Meaning of Notice of Dishonour

There is the liability of several persons behind a negotiable instrument and they are variously concerned with it.If the instrument is dishonoured, all of them are affected. In order to affect them and make them liable, it is essential that on the dishonour of an instrument, its information must begiven to them.As per Sec. 93 of the Indian Negotiable Instruments

Act, as soon as the instrument is dishonoured, it is the duty of the holder to inform the other parties in this connection. If he doesn’t inform, the other parties shall not be liable for the amount of the instrument. Hence, in order to make them liable, it is quite necessary that they be informed accordingly.

It is evident that in the event of dishonour, the information must be given by notice. If due to his carelessness, the holder does not inform in due time, the other parties shall automatically become free from liability, specially in that condition when the prior parties have somehow suffered loss. For instance, if the orderer of the instrument is not informed about the dishonour, and after sometime, he becomes insolvent, he shall become free from the liability of the Instrument. But on the promisor or acceptor not having been informed, they will not become free from liability.

Who Must Inform?

On the dishonour of any instrument, information regarding dishonour should be given by holder, endorser, or any other person liable with regard to the instrument. Hence, if by any party liable, information is given to other party, the holder shall get its benefit as was laid down in the case of Horrison Vs. Eskoi. In the case East Vs. Smith, according to the judgement, if by some unconcerned person the information regarding any bill, cheque or promissory note dishonour is given, it shall neither be legal nor could be admissible.

It is also an important matter that due to the information not being given by the holder, if some party becomes free from the liability, and if he passes on this information to any Other party, such information shall be ineffective since, the informant is not liable.

Information through Representative: The information regarding dishonour could also be given by a representative. It is not necessary for the representative that on whose behalf he is giving the information. Being representative, he may send the information under his own name too.Here, it is not necessary that he must be the representative of that party and the information so given shall be quite valid.

Whom Should the Information be
Given?

The following are the cases in which the information be given to proper party:

(1) Whom Intended to be Made Liable- Besides the promisor, acceptor or the person ordered, those all other parties are not required to be necessarily informed since they themselves are dishonoring the bill or pronote. It is also clear here that those who would receive information, could become liable. Hence, if the holder desires to make all the previous parties liable, all of them must be given information. It is likely that merely on giving information to the endorser, he may not pass on the information to the others.

(2) To the Representative-If the party is not available, the information could be given to his representative, who within reasonably due time, could be able to inform his master and the other concerned parties.

(3) To the Liquidator- If any party receiving information, has become insolvent, the information may be given to the official liquidator.

(4) To Official Successor- If some party expires, the information of dishonour should be given to the legal successor.

(5) To Joint Endorsers- If some instrument has been jointly endorsed by various persons, for justification, they.

6.should be separately informed. But if one of these is authorised for directing all the activities, then information need not be given to all of them.

(6) In Case of Firm, Company or Organisation-If information is to be given to some firm, company or any organisation, then the personal information is not needed. Itis sufficient to inform any secretary, proprietor, or any official of the body.

(7) Hindu Undivided Family- In case of a Hindu Undivided Family, information must be given to the head of the family, mostly designated as the ‘Karta’.