Skip to content

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

Imran holds a bill drawn by Jaya on Kabir and accepted by Kabir, with Lalit as an endorser. The bill is dishonoured on maturity. Imran sends notice of dishonour to Jaya but not to Lalit. Imran later sues Lalit. What is the likely position?

Imran cannot recover from Lalit. A holder must give notice of dishonour to every prior party he wants to hold liable. Notice to Jaya, the drawer, does not count as notice to Lalit, so Lalit is not liable, while Jaya remains liable.

  1. AImran cannot recover from Lalit, as notice was not given to himCorrect
  2. BImran can recover from Lalit because notice to the drawer is notice to every party
  3. CImran can recover from Lalit only if Lalit had changed his address
  4. DImran can recover from Lalit as an endorser needs no notice of dishonour

Explanation

The holder must give notice of dishonour to each party he wishes to make liable, such as the endorser. Notice to the drawer does not substitute for notice to Lalit. Without notice to Lalit, or a valid excuse, he is not liable to Imran, though Imran can still pursue Jaya.

Did you get it right without looking?

One question tells you little. A timed set on The Negotiable Instruments Act, 1881 shows your real accuracy, how long you take and where you lose marks.

Practise The Negotiable Instruments Act, 1881Free diagnostic mock

More The Negotiable Instruments Act, 1881 questions