Under the Negotiable Instruments Act, 1881, how many days of grace are allowed while computing the maturity of a bill or a promissory note payable after date?
- A.Two days
- B.Three days
- C.Five days
- D.Seven days
Correct answer
Explanation
The correct answer is B, three days. Section 22 of the Act provides that the maturity of a promissory note or bill of exchange payable after a stated period is the day on which the period ends, and that three days of grace are added in computing that date. So a bill drawn payable one month after a date matures three days after the end of that month, and if the day of maturity is a public holiday, Section 25 makes it fall due on the next preceding business day.
Options A, C and D are round numbers offered to see whether the candidate remembers the exact figure, and none of them appears in the Act. A further point worth holding is that days of grace apply only to instruments payable after date or after sight; they never apply to a cheque, because a cheque is always payable on demand.
Read the full article: Negotiable Instruments and Cheques: Act, Sections and PYQs
Practice Questions
View allA paper instructing the bank to pay a specific amount from a person's account to another person in whose name it has been issued is known as:
- A.cash
- B.cheque
- C.passbook
- D.currency
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Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Read the full explanation →A cheque returned by bank marked NSF means that
- A.Bank cannot verify your identity
- B.There are not sufficient funds in your account
- C.Cheque has been forged
- D.Cheque cannot be cashed being illegal
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NSF stands for not sufficient funds, and a bank writes it on the return memo when the balance in the drawer's account is less than the amount of the cheque.
Read the full explanation →Negotiable Instrument Act was introduced in
- A.1972
- B.1881
- C.1957
- D.1950
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The Negotiable Instruments Act was enacted in 1881 and came into force on 1 March 1882.
Read the full explanation →The payment of a negotiable instrument becomes due
- A.at maturity
- B.after maturity
- C.before maturity
- D.on third day of maturity
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Section 22 of the Negotiable Instruments Act, 1881 says that the maturity of a promissory note or bill of exchange payable otherwise than on demand is the date on which it falls due, and the three days of grace are already counted in arriving at that date.
Read the full explanation →Which section of the Negotiable Instruments Act, 1881 defines a cheque?
- A.Section 4
- B.Section 5
- C.Section 6
- D.Section 13
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Section 6 says a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand, and it goes on to include the electronic image of a truncated cheque and a cheque in the electronic form, both added by the amendment…
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