Notice of Dishonour (sections 93 and 94) requires : (i) by whom notice to be given: when an instrument is dishonored either by non-acceptance or by nonpayment, the holder thereof or some party thereto who remains liable thereon must give notice of dishounour.
(ii) To whom notice is to be given : Notice must be given to such parties whom the holder proposes to charge with liability severally or jointly, e.g., the drawer and the endorsers. Notices may be given either to the party himself or to his agent, or to his legal representative on his death, or to the official assignee on his insolvency. It is not necessary to give notice to the maker of a note or the drawee or acceptor of a bill or cheque.
(iii) Effect of non-service of notice : if a notice is not sent to any prior party who is entitled to such notice within a reasonable time, he is discharged form liability. It is a condition precedent to the continuation of the liability of the drawer under section 30 and of the endorsee under section 35 of the Act that they should be notified of the dishonour.
(v) Mode of service of notice. The notice, if written, may be given by post at the place of business or at the residence of party for whom it is intended, and even if it is miscarried the notice is not rendered invalid by such miscarriage.
When the holder of the instrument and the party to whom notice of dishonour must be posted by the next post if the parties carry on business or live in the same place, it is sufficient if the notice is so dispatched that it reaches its destination on the day next after the day of dishonour.
(e) Transmission of notice of dishonour by party receiving it (section 95) : any party receiving notice of dishounour should communicate the same within a reasonable time to any prior party whom he intends to
hold liable in respect of the instrument, but if the prior party receives otherwise ,no such communication
is necessary. To illustrate the necessity of transmission of notices, let us consider the following case.
A drawn a bill in favour of B on X. B endorses it to C; C endorses it to D; D endorses it to E; E endorses it to F. Suppose X refuses to accept the bill and F, the holder, gives notice of dishonour only to E and A, but E does not transmit the notice to D, C and B, in that case F shall have the right of action against E or A, E also has right of action against D, C and B,E must transmit the notice to them as well.
(f) When notice of dishonour is unnecessary (section 98): in a suit against the drawer or endorser on an
instrument being dishonored, notice of dishonour is a material part of the cause of action. However, in the following cases the notice of dishonour is not necessary. (i) when the necessity of the notice has been dispended with by an express waiver by the party entitled to it. For example, when the drawer of a bill informs the holder that the bill will be dishonored on presentment, the notice of dishonour is said to have been dispensed with.
(ii) when the drawer has countermanded payment, he, having put an impediment in the way of the holder obtaining payment is not entitled to the notice of dishonour.
(iii) When the party charged would not suffer damage for want of a notice. In such a case neither presentment nor notice of dishonour is necessary is necessary, provided it is shown that at the time of drawing the instrument there were no funds belonging to the drawer in the hands of the drawee
(ii) To whom notice is to be given : Notice must be given to such parties whom the holder proposes to charge with liability severally or jointly, e.g., the drawer and the endorsers. Notices may be given either to the party himself or to his agent, or to his legal representative on his death, or to the official assignee on his insolvency. It is not necessary to give notice to the maker of a note or the drawee or acceptor of a bill or cheque.
(iii) Effect of non-service of notice : if a notice is not sent to any prior party who is entitled to such notice within a reasonable time, he is discharged form liability. It is a condition precedent to the continuation of the liability of the drawer under section 30 and of the endorsee under section 35 of the Act that they should be notified of the dishonour.
(v) Mode of service of notice. The notice, if written, may be given by post at the place of business or at the residence of party for whom it is intended, and even if it is miscarried the notice is not rendered invalid by such miscarriage.
When the holder of the instrument and the party to whom notice of dishonour must be posted by the next post if the parties carry on business or live in the same place, it is sufficient if the notice is so dispatched that it reaches its destination on the day next after the day of dishonour.
(e) Transmission of notice of dishonour by party receiving it (section 95) : any party receiving notice of dishounour should communicate the same within a reasonable time to any prior party whom he intends to
hold liable in respect of the instrument, but if the prior party receives otherwise ,no such communication
is necessary. To illustrate the necessity of transmission of notices, let us consider the following case.
A drawn a bill in favour of B on X. B endorses it to C; C endorses it to D; D endorses it to E; E endorses it to F. Suppose X refuses to accept the bill and F, the holder, gives notice of dishonour only to E and A, but E does not transmit the notice to D, C and B, in that case F shall have the right of action against E or A, E also has right of action against D, C and B,E must transmit the notice to them as well.
(f) When notice of dishonour is unnecessary (section 98): in a suit against the drawer or endorser on an
instrument being dishonored, notice of dishonour is a material part of the cause of action. However, in the following cases the notice of dishonour is not necessary. (i) when the necessity of the notice has been dispended with by an express waiver by the party entitled to it. For example, when the drawer of a bill informs the holder that the bill will be dishonored on presentment, the notice of dishonour is said to have been dispensed with.
(ii) when the drawer has countermanded payment, he, having put an impediment in the way of the holder obtaining payment is not entitled to the notice of dishonour.
(iii) When the party charged would not suffer damage for want of a notice. In such a case neither presentment nor notice of dishonour is necessary is necessary, provided it is shown that at the time of drawing the instrument there were no funds belonging to the drawer in the hands of the drawee
(iv) When the party entitled to notice after due search, cannot be found.
(v) where there has been accidental omission to give notice, provided the omission has been caused by an unavoidable circumstances, e.g., death or dangerous malady of the holder or his agent, or other inevitable accident, or overwhelming catastrophe not attributable to the default, misconduct or negligence of the party tendering notice. (vi) when one of the drawers is acceptor. Form this, it is also possible to deduce a further rule that notice of dishonour is not necessary for charging the drawer where the drawer and drawee of a bill are partners does not give rise to the presumption that they are partners in respect of the drawing of the bill, or that the bill was drawn by one of them on behalf of both. Such a case does not fall under purview of the rule mentioned above, so as to dispense with notice, (vii) in the case of promissory note which is not negotiable, (viii) when the party entitled to notice, knowing the facts, promises unconditionally to pay the amount due on the instrument.
Law relating to Notice of Dishonour
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