Business Laws and Ethics · Negotiable Instruments Act, 1881

Dishonour, Noting, Protest and Discharge of Negotiable Instruments

Updated 10 October 2026 · Fact-checked

An instrument is dishonoured when the drawee or maker refuses to accept or pay it. The holder gives notice of dishonour to prior parties. For a dishonoured note or bill, the holder may have a notary public note the dishonour; noting leads to formal protest. Parties are discharged by cancellation, release, payment or material alteration.

Understand Dishonour, Noting, Protest and Discharge

A negotiable instrument can fail at two points. A bill may be refused at acceptance, or any instrument may be refused at payment. Either refusal is dishonour. Once an instrument is dishonoured, the holder looks to the earlier parties (drawer and indorsers) for the money. To keep that claim alive, the holder must follow the steps the Act lays down.

The first step is notice of dishonour. The holder tells the prior parties that the instrument was dishonoured. Notice must be given within a reasonable time. Under Section 105, what is reasonable depends on the nature of the instrument and the usual course of dealing with similar instruments. Public holidays are excluded when you count that time.

The second step is noting. Under Section 99, when a promissory note or bill of exchange is dishonoured by non-acceptance or non-payment, the holder may have a notary public note the dishonour on the instrument, on a paper attached to it, or partly on each. The note must be made within a reasonable time after dishonour. It must give the date of dishonour, the reason assigned (or, if there was no express refusal, why the holder treats it as dishonoured) and the notary's charges.

The third step is protest. Protest is the formal certificate of dishonour drawn up by the notary. Under Section 104A, if a bill or note must be protested within a specified time or before some further step, it is enough that it was noted for protest within that time. The formal protest can be drawn up later as of the date of noting. Under Section 102, where protest is required by law, notice of protest is given instead of notice of dishonour, in the same manner and on the same conditions, and the notary may give it.

Finally, discharge ends a party's liability. A party can be freed by cancellation, release or payment (Section 82), by a material alteration (Section 87), or by the holder accepting a qualified acceptance that the party did not agree to (Section 86). Learn each ground with its exact condition. Examiners test the conditions.

Key rules to remember

Noting (Section 99): Dishonoured note or bill → holder may have a notary public note it, within a reasonable time; The note states the date of dishonour, the reason, and the notary's charges. Noting is the holder's option, not a duty.
Noting equals protest for time limits (Section 104A): Noted for protest within the time → sufficient; formal protest may be drawn up later as of the date of noting; Applies where a bill or note must be protested within a specified time or before some further proceeding.
Notice of protest (Section 102): Where protest is required by law → notice of protest replaces notice of dishonour; Same manner and conditions. The notary public may give the notice.
Protest after dishonour by non-acceptance (Section 103): Bill payable at a place other than the drawee's residence, dishonoured by non-acceptance → may be protested for non-payment at the place specified, without further presentment to the drawee, unless paid before or at maturity; Do not state this for every bill. It applies only to bills drawn payable at some other place than the drawee's stated residence.
Reasonable time (Section 105): Reasonable time depends on the nature of the instrument and usual course of dealing; public holidays are excluded; Applies to presentment, notice of dishonour and noting.
Discharge of maker, acceptor or indorser (Section 82): (a) cancellation with intent to discharge; (b) release by the holder; (c) payment in due course by such party, if the instrument is payable to bearer or indorsed in blank; In (c), the discharge is as against all parties to the instrument.
Material alteration (Section 87): Material alteration → instrument void against any party who was a party at the time of alteration and did not consent; Exception: the alteration was made to carry out the common intention of the original parties. If an indorsee makes it, his indorser is discharged from liability to him on the consideration. Subject to sections 20, 49, 86 and 125.
Acceptor or indorser and earlier alteration (Section 88): An acceptor or indorser is bound by his acceptance or indorsement despite any previous alteration; Alteration before he signed does not free him.
Payment where alteration is not apparent (Section 89(1)): Payer or banker pays per the apparent tenor, in due course → discharged; payment cannot be questioned; Covers instruments materially altered but not appearing so, and cheques that do not appear crossed or whose crossing was obliterated.
Instrument taken after dishonour or when overdue (Section 59): Holder who takes it after dishonour (with notice) or after maturity has only his transferor's rights; Proviso: a person who in good faith and for consideration takes an accommodation note or bill after maturity may recover from any prior party.
Qualified acceptance (Section 86): Holder acquiesces in qualified or partial acceptance → previous parties who did not consent are discharged, unless they assent on notice; Acceptance is qualified if conditional, for part only, for a different place, or for a different time.

How to solve Dishonour, Noting, Protest and Discharge questions

Use this order for any problem or theory question on dishonour, noting, protest or discharge.

1Identify the instrument: promissory note, bill of exchange or cheque. Noting and protest are framed for notes and bills.
2Identify the failure: refusal to accept, or refusal to pay at maturity. Name it as dishonour by non-acceptance or by non-payment.
3Check who is liable now: the drawer and indorsers, subject to proper notice of dishonour within a reasonable time (exclude public holidays).
4State the optional formal steps: noting by a notary public within a reasonable time, then protest, with the Section 104A point that noting for protest in time is enough.
5If the question mentions a change to the instrument, test it: was it material, did the party consent, was it to carry out the common intention, and was it apparent to the payer (Sections 87, 88, 89).
6If the question mentions release, cancellation, payment or a part or conditional acceptance, match it to Section 82 or Section 86 and state the exact condition.
7Apply the rule to the facts, name each party and say whether they are liable or discharged.
8Close with a one-line conclusion that answers the exact question asked.

