Noting and Protesting

Synopsis

 

• Introduction
• Noting
• Protesting
• Case Law
• Conclusion
• References

 

 

 

Introduction

 

The Negotiable Instrument Act, 1881 (hereinafter referred to as the Act) provides a mechanism by which the transactions related to a negotiable instrument are to be regulated and conducted. Sections 99 to Section 104A of the act deal with a rather important mechanism which is called noting and protesting.

These provisions have been incorporated in the act so as to facilitate the proceedings with regard to recovery of an amount which is due upon a person when a promissory note or a bill of exchange gets dishonoured. These provisions can be called a pre exercise before a person proceeds to the court of law to initiate a legal proceeding against a defaulter.

Noting

 

Sec 99 of the act contemplates that if a promissory note or bill of exchange is dishonoured then a holder can give due notice of such a dishonour to the parties and then initiate proceedings against such parties. However, before he proceeds to initiate legal proceedings he can approach a public notary and get the fact of dishonoured authenticated by getting it noted by such a notary.

The notary when he receives a request for noting generally sends a demand which is formal in nature on the drawer, acceptor or maker for making a payment or accepting the instrument. He then records this fact of dishonour on either the instrument or the paper attached with it within a reasonable time. This is noting. It is not compulsory in the case of an inland bill or note to get noted.

Noting has the following details:

• The facts about dishonour;

 

• Date of that dishonour;

 

• Reasons for the dishonour;

 

• If the instrument is not dishonoured then details behind the holder treating it as a dishonour;

 

• The charges of the notary;

Protesting

 

Sec 100 of the act contemplates that once a promissory note or bill of exchange is dishonoured then a holder, before he proceeds to initiate legal proceedings can approach a public notary and get the fact of dishonoured authenticated by getting it noted by a public notary. Once this fact is noted the public notary certifies the same.

This certificate is known as a Protest. It is document or certificate which is formal in nature and attests the fact of dishonour of a bill or note and it is based on noting.

Contents of Protest

 

A protest certificate shall have information about:

• The instrument itself or its transcript;

 

• The particulars such as name of the individual against whom and for whom the protest has been made;

 

• The reasons for the dishonour;

 

• The time and place where the dishonour happened;

 

• The signature of the public notary;

 

• If the instrument is being accepted or paid for honour then the name of the individual who is accepted or paid and the particulars of the individual for whom such honour has been made.

Protest for better security

 

When an acceptor of a bill of exchange is declared insolvent or he is impeached publicly before the bill gets matured, the holder may involve a public notary and through him demand a better security from the acceptor within a reasonable time. If the acceptor refuses to give a better security then this fact may be recorded by the public notary who was involved by the holder and the fact of refusal gets noted by him and certified. Such a document is known as a protest for better security.

When a demand is made by a holder through a public notary it is not imperative upon the acceptor to give such a security. Meaning thereby that the acceptor has an option to give a better security however he is not bound to give a better security.

If a demand for better security is refused by the acceptor then this does not give any rise to any particular right to the holder. He cannot sue or start legal proceedings in respect of the refusal for better security. A person whose demand has been refused needs to wait till the time for the maturity of the bill and only then can he take recourse to the legal proceedings.

 

Advantages of Protesting

 

Following are the advantages of protesting:

• It provides evidence of dishonour which is authentic to the drawer or endorser;

 

• When a suit is filed the document of protest comes to the aid of the court. It is relied upon by the court during the court proceedings. The court by virtue of the document of protest presumes that dishonour of an instrument has taken place unless it is proved to the contrary.

Notice of Protest

 

Sec 102 of the Act contemplates that when a promissory note or bill of exchange needs to be protested then a notice of such a protest needs to be given in the same manner in which a notice of dishonour is given. This notice has to be given through the public notary who has made the protest. It is important to note that a notice for protest has to be given and not a notice for dishonour.

Protest for non-payment after dishonour by non acceptance

 

Sec 103 of the Act contemplates that where a bill of exchange which is drawn payable at certain place and it is not the place which is mentioned as the home address of the drawee gets dishonoured due to its non acceptance then it need not be presented again for payment. However, it may be protested at the place which is specified for payment unless it is paid before the instrument gets matured or at the time of maturity.

