Distinction between discharge of a party and discharge of instrument: An instrument is said to be discharged only when the party who is ultimately liable thereon is discharged from liability. Therefore, discharge of a party to an instrument does not discharge the instrument itself. Consequently, the holder in due course may proceed against the other parties liable for the instrument. For example, the endorser of a bill may be discharged from his liability, but even then acceptor may be
(a) Dishonour by non - acceptance (section 91): A bill may be dishonored either by non acceptance or by non – payment. A dishonour by non - acceptance may take place in any one of the following circumstances: (i) when the drawee either does not accept the bill within forty – eight hours of presentment or refuse to accept it; (ii) when one of several drawees, not being partners, makes default in acceptance; (iii) when the drawee gives a qualified acceptance; (iv) when presented for acceptance is excused and the bill remains unaccepted; and (v) when the drawee is incompetent to contract.
Note that presentment is not necessary where the drawee after diligent, search cannot be discovered, or where the drawee is incompetent to contract or here the drawee is a fictitious person.
When a bill has been dishonoured by non- acceptance, it gives the holder an immediate right to have recourse against the drawer or the endorser. Since a dishonour by non -acceptance constitutes a material ground entitling the holder to take action against the drawer, he need not wait till the maturity of the bill for it to be dishonored on presentment for payment (Ram Ravij Jambekar vs. prulhaddas 20 Bom. 133).
(b) Dishonour by non-payment (section 92) : An instrument is dishonored by non-payment when the party primarily liable e.g., the acceptor of a bill, the maker of a not or the drawee of a cheque, make default in payment. An instrument is also dishonored for non-payment when presentment for payment excused and the instrument, when overdue, remains unpaid, under section 76 of the Act.
(a) Dishonour by non - acceptance (section 91): A bill may be dishonored either by non acceptance or by non – payment. A dishonour by non - acceptance may take place in any one of the following circumstances: (i) when the drawee either does not accept the bill within forty – eight hours of presentment or refuse to accept it; (ii) when one of several drawees, not being partners, makes default in acceptance; (iii) when the drawee gives a qualified acceptance; (iv) when presented for acceptance is excused and the bill remains unaccepted; and (v) when the drawee is incompetent to contract.
Note that presentment is not necessary where the drawee after diligent, search cannot be discovered, or where the drawee is incompetent to contract or here the drawee is a fictitious person.
When a bill has been dishonoured by non- acceptance, it gives the holder an immediate right to have recourse against the drawer or the endorser. Since a dishonour by non -acceptance constitutes a material ground entitling the holder to take action against the drawer, he need not wait till the maturity of the bill for it to be dishonored on presentment for payment (Ram Ravij Jambekar vs. prulhaddas 20 Bom. 133).
(b) Dishonour by non-payment (section 92) : An instrument is dishonored by non-payment when the party primarily liable e.g., the acceptor of a bill, the maker of a not or the drawee of a cheque, make default in payment. An instrument is also dishonored for non-payment when presentment for payment excused and the instrument, when overdue, remains unpaid, under section 76 of the Act.
Distinction between dishounour by non-acceptance and by non-payment. If a bill is dishonored by non-acceptance, there is no right of action against the drawee as he is not a party to the bill. The holder of the bill can proceed only against the drawer or endorser, if any, on Dishonour by non-payment the drawee can be sued.
Modes of dishonour of bills
![Modes of dishonour of bills]()
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