Question 2: Briefly explain the effects of dishonour and noting of a bill of exchange.
Answer:
When the acceptor of the bill refuses to pay the amount of the bill on the date of maturity or becomes insolvent, it is called dishonour of the bill of exchange.
To establish the fact that the bill was properly presented and dishonoured, the bill is usually handed over to a person called ‘Notary Public’, appointed by the court. The notary public again presents the dishonoured bill to the acceptor for payment and if the acceptor still refuses to make the payment, the Notary Public notes down the fact of dishonour on the bill itself. Such an act of Notary Public is called ‘Noting’. Dishonour of a bill means refusal to pay or inability to pay by the debtor because of insolvency. In other words, a bill is said to have been dishonoured when the drawee fails to make the payment on the date of maturity. In this situation, liability of the acceptor is restored. When a bill is dishonoured, it is always better if it is certified by a notary which is known as noting.
So, it is an ample proof that a bill is dishonoured which is noted down on the face to it. For this, the noting charges are something known as notary charge or noting charges which may be recovered from the person who is responsible for the dishonour of the bill.
The notary is compulsory in case of foreign bills as required under the law of that country whereas it is not so in case of inland bills. It is done with a view to have proof of dishonouring the bill. So, it is very useful. Notary has to assign reasons for dishonour of a bill along with date of dishonour and charges made by him. It is to be noted that whoever pays the noting charges, ultimately these have to be borne by the drawee.
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