Dishonour of bill of exchange
Dishonour of the bill means the non-payment of bill, when it is presented for payment. It refers to the nonpayment of the amount when the bill is produced on maturity to the drawer.
A bill is said to have been dishonoured when the drawee fails to make the payment on the date of maturity. In such case, liability of the acceptor is restored. So, the entries made on the receipt of the bill should be reversed.
A bill is dishonoured either by non-acceptance or by non-payment.
- Effect of dishonour by non-acceptance:
Where a bill is dishonoured by non-acceptance, it gives an instant right of action to the holder alongside the drawer and indorsers. The holder need not wait till the date of maturity nor is it necessary to present it for payment.
- Effect of dishonour by non-payment:
The holder has the right to carry on alongside the drawer, drawee and all other preceding indorsers after giving discern of such dishonour.