Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Dishonour, Noting, Protest and Compensation under the NI Act

Updated 11 October 2026 · Fact-checked

An instrument is dishonoured when the acceptor, maker or drawee refuses or fails to accept or pay it when duly required. The holder must give notice of dishonour to the parties he wants to make liable. He may have it noted and protested by a notary public. Compensation covers the amount, expenses and interest.

Understand Dishonour, Noting, Protest and Compensation

A negotiable instrument is a promise or order to pay money. Dishonour is what happens when that promise fails at the point of acceptance or payment. The Negotiable Instruments Act, 1881 then gives the holder a clear route to recover from the parties behind the instrument.

Dishonour by non-acceptance (Section 91) applies to a bill of exchange. It occurs when the drawee, or one of several drawees who are not partners, defaults in acceptance after being duly required to accept. It also occurs where presentment is excused and the bill is not accepted. If the drawee is incompetent to contract, or the acceptance is qualified, the bill may be treated as dishonoured.

Dishonour by non-payment (Section 92) applies to a promissory note, bill or cheque. It occurs when the maker of the note, the acceptor of the bill or the drawee of the cheque defaults in payment after being duly required to pay.

After dishonour, three things follow. First, notice of dishonour (Section 93): the holder, or a party who remains liable on it, must tell the other parties he wants to make liable. Second, optional noting and protest by a notary public (Sections 99 and 100). Third, compensation (Section 117): the holder recovers the amount and expenses from the liable party.

Think of notice as the warning, noting as a quick official record, protest as the formal certificate, and compensation as the money you get back. The Act also says what is a reasonable time (Section 105) and what happens if the instrument is acquired after dishonour (Section 59).

Key rules to remember

Dishonour by non-acceptance (Section 91): Drawee (or one of several drawees not being partners) defaults in acceptance on being duly required, or presentment is excused and the bill is not accepted; Applies to bills of exchange. A bill may also be treated as dishonoured if the drawee is incompetent to contract or the acceptance is qualified.
Dishonour by non-payment (Section 92): Maker of note / acceptor of bill / drawee of cheque defaults in payment on being duly required to pay; Applies to promissory notes, bills and cheques.
Notice of dishonour (Section 93): Holder or a party remaining liable gives notice to all parties to be made severally liable, and to one of several parties to be made jointly liable; No notice is necessary to the maker of a note, or the drawee or acceptor of a bill or cheque.
Noting (Section 99): Notary public notes dishonour on the instrument or an attached paper, within a reasonable time; The note must state the date of dishonour, the reason (or why the holder treats it as dishonoured) and the notary's charges.
Protest (Section 100): Noting + certificate by a notary public = protest; Applies to promissory notes and bills. Protest for better security arises when the acceptor becomes insolvent or his credit is publicly impeached before maturity.
Noting equivalent to protest (Section 104A): Where protest is required within a time, noting before that time is enough; formal protest can be extended later as of the date of noting; Protects the holder who is short of time.
Notice of protest (Section 102): Where protest is required by law, notice of protest replaces notice of dishonour; The notary public who makes the protest may give the notice.
Reasonable time (Section 105): Depends on the nature of the instrument and usual course of dealing; public holidays excluded; Applies to presentment, notice of dishonour and noting.
Compensation (Section 117): Holder: amount due + expenses properly incurred in presenting, noting and protesting. Indorser who paid: amount paid + interest at 18% per annum from payment until tender or realisation + all expenses caused by dishonour and payment; Where the parties live at different places, the sum is at the current rate of exchange between the two places.

How to solve Dishonour, Noting, Protest and Compensation questions

Use this order for any question on dishonour, noting, protest or compensation. It gives you the provision, the analysis and the conclusion that ICSI-style answers need.

1Identify the instrument: promissory note, bill of exchange or cheque. Protest applies to notes and bills.
2Decide the type of dishonour. Non-acceptance is only for bills (Section 91). Non-payment applies to all three (Section 92).
3Name the parties: who is the holder, who dishonoured, and who the holder wants to make liable.
4Check notice under Section 93. Who must give it, to whom, and whether the party is one who needs no notice (maker, drawee, acceptor).
5Check noting or protest. Was it done by a notary public within a reasonable time (Sections 99, 100, 105)? Is Section 104A relevant?
6Apply Section 117 to compute compensation: amount, expenses, exchange, and 18% interest for an indorser who paid.
7Write the conclusion in one clear line, citing the section.

Quickest way: Dishonour answer in four lines

When to use it: Use this for short-note questions and when time is tight.

Define the dishonour in one sentence with Section 91 or 92.
State who must give notice and to whom (Section 93), and who is exempt.
Say noting is a notary's record on or attached to the instrument (Section 99), and protest is the notary's certificate (Section 100).
Close with compensation under Section 117: amount + expenses, plus 18% interest for an indorser who paid.

