All India Bar Examination (AIBE) 3-III Previous Year Question Papers with Answers

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22.

Which of the following statements is least accurate in relation to 'negotiable instruments in terms of the Negotiable Instruments Act, 1881 ?

A: A' negotiable instrument 'means a promissory note, bill of exchange, or cheque payable either to order or to bearer.
B: 'Negotiation' of an instrument means the transfer of a promissory note, bill of exchange, or cheque to any person, which makes that person the holder of the instrument.
C: A person affixing a signature on an instrument for the purposes of negotiation of the instrument is known as an 'indorser'.
D: A 'negotiable instrument is only to be for the payment of money.
E: A negotiable instrument may not presumed to be made or drawn for consideration.

The answer is: E

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Explanation

The correct option is E: A negotiable instrument may not presumed to be made or drawn for consideration.

This is because Section 118 of the Negotiable Instruments Act, 1881, states that "Until the contrary is proved, the following presumptions shall be made:

(a) 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". Therefore, it is a legal presumption that a negotiable instrument is made or drawn for consideration, unless there is evidence to the contrary.

The other options are accurate because:

Option A is accurate because it is the definition of a negotiable instrument given in Section 13 of the Act.

Option B is accurate because it is the definition of negotiation given in Section 14 of the Act.

Option C is accurate because it is the definition of an indorser given in Section 15 of the Act.

Option D is accurate because it is one of the essential features of a negotiable instrument that it must be for the payment of money only.