Negotiable Instruments Act, Section 91

Negotiable Instruments Act, Section 91: Dishonour by Non-Acceptance

Section 91 of the Negotiable Instruments Act, 1881 explains the circumstances in which a bill of exchange is said to be dishonoured by non-acceptance. 

The provision deals with situations where the drawee fails or refuses to accept the bill when properly called upon to do so, or where the law permits the holder to treat the bill as dishonoured.

This section is important because acceptance of a bill of exchange is a crucial step in fixing the liability of the drawee and ensuring payment at maturity. Failure of acceptance gives rise to immediate rights and remedies in favour of the holder against prior parties.

1. Meaning of Dishonour by Non-Acceptance

A bill of exchange is dishonoured by non-acceptance when the drawee fails to accept the bill upon proper presentment, and acceptance signifies the drawee’s agreement to honour the bill and pay the amount due at maturity.

Where such acceptance is refused, withheld, or legally ineffective, the bill is treated as dishonoured by non-acceptance, which generally occurs before the bill reaches maturity.

2. Applicability of the Provision

Section 91 applies specifically to bills of exchange and concerns situations involving presentment of the bill for acceptance and failure or refusal of the drawee to accept it.

The section also covers circumstances where acceptance cannot legally or properly occur, and it does not apply in the same manner to promissory notes or cheques because acceptance is peculiar to bills of exchange.

3. Requirement of Due Presentment for Acceptance

The section provides that dishonour by non-acceptance occurs when the drawee makes default in acceptance upon being duly required to accept the bill, and this requires proper presentment of the bill for acceptance.

The holder must comply with legal requirements relating to presentment and give the drawee a valid opportunity to accept, since only then can refusal or default amount to dishonour by non-acceptance.

4. Default in Acceptance

Default in acceptance occurs where the drawee refuses acceptance, fails to accept within the prescribed time, or does not return the accepted bill, and such conduct amounts to dishonour by non-acceptance.

5. Several Drawees Not Being Partners

The section provides that where several drawees who are not partners are named in a bill, acceptance ordinarily requires all of them, and refusal or default by even one drawee may result in dishonour by non-acceptance.

6. Cases Where Presentment Is Excused

The section provides that where presentment is legally excused and the bill is not accepted, it is treated as dishonoured by non-acceptance even without actual presentment.

7. Drawee Incompetent to Contract

The section further provides that where the drawee is incompetent to contract, such as being a minor or of unsound mind, the bill may be treated as dishonoured by non-acceptance since no valid acceptance can be given.

8. Qualified Acceptance

The section provides that where acceptance is qualified by conditions or changes in amount, place, or time of payment, the holder may refuse such modified acceptance and treat the bill as dishonoured by non-acceptance.

9. Importance of Dishonour by Non-Acceptance

Dishonour by non-acceptance gives the holder immediate rights against the drawer and indorsers, allowing notice of dishonour and legal proceedings to be initiated without waiting for the bill’s maturity.