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DISHONOUR AND DISCHARGEOF INSTRUMENTS
Presented By:Reena BansalMBA
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DISHONOUR OF NEGOTIABLEINSTRUMENT
A negotiable instrument may be dishonouredeither by :
N on- acceptance, or N on- payment
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2 . Dishonour by Non- payment:
S ection 92
When maker of the promissory note, acceptor of bill or drawee of cheque makes default in payment, theinstrument is said to be dishonoured due to non-
payment .S ection 76
When the presentment for payment is excused by themaker or acceptor and the instrument remains unpaid ator after maturity, it is also said to be dishonoured by non-payment.
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Difference -
Basis of Difference Dishonour by non-acceptance Dishonour by non-payment
1 . R eason It occurs when the billis presented to thedebtor for acceptance& acceptance is notgranted.
It occurs when themaker, acceptor or drawee bank refusesto make payment.
2. Liability A suit cannot be filedagainst debtor sincehe is not a party tothe instrument.
A suit can be filed bythe holder if he hasserved notice of dishonour to all other
parties.
3. Amount Due The holder can file asuit only for therecovery of actualamount.
Drawer can file a suitto recover the noting& protesting chargesalong with the actualamount.
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EFFECT OF DISHONOUR-
The holder becomes entitled to sue the
parties liable to pay thereon.
The holder must give the notice of dishonour
to all the parties liable to him under the
instrument.
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NOTICE OF DISHONOUR-
N otice by whom
N otice to whom
Mode of notice
Time of giving notice
Effect of default in giving notice
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W hen Notice of Dishonour is notnecessary ?????
B y waiver of N otice
Countermanding payment
No damage to the party charged
When the party entitled is not traceable
In case of special circumstances
Drawer and acceptor same
N ot negotiable promissory note
Promise to pay
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NOTING
When a promissory note or bill of exchange
has been dishonoured by non-acceptance or
non- payment, the holder may get this fact
noted by a N otary Public.
N oting is the authentic and official proof of
presentment and dishonour of a negotiableinstrument.
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N ecessity
Time of N oting
Procedure
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P ROTESTING
Protest is a certificate formally issued by the
N otary Public which certifies that the instrument
has been dishonored.
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Protest for better S ecurity
Contents of Protest
N otice of Protest
Compensation for Dishonour:
Compensation to Holder
Compensation to Endorser
R edraft