MBA Buisness Law As per AKTU Syllabus

1. Negotiable Instruments Act,
1881

2. Dishonor of a negotiable instrument
A bill may be dishonored by non-acceptance
since only bill require acceptance or by non-
payment. A promissory note & cheque are
dishonored by non-payment only. When a
negotiable instrument is dishonored, the
holder must give a notice of dishonor to all
the prior parties in order to make them liable
on an instrument. (Sec. 93)

3. Dishonor by non-acceptance (Sec. 91)
A bill of exchange is dishonored by non-
acceptance in anyone of the following ways:-
a) If the drawee doesn’t accept the bill within 48
hours from the time of presentment though it
is duly presented for acceptance.
b) If there are several drawees & all of them do
not accept.
c) When drawee is incompetent to contract.
d) When the drawee is a fictitious person or
after reasonable search cannot be found.

4. Dishonor by non-payment (Sec. 92)
• A promissory note, bill of exchange or cheque
is said to be dishonored by non-payment
when the maker of the note, acceptor of the
bill or drawee of the cheque makes default in
the payment upon being duly required to pay
the same. (Sec. 92)

5. Endorsement
• An endorsement is a signature of the endorser
of an instrument with or without the
additional words or statement.
• It is most often written on the back of the
instrument itself. If there is no space on the
instrument, endorsement can be written on a
separate piece of paper called ‘allonge’. The
allonge must be firmly affixed to the
instrument so as to become a part of it.

6. Essentials of a valid endorsement
a) It must be made on the instrument or it may
be made on separate paper attached to it
called allonge.
b) It should be made in ink.
c) It must be made by the holder of the
instrument.
d) It must be made with an intention to
negotiate the instrument.
e) It must be signed by the endorser.

7. Effect of endorsement
• The ownership of the instrument is
transferred from endorser to the endorsee.
• The endorsee gets the right of further
negotiation of the instrument.
• The endorsee gets the right to bring an action
for recovery against all the parties whose
name appears on the instrument.
• The endorsee is entitled to recover the full
amount of the instrument even though he
paid less for the transfer in his favor.

8. Presentment
• Presentment means showing an instrument to
the drawee, acceptor or maker for
acceptance, sight or payment. There are
therefore, three kinds of presentment:

9. Presentment of bill of exchange for
acceptance
• It is only bills of exchange of certain type that
require acceptance. A bill is said to be
accepted when the drawee puts his signature
on it signifying his assent to the order of the
drawer that he will pay the bill at the time
when it is due.

10. Presentment for sight
• In case of a promissory note, there is no
question of acceptance because the maker
himself is the person primarily liable on it. If
the maker can not be found after reasonable
search, presentment is excused & the
instrument may be treated as dishonored.
Presentment should be made during business
hours on a business day.

11. Presentment for payment
• Promissory notes, bill of exchange & cheque
must be presented for payment to the maker,
acceptor or drawee thereof respectively by or
on behalf of the holder.

12. Presentment for payment not
necessary (Sec. 76)
No presentment for payment is necessary where,
• The maker, drawee or acceptor intentionally
prevents presentment of the instrument.
• The instrument is payable at the place of the
business and such place on the due date during
the usual business hours is closed.
• The instrument is payable at a specified place and
neither the maker, acceptor or drawee nor any
other person authorized to pay it is present during
the usual business hours.
• Presentment for payment is waived either
expressly or impliedly before or after the maturity
by party entitled to presentment.

13. Noting
• When a promissory note or bill of exchange is
dishonored, the holder can, after giving due
notice of dishonor, sue any or all liable parties
thereon but before he does that, he may get
the fact of dishonor authenticated by ‘noting’
by a Notary Public.
• “Noting” means the recording of the fact of
dishonor by a notary public upon the
instrument or upon a paper attached thereto
or partly upon each within a reasonable time
after dishonor.

14. ‘Noting’ must contain the
following particulars
• The fact of dishonor.
• The date of dishonor.
• The reasons, if any, assigned for such dishonor.
• If the instrument has not been expressly
dishonored, the reason why the holder treats
it as dishonored.
• The notary charges.

15. Protest
• When a promissory note or bill of exchange
has been dishonored by non-acceptance or
non-payment, the holder may within a
reasonable time, cause such dishonor to be
noted & certified by a Notary Public. Such
certificate is called a ‘Protest’.

16. Contents of Protest
• The name of the person for whom & against
whom the instrument has been protested.
• The fact of, and reason for, dishonor.
• The place & time of dishonor.
• The signature of the notary public.

17. Discharge of Party from liability
• By Payment:- When payment on an
instrument is made in due course, both the
instrument & the parties to it are discharged.
• By cancellation:- When the holder of a
negotiable instrument cancels the name of a
party on the instrument with intent to
discharge him, such party whose name is
cancelled are discharged from liability to
holder.

18. • By release:- Where the holder of a negotiable
instrument releases any party to the
instrument by any method other then
cancellation, the party so released is
discharged from liability.
• By allowing drawee more then 48 hours:- If
the holder of a bill of exchange allows the
drawee more then 48 hours exclusive of public
holidays to consider whether he will accept
the same, all previous parties not consenting
to such allowance are thereby discharged
from liability to such holder.