Common mistakes in Dishonour, Noting, Protest and Compensation

Saying a cheque can be dishonoured by non-acceptance.
Students link all three instruments to both types of dishonour.
Fix: Non-acceptance is for bills of exchange. A cheque is dishonoured by non-payment (Section 92).
Writing that notice of dishonour must be given to every party including the maker or drawee.
Students read Section 93 as covering everyone.
Fix: Notice goes to the parties the holder seeks to make liable. Section 93 says it is not necessary to give notice to the maker of a note, or the drawee or acceptor of a bill or cheque.
Treating noting and protest as the same thing.
Both are done by a notary public and appear together in answers.
Fix: Noting is the record of dishonour made on the instrument (Section 99). Protest is the notary's certificate after noting (Section 100). Noting is the first step.
Forgetting the interest rate for an indorser.
Students remember the amount and expenses only.
Fix: Under Section 117(c) an indorser who paid gets the amount, interest at 18% per annum from the date of payment until tender or realisation, and all expenses.
Saying protest is compulsory for every dishonour.
Students assume formality is always needed.
Fix: The holder 'may' cause noting and protest. Notice of protest replaces notice of dishonour only where protest is required by law (Section 102).
Counting public holidays in reasonable time.
Students use calendar days.
Fix: Section 105 excludes public holidays and looks at the nature of the instrument and usual dealings.

Worked examples

Example 1

Distinguish between noting and protest of a dishonoured bill of exchange.

Show the solution

Provision: When a note or bill is dishonoured by non-acceptance or non-payment, the holder may cause the dishonour to be noted by a notary public (Section 99).
Noting is made upon the instrument, or on a paper attached to it, or partly on each. It must be made within a reasonable time and must state the date of dishonour, the reason assigned (or why the holder treats it as dishonoured) and the notary's charges.
Protest: The holder may, within a reasonable time, cause the dishonour to be noted and certified by a notary public. That certificate is called a protest (Section 100).
Difference: noting is the record or minute of dishonour. Protest is the formal certificate that follows it.
Section 104A: where protest is required within a time, noting before that time is enough, and the formal protest can be drawn up later as of the date of noting.

Answer: Noting is the notary's record of dishonour made on or attached to the instrument (Section 99). Protest is the notary's certificate of that noted dishonour (Section 100). Noting comes first, and under Section 104A noting within time is sufficient, with protest extended later.

Example 2

A draws a bill on B in favour of C. C indorses it to D, and D indorses it to E. B refuses to pay at maturity. E gives notice to D and D pays E the bill amount of ₹50,000. Who can D claim compensation from, and what can D recover?

Show the solution

Provision: The bill is dishonoured by non-payment, because the acceptor defaults in payment on being duly required (Section 92). We assume B accepted it.
Notice: E, the holder, must give notice to the parties he seeks to make liable (Section 93). No notice is needed to B as acceptor.
D has paid and is an indorser who was liable. D can recover from parties prior to him on the instrument, namely C and A, subject to their liability.
Compensation under Section 117(c): D is entitled to ₹50,000 with interest at 18% per annum from the date of payment until tender or realisation, together with all expenses caused by the dishonour and payment.
If D and the party charged reside at different places, D is entitled to the sum at the current rate of exchange between the two places (Section 117(d)).

Answer: D can claim from the prior parties liable to him, such as C and A. He recovers ₹50,000, interest at 18% per annum from the date of payment until tender or realisation, and all expenses caused by the dishonour and payment (Section 117(c)).

Exam tips

Learn Sections 91, 92, 93, 99, 100, 102, 104A, 105 and 117 as a set. Questions often ask for a short note or a distinction.
Use the Section 93 exemption in every notice question: maker, drawee and acceptor need no notice.
In compensation problems, split the answer: amount, expenses, exchange rate, interest. Mention 18% only for an indorser who paid.
Conclude every problem answer with a one-line finding citing the section.
For distinctions, use two short columns of points in sentences: who does it, when, what it contains, and the section.

Practice questions from Law relating to Negotiable Instruments

Dishonour, Noting, Protest and Compensation in other exams

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

CMA IntermediateDishonour, Noting, Protest and Discharge

Dishonour, Noting, Protest and Compensation: frequently asked questions

What is the difference between noting and protest?

Noting is the notary public's record of dishonour made on the instrument or an attached paper (Section 99). Protest is the notary's certificate of the noted dishonour (Section 100). Noting comes first.

Is notice of dishonour needed for every party?

No. The holder gives notice to the parties he wants to make liable (Section 93). Notice to the maker of a note, or the drawee or acceptor of a bill or cheque, is not necessary.

What compensation can an indorser who paid recover?

Under Section 117(c) he recovers the amount paid with interest at 18% per annum from the date of payment until tender or realisation, plus all expenses caused by dishonour and payment.

Is protest compulsory?

Section 100 says the holder may cause noting and certification by a notary. Notice of protest replaces notice of dishonour only where the law requires protest (Section 102).