) Pau ed Mock Tests port ry Download App MCQ Question 7: View this Question Online > Which among the following accounts have the cheque facilities? 1. Recurring Account 2. Saving Account 3. Current Account 4. Term and Fixed Account 1. Both (1) and (2) are correct . Both (2) and (3) are correct 3. Both (1) and (4) are correct 4. None is correct a . All (1),(2),(3) and (4) are correct c Answer (Detailed Softition Below) Option 2 : Both (2) and (3) are correct Negotiable Instruments MCQ Question 7 Detailed Solution The correct answer is Saving Account and Current Account.+ Savings Account: Savings accounts are meant for saving purposes and these are used by any individual or joint members. Most of the salaried persons, pensioners, and students used this account. Banks pay a certain rate of interest on the savings accounts normally it varies between 3-6%. Certain banks recommend maintaining the minimum amount in the account * Current Account: Current accounts are mainly used for business purposes, firms, public enterprises, companies, etc. and are not used for the investment of savings purposes. There is no limit to the no. of transactions in a day. There is no interest paid on the amount held in the account, while banks charge certain charges on such accounts. * DEMAT Account: A dematerialized accounts also known as the DEMAT account, it is used to hold shares and securities in the electronic format. It holds all the investment an individual makes in shares, government securities, bonds, and mutual funds in one single place. + Recurring deposit account- RD account is opened by those who want to deposit a certain amount of money regularly for a certain period of time and earn a higher interest rate than savings accounts. These accounts can be open for a minimum of 6months up to ten years maximum period. + Fixed deposit account- FD accounts are opened for a particular period of timein which the amount is fixed in a bank for a specified period of time. Itis the one time deposit and one time take away account. The interest rates are higher with respect to other types of accounts. Usually, the duration of FD varies between 7days to ten years. & Teen ete) Start Complete Exam Preparation Cee DAR ec ostcn PAu area aa PS cier cy Cres eas Ean Download App MCQ Question 8: View this Question Opiine > Which of the following section of Negotiable Instrument Act, 1881 describes about "Chequ 1. Section 4 2. Section 5 3. Section7 4. Section6 5. Section 8Answer (Detailed Soliition Below) Option 4: Section 6 Negotiable instruments MCQ Question 8 Detailed Solution The correct answer is option 4, i Section 6. + Negotiability means transfer of an instrument from a person / entity to another person / entity. + Negotiable instruments are documents meant for making payments, the ownership of which can be transferred from one person to another many times before the final payment is made. - According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means “promissory note, bill of exchange, or cheque, payable either to order or to bearer” + According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments ie., promissory note, bill of exchange and cheque. - However many other documents are also recognized as negotiable instruments on the basis of custom and usage, like hundis, treasury bills, share warrants, etc., provided they possess the features of negotiability. + There are 147 different sections in this act. + Key sections of this act are as follows: = Section 4 deals with Promissory notes = Section 5 deals with Bill of Exchange > Section 6 deals with Cheque 2 Section 15 deals with Endorsements + As per Section 6 of Negotiable Instruments Act 1881: A "cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. India’s #1 Learning Platform Start Complete Exam Preparation Gees ea Mock Tests RS cher oe reereuios exerci Download App MCQ Question 9: View this Question Online > Which of the following section defines the Negotiable Instruments, under the Negotiable Instruments Act, 1881? 1. Section 6 2. Section 43. Section 13 4, Section 5 5. section 7 Answer (Detailed Solution Below) Option 3: Section 13 Negotiable Instruments MCQ Question 9 Detailed Solution The correct option is Section 13. * Section 13 of the Negotiable Instrument Act 1881 states what are the Negotiable Instruments. ~ Section 13 is defined, Negotiable Instrument means a Promissory note, Bill of Exchange or Cheque payable either to Order or to Bearer. * The act came into force on 1 March 1882. * Anegotiadle instrument is a document that promises payment to the payee. * These instrumerts are transferable signed documents that promise to pay the holder the sum of money on demand or any time in the future.& Xs ra India's #1 Learning Platform Start Complete Exam Preparation CBee DAR cerca cae Fhe bees ieee resinous & Quizzes D» Download App MCQ Question 10: View this Question Ofline = Asmita has an account in the Union Bank of India and he issued a cheque to Deependra. So, a) Asmita is a drawer, Deependra is a drawee, and Union Bank of India is a payee. b) Asmita is a drawer, Deependra and Union Bank of India are drawees and any one of the above can bea payee. c) Asmita is a drawer, Union Bank of India is a drawee and Deependra is a payee. d) Deependra is a drawer, Union Bank of India is a drawee and Asmita is the payee. e) All of above are drawee 1. Only C 2. OnlyD 3. OnlyA 4. Only E 5. Only B Answer (Detailed Solution Below) Option 1 : Only &Negotiable Instruments MCQ Question 10 Detailed Solution ‘The correct answer is the Only C. © Key Points * Asmita- > The person who craws the bill is celled the drawer. 2 He gives the order to pay money ta the third party. * Union Bank of India- > The party upon whom the bill is drawn is called the drawee. = He is the person to whom the bill is addressed and who is ordered to pay. 2 He becomes an acceptor when he indicates his willingness to pay the bill > The Drawee of a Cheque in Bill of Exchange is always a Banker. + Deependra- > The party in whose favour the bill is drawn or Is payable Is called the payee.