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2. LLB


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Dishonour of cheques refers to the practice of issuing cheques without the intention of honouring them. The law relating to dishonour of cheques deals with the meaning of dishonour as well as the remedy in such cases against the defaulters.

a) Types of dishonour of cheques:

i) Dishonour by non-acceptance (S. 91)

In any of the following ways:
- if drawee does not accept the bill within 48 hours from the time of presentation even if duly presented for acceptance
- if there are several drawees and all of them do not accept
- if presentment for acceptance is excused and bill is not accepted
- if drawee is incompetent to contract
- if drawee gives a qualified acceptance
- if drawee is a fictitious person or cannot be found after reasonable search
- if a drawee is mentioned on a bill in case of need, and such bill is dishonoured by this drawee

ii) Dishonour by non-payment (S. 92)

when the maker of the note, acceptor of the bill or drawee of the cheque makes default in the payment upon being duly required to pay the same. Also when presentment is excused and the instrument overdue remains unpaid (S. 76)

b) Notice of dishonour

When an instrument is dishnoured either by non-acceptance or by non-payment, the holder of the instrument or some party who is liable therein must give notice of dishonour to the prior parties whom they want to make liable therein. If a party does not give notice except in cases where giving of a notice is excused, all the prior parties liable theron are discharged from their liability. (S. 93)

A. Notice to be given by -

i) By holder/any prior party
ii) Chain of giving notice - any party receiving the notice must give notice to the party liable prior to such party (if any)
iii) By principal/agent of the holder/prior party

B. Notice to be given to -

i) all parties whom the holder seeks to make liable
ii) such party/his agent/legal representative/assignee

C. Form of Notice -

i) oral/written - if written - must be sent by post
ii) must clearly indicate that the instrument has been dishonoured and in what way and that the party to whom notice is given will be liable on the instrument
iii) must be given within reasonable time at the place of business/residence of the intended party

D. When notice is not necessary -

i) when the requirement is dispensed with by the party entitled thereto
ii) when it is required to charge the drawer when he has countermanded payment
iii) when the party charged would not suffer for want of notice
iv) when the party entitled to notice cannot be found even after reasonable search
v) when it is required to charge the drawer when acceptor is also the drawer
vi) in case of non-negotiable promissory note
vii) when the party entitled to notice promises to unconditionally pay the amount due on the instrument

c) Duties of the holder on dishonour

A. Giving notice of dishonour

S. 93 - On dishonour by non-payment, the holder must give notice of dishonour to all the parties to the instrument whom he seeks to make liable thereon

B. Noting and Protesting

S. 99 - Holder may cause such dishonour to be noted by a Notary Public upon the instrument S. 100 - Holder may also within reasonable time of the note or bill, get the instrument protested by the Notary Public

d) Instrument acquired after notice of dishonour

S. 59 - Holder of the instrument who has acquired it after dishonour whether by non-acceptance or non-payment with notice thereof has rights only of his immediate transferor against other parties. The same holds when the instrument is acquired after maturity


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