Protest of foreign bills

 

Sec 104 of the act talks about the law relating to protesting in foreign instruments. It contemplates that if there is a bill of exchange which is foreign in nature then such a bill must be protested for dishonour if the foreign country where the bill was drawn requires that if a  of dishonour of a bill of exchange happens then it need to be protested.

When Noting is equivalent to Protest

 

Many a times it may happen that an instrument requires that it be noted and protested before or at a specific or certain time. Sec 104 A of the act deals with such a situation. The section contemplates that if a bill or a note is to be or needs to be protested before a specific time period or at a certain time or before taking some further proceeding, then in such a case it would suffice if the bill had been noted for the purpose of protest before the exhaustion of the specific time or the taking of the proceeding; and the protest may be extended for a time from the date, once the noting has taken place.

Case Law

 

1. In the case of M/S. Sineximco Pte Ltd. v M/S. Dinesh International Pvt Ltd 174 (2010) DLT 422, it was held that a protest must contain the following ingredients:

 

• The instrument itself or its transcript;

 

• The particulars such as name of the individual against whom and for whom the protest has been made;

 

• The reasons for the dishonour;

 

• The time and place where the dishonour happened;

 

• The signature of the public notary;

 

• If the instrument is being accepted or paid for honour then the name of the individual who is accepted or paid and the particulars of the individual for whom such honour has been made.

2. In the case of Vintron Informatics Limited v Dena Bank P.(C) 9091/2015 (DHC), it was held that a mere testimony or oral evidence of a notary that a bill was presented and protested will not suffice the provisions of the act. There needs to be documentary evidence to prove that the bills had been noted and protested.

 

3. In the case of Neolite Polymer Industries v Standard Chartered Bank 2007 (6) BomCR 539, an argument was made that the bills of exchange which were drawn in England were not noted and protested.

 

• The court invoked the provisions of sec 104 of the act. As sec 104 contemplates that in a case of bill of exchange being drawn in a foreign country then the law of that country need to be looked in to and analysed as to whether a requirement is provided for the same under the law.

 

• After going through the applicable provisions in Sections 51 and 52 of the Bill of Exchange Act, 1882 of England it was held that there was no requirement for a bill of exchange to be noted and protested there. As such the defence that the foreign bill was not noted and protested cannot be taken in the present circumstances.

 

4. In the case of T.V.R.T. Veerappa Chetty v Vellayan Ambalam 52 Ind Cas 370, it was held that where the certificate only says that it has been noted for non payment and does not give the date of dishonour as required by sec 99 of the Negotiable Instrument Act, 1881 then such a document or certificate cannot be called a certificate of protest for the purpose of sections 100 and 101 of the Negotiable Instrument Act, 1881.

 

• The court will only presume the fact of dishonour when there is a proper certificate as per the provisions of the act,

 

5. In the case of H. Java And Company v State Bank Of India  I (2007) BC 47, it was held that the provisions which are contained in section 99 and section 100 of the act are not obligatory in nature. These provisions are directory in nature and therefore it is not necessary that they have to be complied with.

 

• If these provisions are not complied with then the same will not defeat the purpose of the Act. This analogy can be easily deduced by comparing the sections 99 and 100 with the provisions of section 104 which deals with the law in relation to a foreign bill.

Conclusion

 

Thus it can be concluded that the provisions incorporated in sec 99 to 104A are a pre exercise before a person proceeds to the court of law to initiate a legal proceeding against a defaulter.

The primary objective to incorporate this mechanism or noting and protesting is to record in evidence the fact of dishonour. Once this fact is recorded as a proof by an authorised person then it becomes easy for the courts to decide and hear the matter. A certificate of protest is a clinching piece of evidence which helps the court to arrive at a proper conclusion.

For the purpose of these provisions the role of notary public is of paramount importance. The notary has to make sure that when is conducting the affairs as per the above sections then he very cautiously and diligently does his job of drawing the certificate of protest. Any omission on his part can result in a bad piece of evidence.

As seen earlier that where the notary fails to note the date of dishonour and other such details then the document does not stay reliable and the presumption of dishonour gets diluted. Thus it is imperative that all the details and requirements are followed as they have been laid down although these provisions are not mandatory but still is a holder uses these then they come as an added advantage to recover his amount.