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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

Meera Traders issues a cheque to Kiran Suppliers. The cheque is dishonoured by the drawee bank. Under Section 30, the drawer's liability to compensate the holder arises provided that:

The drawer must compensate the holder on dishonour provided due notice of dishonour has been given to, or received by, the drawer. Section 30 makes notice the condition for liability. No prior suit against the bank, insolvency or repeated endorsement is required.

  1. AThe holder has first sued the bank for refusing payment
  2. BDue notice of dishonour has been given to, or received by, the drawerCorrect
  3. CThe drawer has been declared insolvent by a court
  4. DThe cheque has been endorsed at least twice before presentment

Explanation

Section 30 makes the drawer bound to compensate the holder on dishonour, provided due notice of dishonour has been given to or received by the drawer. Suing the bank, insolvency or multiple endorsements are not conditions stated in the section.

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