Sections 90 and 91 of Negotiable Instruments Act 1881: Extinguishment of Rights and Dishonour by Non-Acceptance
Section 90 concludes Chapter VII of the Negotiable Instruments Act, 1881 and deals with extinguishment of rights of action when a negotiated bill is held by its acceptor in the acceptor's own right at or after maturity. Section 91 begins Chapter VIII, "Of Notice of Dishonour", and defines when a bill of exchange is dishonoured by non-acceptance.
- Section 90: rights of action on a negotiated bill are extinguished when, at or after maturity, it is held by the acceptor in the acceptor's own right.
- Section 91: explains dishonour by non-acceptance, including default by a drawee, non-acceptance where presentment is excused, incompetency of the drawee to contract, and qualified acceptance.
Section 90 - Extinguishment of rights of action on bill in acceptor's hands
If a bill of exchange which has been negotiated is, at or after maturity, held by the acceptor in his own right, all rights of action thereon are extinguished.
Meaning of Section 90
A bill of exchange is defined in Section 5 of the Act as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. The acceptor is the drawee who has signed assent upon the bill and completed the statutory requirements for acceptance.
Section 90 applies after the bill has been negotiated and, at or after its maturity, comes into the acceptor's hands in the acceptor's own right. In that situation, all rights of action on the bill are extinguished.
Section 91 - Dishonour by non-acceptance
A bill of exchange is said to be dishonoured by non-acceptance when the drawee, or one of several drawees not being partners, makes default in acceptance upon being duly required to accept the bill, or where presentment is excused and the bill is not accepted.
Where the drawee is incompetent to contract, or the acceptance is qualified, the bill may be treated as dishonoured.
When does dishonour by non-acceptance arise?
The provision covers default in acceptance after a proper requirement to accept. It also applies where presentment for acceptance is legally excused but the bill remains unaccepted. In addition, a bill may be treated as dishonoured where the drawee is incompetent to contract or where the acceptance is qualified.
Qualified acceptance
Section 86 explains qualified acceptance. It includes, among other forms, an acceptance made conditional on an event, an acceptance limited to part of the amount, and specified changes to the place or time of payment. Section 91 permits a bill to be treated as dishonoured where the acceptance is qualified.