Dishonour by Non-acceptance
A bill can be dishonoured by non-acceptance in several ways, as discussed below:
1) If a bill is presented to the drawee for acceptance and he does not accept it within 48 hours from the time of presentment for acceptance, the bill is considered to have been dishonoured. If there are two or more drawees (and they are not partners of a firm) and the bill is accepted by one or some of them only, the holder is entitled to treat it as dishonoured.
He can also treat such a bill as accepted, but such acceptance is a qualified acceptance, and therefore, he cannot charge the prior parties, unless they give their assent to such an acceptance. But, if the drawees are all partners of a firm, acceptance by anyone of them is taken as an acceptance by all the partners of the partnership.
2) If a bill is given a qualified acceptance, the holder can treat it as dishonoured. The holder can also take such acceptance as in order, but if he does so, all prior parties, unless they give their assent to such acceptance, are discharged.
3) A bill is considered dishonoured by non-acceptance, if the drawee cannot be found after reasonable search.
4) It is also considered dishonoured for non-acceptance, if the drawee is incompetent to enter into a valid contract. When a drawer draws a bill, he impliedly undertakes that the drawee is a person competent to contract. If the holder finds that the drawee is incompetent to contract, he need not make presentment for acceptance and can treat the bill as dishonoured.
5) A bill is also considered dishonoured for non-acceptance if the drawee is a fictitious person. No presentment for acceptance in such a case is possible, because the drawee given in the instrument does not exist.
6) A bill is dishonoured for non-acceptance, where the drawee has either become insolvent or is dead. In such a case presentment for acceptance to the assignee or the legal representative of the deceased drawee is optional with the holder.
Dishonour by Non-payment
“A promissory note, bill-of-exchange or cheque is said to be dishonoured by non-payment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same” (section 92).
The provision of this section dealing with dishonour by non-payment are applicable to bill of exchange payable at sight or on demand. There may be dishonour by non-acceptance of a bill payable on demand, though presentment for acceptance is not required by law in such a case.
If notice of dishonour is not given to drawer and endorsers, it will discharge them all from liability not only on the bill but also with regard to the original consideration. In the absence of a contract to the contrary, the endorsee of a promissory note is not liable when he has no notice of dishonour.
This section 92 must be read with section 76, which specifies the circumstances in which the holder of a bill or note may treat it as dishonoured, without presenting for payment.