Quickest way: Three-question filter

When to use it: Use this for MCQs and short case questions where you have under two minutes.

Ask: what went wrong? Refusal to accept or to pay means dishonour; a change to the document means alteration.
Ask: what did the holder do next? Notice, noting, or protest. Remember noting is the first record by the notary and protest is the formal certificate.
Ask: who is freed? Match the facts to cancellation, release, payment, material alteration or non-consenting parties to a qualified acceptance, then check the exception in the section.

Common mistakes in Dishonour, Noting, Protest and Discharge

Treating noting and protest as the same thing.
Both are done by a notary public and both follow dishonour, so they blur together.
Fix: Noting is the notary's record of the dishonour on or attached to the instrument (Section 99). Protest is the formal certificate. Under Section 104A, noting in time is enough for time-limit purposes.
Saying every material alteration voids the instrument against everyone.
Students memorise the first line of Section 87 and skip its conditions.
Fix: It is void only against a party who was a party at the time and did not consent, and not where the alteration was made to carry out the common intention of the original parties.
Saying noting is compulsory.
Students confuse it with notice of dishonour.
Fix: Section 99 says the holder 'may' cause the dishonour to be noted. Where protest is required by law, Section 102 replaces notice of dishonour with notice of protest.
Freeing an acceptor or indorser because the instrument was altered before he signed.
Students apply Section 87 without checking when the party joined.
Fix: Section 88 binds an acceptor or indorser to his acceptance or indorsement despite any previous alteration.
Forgetting the condition in discharge by payment.
Students write 'payment discharges all parties' without the condition.
Fix: Under Section 82(c), payment in due course by the maker, acceptor or indorser discharges all parties only if the instrument is payable to bearer or indorsed in blank.
Counting public holidays in the reasonable time for notice.
Students count calendar days.
Fix: Section 105 excludes public holidays and tells you to look at the nature of the instrument and the usual course of dealing.

Worked examples

Example 1

Meera draws a bill on Kiran for ₹50,000 in favour of Anand. Kiran refuses to accept it. Anand wants to preserve his rights and have a formal record of the refusal. Advise Anand.

Show the solution

The bill was refused at the acceptance stage, so it is dishonoured by non-acceptance.
Anand should give notice of dishonour to Meera, the drawer, and to any indorsers, within a reasonable time. Under Section 105 the time depends on the nature of the instrument and usual dealing, and public holidays are excluded.
Under Section 99, Anand may have a notary public note the dishonour on the bill or on a paper attached to it, within a reasonable time after dishonour.
The note must record the date of dishonour, the reason assigned by Kiran (or why Anand treats it as dishonoured) and the notary's charges.
If protest is needed within a time limit, Section 104A says that noting for protest within that time is sufficient. The formal protest can be drawn up later as of the date of noting.

Answer: Anand should give notice of dishonour within a reasonable time and may have the dishonour noted by a notary public, and the protest can follow as of the date of noting.

Example 2

Ravi makes a promissory note for ₹40,000 payable to Sunil. Sunil indorses it to Tara. Without anyone's consent, Tara changes the amount to ₹90,000 to gain an advantage. Examine the effect on Sunil and Ravi.

Show the solution

Changing the amount is a material alteration.
Under Section 87, a material alteration makes the instrument void against anyone who was a party at the time and did not consent, unless it was made to carry out the common intention of the original parties.
Ravi and Sunil were parties at the time and did not consent. The alteration was not to carry out their common intention.
Because the alteration was made by an indorsee, Section 87 also discharges her indorser, Sunil, from all liability to her on the consideration of the instrument.
So Tara cannot enforce the note against Ravi, and cannot hold Sunil liable to her.

Answer: The note is void against Ravi and Sunil, who did not consent, and Sunil is also discharged from liability to Tara as her indorser.

Exam tips

In theory answers, quote the exact condition or exception for each rule, especially Sections 82, 86 and 87. This is where step marks are lost.
Draw a short three-line chain in case answers: dishonour, notice, noting or protest. Then state the legal effect on each named party.
For MCQs, watch the word 'may'. Noting is optional. Also watch for the exception in Section 87 (common intention).
Write the section number only when you are sure of it. The sections in this page are safe to cite.
Keep a one-line distinction ready: noting is the record made by the notary; protest is the formal certificate that follows.

Practice questions from Negotiable Instruments Act, 1881

Dishonour, Noting, Protest and Discharge in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Dishonour, Noting, Protest and Discharge: frequently asked questions

What is the difference between noting and protest?

Noting is the notary public's record of the dishonour, made on the instrument or on an attached paper under Section 99. Protest is the formal certificate of dishonour. Under Section 104A, if protest is required within a time, noting within that time is enough, and the formal protest can be drawn up later as of the date of noting.

Is noting compulsory after dishonour?

No. Section 99 says the holder may cause the dishonour to be noted. It becomes important where the law requires protest, because then notice of protest takes the place of notice of dishonour under Section 102.

How is a party discharged from liability on a negotiable instrument?

A maker, acceptor or indorser is discharged by cancellation of his name with intent to discharge him, by release by the holder, or by payment in due course if the instrument is payable to bearer or indorsed in blank (Section 82). Other grounds include material alteration under Section 87 and non-consent to a qualified acceptance under Section 86.

What is the effect of a material alteration of an instrument?

Under Section 87, it makes the instrument void against any party who was a party at the time and did not consent. It does not do so if the alteration carried out the common intention of the original parties. An acceptor or indorser stays bound by his own signature despite a previous alteration (Section 88).