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

Ravi holds a bill of exchange accepted by Shreya for Rs 70,000, due on 1 June. The bill is dishonoured by non-payment. Ravi does not give notice of dishonour to the drawer, Tarun, but sues Shreya, the acceptor. Which statement is correct?

Ravi can recover from Shreya. The acceptor is the principal debtor and is liable without any notice of dishonour. Failing to notify the drawer Tarun only costs Ravi his remedy against Tarun, not against the acceptor.

  1. ARavi can recover from Shreya, as the acceptor is primarily liable and needs no noticeCorrect
  2. BRavi cannot recover from Shreya because notice to the drawer was not given
  3. CRavi can recover only if he gives notice to Shreya within 24 hours
  4. DRavi loses all rights on the bill, including against Shreya, for want of notice

Explanation

Notice of dishonour is needed to charge secondary parties like the drawer and endorsers. The acceptor is the principal debtor and is liable on the bill without any notice. So Ravi may sue Shreya, though his claim against Tarun is lost. Option D wrongly extends the effect of missing notice to the acceptor.

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