Which one of the following statements correctly describes the meaning of legal tender money ?

(a) The money which is tendered in courts of law to defray the fee of legal cases
(b) The money which a creditor is under compulsion to accept in settlement of his claims ✓ UPSC's answer
(c) The bank money in the form of cheques, drafts, bills of exchange, etc.
(d) The metallic money in circulation in a country

Why the answer is (b)

• Legal tender is money that, by law, a creditor must accept when offered in payment of a debt; refusal extinguishes the creditor's right to demand payment in another form — option (b).

• In India, RBI notes are unlimited legal tender (Section 26, RBI Act) and coins are limited legal tender up to ₹1,000 (Coinage Act, 2011).

• Cheques and drafts (c) are bank money that may be refused; metallic money (d) is only one part of legal tender; option (a) confuses 'tender' with court fees.

• Hence option (b).

Why the other options are wrong

(a) The money which is tendered in courts of law to defray the fee of legal cases: Legal tender has nothing to do with court fees.
(c) The bank money in the form of cheques, drafts, bills of exchange, etc.: Cheques and drafts are not legal tender; they can be refused.
(d) The metallic money in circulation in a country: Metallic money is only a part (and limited) legal tender.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2018, held on 3 June 2018. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.