Question

Read the given statements and choose the correct option.
Statement 1: Under the Negotiable Instruments Act, 1881, a negotiable instrument made, drawn, accepted, or transferred without consideration creates no obligation of payment between the parties to the transaction.
Statement 2: According to the same Act, if the consideration for which a negotiable instrument was issued fails in part, the holder in immediate relation is entitled to recover only the proportionate amount corresponding to the consideration actually received.

• A. Both Statements 1 and 2 are false
• B. Only Statement 1 is true
• C. Only Statement 2 is true
• D. Both the Statements are true

Hint:

Section 43 → No consideration = no liability; Section 44 → Partial failure = proportionate recovery.

Answer 1

The Correct Option is D

Step 1: Verifying Statement 1.
Section 43 NI Act states that an instrument without consideration creates no payment obligation between the involved parties. Hence, Statement 1 is correct.
Step 2: Verifying Statement 2.
If consideration partially fails, the holder in immediate relation may recover only the proportionate amount (Section 44). Hence, Statement 2 is also correct.
Step 3: Conclusion.
Both statements correctly reflect Sections 43 and 44 of the NI Act.