Notice of Dishonour and Reasonable Time (Sections 93 to 98 and 105 to 107)

The drawer and indorsers of an instrument are entitled to know promptly that it has been dishonoured, so that they can protect themselves against the parties liable to them. The Act therefore makes notice of dishonour a condition of their liability. This note explains who must give notice and to whom, its form and timing, the chain of notices back up the instrument, the cases where notice is unnecessary, and the rules on "reasonable time".

1. By Whom and to Whom (Section 93)

Section 93, Negotiable Instruments Act, 1881

When a promissory note, bill of exchange or cheque is dishonoured by non-acceptance or non-payment, the holder thereof, or some party thereto who remains liable thereon, must give notice that the instrument has been so dishonoured to all other parties whom the holder seeks to make severally liable thereon, and to some one of several parties whom he seeks to make jointly liable thereon.

Nothing in this section renders it necessary to give notice to the maker of the dishonoured promissory note or the drawee or acceptor of the dishonoured bill of exchange or cheque.

By whom: the holder, or any party who remains liable on the instrument.
To whom: every party the holder seeks to make severally liable (the drawer and each indorser), and one of several parties sought to be made jointly liable.
Not needed for principal debtors: the maker of a note and the drawee or acceptor of a bill or cheque are not entitled to notice.
Effect of failure: a party who should have received notice and did not is discharged as against the holder.

2. Mode and Content (Section 94)

Recipient: the party himself, his authorised agent, his legal representative if he has died, or his assignee if he has been declared insolvent.
Form: oral or written, in any form; if written, it may be sent by post.
Content: it must inform the party, expressly or by reasonable intendment, that the instrument has been dishonoured, in what way, and that he will be held liable.
Place: at his place of business, or if he has none, his residence.
Time: within a reasonable time after dishonour (Section 106).
Miscarriage in post: a notice duly addressed and posted is valid even if it miscarries.

3. The Chain of Notices (Sections 95 to 97)

Transmission (Section 95): a party who receives notice must, to keep any prior party liable to himself, pass notice on to that party within a reasonable time, unless the prior party has already received due notice from someone else.
Agent for presentment (Section 96): where the instrument was deposited with an agent, such as a bank, for presentment, the agent has the same time to notify his principal as a holder would have, and the principal has a further like period to notify prior parties.
Death of recipient (Section 97): notice sent to a party who has died, by someone unaware of the death, is sufficient.

4. When Notice Is Unnecessary (Section 98)

No notice of dishonour is necessary:

(a) when it is dispensed with by the party entitled to it;
(b) to charge the drawer when he has countermanded payment;
(c) when the party charged could not suffer damage for want of notice;
(d) when the party entitled cannot be found after due search, or the party bound to give it is unable to do so without fault;
(e) to charge the drawers when the acceptor is also a drawer;
(f) for a promissory note that is not negotiable;
(g) when the party entitled, knowing the facts, promises unconditionally to pay.

⚠ Note

The civil notice of dishonour under Section 93 is different from the statutory demand notice under Section 138(b), which the payee must send to the drawer within 30 days of receiving the bank's information of dishonour, as a condition for prosecution (Topic 44).

5. Reasonable Time (Sections 105 to 107)

Section 105, Negotiable Instruments Act, 1881

In determining what is a reasonable time for presentment for acceptance or payment, for giving notice of dishonour and for noting, regard shall be had to the nature of the instrument and the usual course of dealing with respect to similar instruments; and, in calculating such time, public holidays shall be excluded.

General test (Section 105): the nature of the instrument and the usual course of dealing with similar instruments; public holidays are excluded. It applies to presentment, notice and noting.
Different places (Section 106): if the holder and the party to be notified live or do business in different places, notice is in time if despatched by the next post or on the day after the day of dishonour.
Same place (Section 106): if they are in the same place, notice is in time if despatched so as to reach the party on the day after the day of dishonour.
Transmitting notice (Section 107): a party who receives notice transmits it in time if he does so within the same time after receipt as he would have had as holder.

⚠ Key point

On dishonour, the holder or a party still liable must give notice of dishonour to every party he seeks to make severally liable, and to one of those jointly liable; the maker, drawee and acceptor need not be notified (Section 93). Notice may be oral or written, in any form, by post, to the party or his agent, legal representative or assignee, and must state that the instrument has been dishonoured, how, and that he will be held liable; a posted notice that miscarries is still valid (Section 94). Each recipient must pass it on to prior parties (Sections 95 to 97). Notice is unnecessary in the seven cases in Section 98. A reasonable time depends on the nature of the instrument and usage (Section 105): next post or next day for different places, arrival next day for the same place (Section 106).

6. Related Topics and Provisions

Dishonour (Topic 29)
Noting and protest (Topic 31)
Notice under Section 138 (Topic 44)