Types of Dishonour
1. Dishonour by Non-Acceptance
This is specified in Section 91. Dishonor by non-acceptance is the refusal to accept a negotiable instrument. In addition, it is not accepted in the event of an exchange. This is because it is the only negotiable instrument that requires an offer in order to be accepted or rejected. In the case of dishonor owing to non-acceptance, only the manufacturers and endorsers are accountable to the bill holder if the holder sends notice of dishonor.
The following are some of the scenarios that might result in dishonest invoice approval:.
- If the receiver does not accept it within 48 days of being raised for acceptance.
- If it is used as a pretense for presenting, the invoice will not be accepted.
- If the borrower lacks the necessary qualifications to enter into the contract.
- If we cannot locate the receiver after a thorough search.
- If the lottery winner is not a real person.
- If the proof is valid.
2. Dishonour by Non-Payment
This falls under Section 92. This signifies that a promissory note, such as a check or bill of exchange, has been dishonored since the creator of the note, acceptor of the bill, or drawee of the check failed to pay when he was required to do so. A promissory note, bill, or check is dishonoured if the creator, drawee, or acceptor of the cheque fails to make payment when needed. Furthermore, a holder of a promissory note or bill may declare it dishonoured if the creator or acceptor expressly excuses the presentation of payment when payment is past due. It is critical to understand that all bill endorsers and makers are accountable to the holder in the event of bill dishonor, provided the holder issues a notification of dishonor. It should be noted that a drawee is only accountable to the holder if he or she fails to pay.
Dishonour of Negotiable Instruments: Types, Effects & Notice
Negotiable Instruments Act 1881 is the most significant law in India regulating negotiable instruments. It governs instruments such as promissory notes, bills of exchange, and cheques, which are necessary for effective company operations. Negotiable Instruments are critical in commercial transactions because they provide a simple, portable, and enforceable mode of payment for the exchange of goods and services. However, it is critical to comprehend the nuances of Dishonor of Negotiable Instruments. Individuals and organizations engaged in financial transactions must be able to discern between these two notions in order to properly navigate the complexity of commercial law. In this article, we will discuss dishonour of negotiable instruments.
Geeky Takeaways:
- A negotiated instrument is a written contract that promises a specific payment to a defined person or holder of the instrument.
- The Negotiable Instruments Act 1881 created a legislative framework for all types of negotiable instruments.
- Dishonour of Negotiable Instruments refers to a person’s incapacity or reluctance to honor a negotiable document, such as a promissory note or cheque.
- The act provides legal avenues for parties to protect their rights and seek resolution in the event of dishonour-related disputes or breaches, as well as to ensure justice and responsibility.
Table of Content
- Dishonour of a Negotiable Instrument
- Types of Dishonour
- Effects of Dishonour
- Notice of Dishonour
- Notice to Whom?
- Mode of Giving Notice
- Noting under Negotiable Instruments Act
- Protest under Negotiable Instruments Act
- Conclusion
- Dishonour of Negotiable Instruments- FAQs