Non-acceptance is a valid mode of dishonour for :

The correct answer is - Bill of Exchange

Key Points

• Non-acceptance is a valid mode of dishonour for a Bill of Exchange.
  • A Bill of Exchange is a negotiable instrument that requires the drawee’s acceptance to be valid.
  • If the drawee refuses to accept the bill when it is presented for acceptance, it is considered as dishonoured by non-acceptance.
  • The dishonour may occur due to several reasons, such as:
    • The drawee refuses to accept the bill.
    • The drawee is incapable of accepting the bill (e.g., insolvency).
    • Acceptance is not provided within the stipulated time.
  • In such cases, the holder of the bill may initiate legal action or protest the bill.

Additional Information

• Modes of Dishonour for Other Instruments
  • Cheque: A cheque is dishonoured by non-payment when the bank refuses to pay the amount due to insufficient funds, stop-payment instructions, or other reasons.
  • Promissory Note: A promissory note is dishonoured by non-payment, as it does not require acceptance by the payee or drawee.
  • Bank Draft: A bank draft is generally not dishonoured as it is a payment instrument guaranteed by the issuing bank.
• Legal Provisions
  • The rules regarding the dishonour of negotiable instruments are governed by the Negotiable Instruments Act, 1881.
  • Section 92 of the Act specifies the conditions under which a negotiable instrument is considered dishonoured.
  • For a Bill of Exchange, Section 91 explains the concept of dishonour by non-acceptance.
• Protest for Dishonour
  • When a bill is dishonoured by non-acceptance, the holder may prepare a formal document called a protest to record the dishonour.
  • The protest serves as evidence of the dishonour and is usually required for initiating legal proceedings.