Negotiable Instruments Act, Section 93

Negotiable Instruments Act, Section 93: By and to Whom Notice Should Be Given

Section 93 of the Negotiable Instruments Act, 1881 lays down the rules regarding notice of dishonour of a negotiable instrument and specifies who must give such notice and to whom it must be given in order to make other parties liable.

The section is based on the principle that parties secondarily liable on a negotiable instrument are entitled to receive information regarding dishonour so that they may take necessary protective measures.

1. Meaning of Notice of Dishonour

Notice of dishonour is a formal communication informing a party that a negotiable instrument has been dishonoured either by non-acceptance or by non-payment.

The notice preserves the holder’s rights against secondary parties, informs liable parties that the instrument has not been honoured, and enables them to safeguard their interests.

2. Applicability of the Provision

Section 93 applies where a promissory note, bill of exchange, or cheque is dishonoured by non-acceptance or non-payment, and governs the giving of notice after such dishonour.

3. Instruments Covered Under the Section

The section applies to promissory notes, bills of exchange, and cheques, thereby extending the rule regarding notice of dishonour to all major negotiable instruments under the Act.

4. Dishonour by Non-Acceptance or Non-Payment

Notice may become necessary when a negotiable instrument is dishonoured either by non-acceptance, such as refusal of acceptance of a bill of exchange, or by non-payment, such as failure to pay at maturity or upon demand.

The occurrence of such dishonour gives rise to the requirement of giving notice to parties secondarily liable on the instrument.

5. Persons Entitled to Give Notice

The section provides that notice of dishonour may be given either by the holder of the instrument or by any party thereto who remains liable on it.

i) Notice by Holder

The holder, being the person entitled to recover the amount due, may directly give notice of dishonour to the parties sought to be charged.

ii) Notice by Liable Party

A party who remains liable on the instrument and who may later seek reimbursement from prior parties may also give notice.

6. Persons to Whom Notice Must Be Given

The section provides that notice must be given to all parties whom the holder seeks to make severally liable on the instrument, meaning each separately liable party must receive notice. 

7. Several Liability

Several liability means the separate liability of each party, such as individual indorsers on a bill, and therefore notice must ordinarily be given to each liable party to preserve rights against them.

8. Joint Liability

The section provides that where parties are jointly liable, notice to any one of them is sufficient notice to all jointly liable parties, thereby simplifying the process of giving notice in cases of joint obligations.

9. Purpose of Notice of Dishonour

Notice is important because it informs parties secondarily liable that the instrument has been dishonoured, enabling them to protect their interests, arrange payment, recover from prior parties, and avoid further loss, thereby promoting fairness and commercial certainty.

10. Consequence of Failure to Give Notice

If proper notice of dishonour is not given to parties entitled to receive it, such parties may be discharged from liability and the holder may lose the right to proceed against them under the instrument.