Sections 107 and 108 of Negotiable Instruments Act 1881: Notice of Dishonour and Acceptance for Honour
Section 107 explains the reasonable time available to a party who receives notice of dishonour and must transmit that notice to a prior party. Section 108 begins the statutory scheme on acceptance for honour after a bill of exchange has been noted or protested for non-acceptance or for better security.
Section 107 - Reasonable Time for Transmitting Such Notice
A party receiving notice of dishonour, who seeks to enforce his right against a prior party, transmits the notice within a reasonable time if he transmits it within the same time after its receipt as he would have had to give notice if he had been the holder.
Meaning and effect of Section 107
Section 107 applies where a party has received notice that a negotiable instrument has been dishonoured and wishes to preserve or enforce a right against a prior party. The recipient is treated as having transmitted the notice within reasonable time if, after receiving it, the recipient forwards it within the same period that would have been available for giving notice had that recipient been the holder.
- The provision concerns onward transmission of a notice of dishonour.
- It applies to a party seeking to enforce a right against a prior party.
- The permitted period is measured from receipt of the notice.
- The statutory benchmark is the time that party would have had to give notice if that party had been the holder.
Section 108 - Acceptance for Honour
When a bill of exchange has been noted or protested for non-acceptance or for better security, any person not being a party already liable thereon may, with the consent of the holder, by writing on the bill, accept the same for the honour of any party thereto.
What is acceptance for honour?
Acceptance for honour is a statutory mechanism under which a person who is not already liable on the bill may, after the bill has been noted or protested for non-acceptance or for better security, accept the bill for the honour of a party to it. Section 108 requires the holder's consent and requires the acceptance to be made by writing on the bill.
- The instrument must be a bill of exchange.
- The bill must have been noted or protested for non-acceptance or for better security.
- The person accepting for honour must not already be a party liable on the bill.
- The consent of the holder is required.
- The acceptance must be made by writing on the bill.
- The acceptance is for the honour of a party to the bill.
How Sections 107 and 108 Fit Within the Act
Section 107 completes the group of provisions dealing with reasonable time for notice of dishonour. Section 108 then opens a different statutory subject: acceptance and payment for honour. The detailed rules governing the form and consequences of acceptance for honour continue in Sections 109 to 112.
Related Provisions
Section 106 deals with reasonable time for giving notice of dishonour. Section 109 prescribes how acceptance for honour must be made, Section 110 addresses an acceptance that does not specify for whose honour it is made, Section 111 states the liability of an acceptor for honour, and Section 112 specifies when an acceptor for honour may be charged.
Official Statutory Source
The current text of the Negotiable Instruments Act, 1881 may be checked through the Government of India's India Code portal. For statutory, professional or litigation use, the official text and applicable amendments should be verified.