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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Anil Traders accepted a bill of exchange for Rs 60,000 drawn by Bhavna, payable to Chetan. On the due date the bill is presented to Anil Traders, who refuses to pay. Under the Negotiable Instruments Act, 1881, what is the position of the bill?

The bill is dishonoured by non-payment. It was already accepted, so refusal on the due date is a failure to pay. Non-acceptance applies only when the drawee refuses to accept when the bill is first presented for acceptance.

  1. AIt stands dishonoured by non-paymentCorrect
  2. BIt stands dishonoured by non-acceptance
  3. CIt stays valid and cannot be treated as dishonoured until it is presented again
  4. DIt is discharged because the drawer has not been informed

Explanation

A bill that has already been accepted and is presented for payment on its due date is dishonoured by non-payment if the acceptor refuses to pay. Dishonour by non-acceptance arises only when acceptance is refused at the earlier presentment for acceptance. Dishonour takes effect on refusal, and notice only preserves the holder's rights against prior parties.

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