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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