Third-year Law Notes & Flashcards

Introduction

Negotiable instruments such as promissory notes, bills of exchange, and cheques play a vital role in commercial transactions as substitutes for money and instruments of credit. These instruments facilitate smooth financial dealings by allowing easy transfer of rights from one person to another. However, situations may arise where such instruments are dishonoured, either due to refusal of acceptance or refusal of payment.

To provide authentic proof of such dishonour, the Negotiable Instruments Act, 1881 provides specific mechanisms known as Noting and Protest under Sections 99 to 104A. These procedures involve certification by a notary public and serve as formal evidence that the instrument has been dishonoured. While noting is a preliminary step, protest is a formal certificate confirming the dishonour.

Dishonour of Negotiable Instruments

A negotiable instrument may be dishonoured in the following ways:

Dishonour by Non-Acceptance – Applicable only to bills of exchange when the drawee refuses to accept the bill.

Dishonour by Non-Payment – Applicable to promissory notes, bills of exchange, and cheques when payment is refused at maturity.

When dishonour occurs, the holder must give notice of dishonour to prior parties such as the drawer and indorsers to make them liable.

Noting (Section 99)

Meaning

Noting refers to the recording of the fact of dishonour by a notary public on the negotiable instrument or on a separate attached paper.

It is a brief official note made after dishonour to authenticate that the instrument has been presented and dishonoured.

Procedure of Noting

When a bill of exchange or promissory note is dishonoured:

• The holder takes the instrument to a Notary Public.
• The notary again presents the instrument for acceptance or payment.
• If the drawee or acceptor still refuses, the notary records the dishonour on the instrument.

Contents of Noting

Noting must include the following details:

• Fact of dishonour
• Date of dishonour
• Reason for dishonour (if any)
• Notary's charges
• Reference to notary’s register
• Initials/signature of the notary public

Legal Nature of Noting

Noting itself does not create legal rights, but it serves as authentic evidence of dishonour.

It must be done within a reasonable time after dishonour.

It is not compulsory for inland bills, but it is often done for evidentiary purposes.

Example

A draws a bill of exchange on B for ₹50,000 payable to C after 30 days. When C presents the bill for payment, B refuses to pay due to insufficient funds. C takes the bill to a notary public, who records the refusal and enters the details on the instrument. This act is known as noting.

Protest (Section 100)

Meaning

A Protest is a formal certificate issued by a notary public confirming the dishonour of a negotiable instrument.

It is usually prepared after noting and contains a detailed declaration about the dishonour.

Definition

Protest is a formal notarial certificate attesting the dishonour of a bill of exchange or promissory note by non-acceptance or non-payment.

Purpose of Protest

The main purpose is to provide legal and authentic proof of dishonour, especially in international commercial transactions.

Legal Effect

Under the law, courts presume the fact of dishonour upon production of a protest, making it strong evidence in legal proceedings.

Types of Protest

1. Protest for Non-Acceptance

Occurs when the drawee refuses to accept the bill when presented.

Example:
A draws a bill on B payable after 3 months. When the bill is presented to B for acceptance, he refuses to accept it. The holder may get the bill protested for non-acceptance.

2. Protest for Non-Payment

Occurs when the acceptor refuses to pay the bill at maturity.

Example:
A bill accepted by B becomes payable after 90 days. When the holder presents it on the due date, B refuses to pay. The holder may get the bill protested for non-payment.

3. Protest for Better Security

Under certain circumstances, the holder may protest the bill before maturity.

This happens when the acceptor:

• becomes insolvent
• suspends payment
• absconds

In such cases, the holder may demand better security for payment.

Example:
If B accepts a bill but later becomes insolvent before maturity, the holder may protest the bill for better security.

Contents of Protest (Section 101)

A valid protest must contain:

• The instrument itself or its exact copy
• Name of the person requesting protest
• Name of the person against whom protest is made
• Statement that payment or acceptance was demanded and refused
• Time and place of demand and dishonour
• Signature of the notary public
• Details of acceptance for honour or payment for honour, if applicable

When Protest is Necessary

Inland Bills

Protest is optional.

Foreign Bills

Protest is mandatory if the law of the place where the bill is drawn requires it.

This is provided under Section 104 of the Negotiable Instruments Act, 1881.

Relationship Between Noting and Protest

Basis	Noting	Protest
Nature	Preliminary act	Formal certificate
Performed by	Notary Public	Notary Public
Purpose	Record dishonour	Official proof of dishonour
Time	Immediately after dishonour	Usually after noting
Legal effect	Limited evidentiary value	Strong legal evidence

Important Judicial Decisions

1. K. Bhaskaran v. Sankaran Vaidhyan Balan MANU/SC/0625/1999

The Supreme Court explained the legal consequences of dishonour of negotiable instruments and clarified procedural requirements such as presentation, dishonour, and notice under the Negotiable Instruments Act. The judgment emphasized the importance of establishing the fact of dishonour through reliable evidence.

2. Laxmi Dyechem v. State of Gujarat MANU/SC/1030/2012

The Supreme Court held that dishonour of cheques for reasons such as “account closed”, “payment stopped”, or “refer to drawer” would also amount to dishonour similar to insufficiency of funds. The case broadened the interpretation of cheque dishonour under the Act.

3. J. Thomas v. Thomas Job (2005) 6 SCC 478

The Court discussed liability arising from dishonour of negotiable instruments and the evidentiary importance of documentation proving dishonour, reinforcing the significance of formal procedures such as noting and protest.

Practical Significance of Noting and Protest

• Authentic proof of dishonour
• Facilitates legal action against prior parties
• Important in international trade
• Prevents fraudulent denial of dishonour
• Acts as documentary evidence in court

Conclusion

Noting and protest are important procedural safeguards under the Negotiable Instruments Act, 1881 that help establish the fact of dishonour of negotiable instruments. Noting acts as the preliminary recording by a notary public, while protest serves as the formal certificate confirming the dishonour. Although not mandatory in all cases—particularly for inland bills and cheques—they play a significant role in providing reliable legal evidence and protecting the rights of the holder. In commercial and international transactions, these mechanisms ensure transparency, accountability, and enforceability of financial obligations arising from negotiable instruments.

Copyright © 2026 Manupatra. All Rights Reserved.