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negotiable-instruments:note:protest

Protest of promissory note or bill of exchange

A protest is, properly speaking, a solemn declaration on behalf of the holder against any loss to be sustained by the non-acceptance or by the non-payment of a bill or a note as the case may be. It must be made and signed by a notary public, an official recognised by law, whose business it is to make and attest important documents. A one rupee foreign bill stamp bearing the word ‘notarial’ must be affixed on the certificate of protest. The stamp is to be cancelled by the notary.

Protest

Section 100 of the Negotiable Instruments Act,1881.

When a promissory note or bill of exchange has been dishonoured by non-acceptance or non-payment, the holder may, within a reasonable time, cause such dishonour to be noted and certified by a notary public. Such certificate is called a protest.

Protest for better security. When the acceptor of a bill of exchange has become insolvent, or his credit has been publicly impeached, before the maturity of the bill, the holder may, within a reasonable time, cause a notary public to demand better security of the acceptor, and on its being refused may, with a reasonable time, cause such facts to be noted and certified as aforesaid. Such certificate is called a protest for better security.

How protest is made

The notary or his clerk proceeds to make a formal demand upon the drawee or acceptor for acceptance or payment, as the case may be, and on refusal, notes the bill, that is, he writes a minute on the face of the bill. This minute consists of his initials, the date, the noting charges and a reference to the notary’s register. A ticket or label is also attached to the bill, on which is written the answer given to the notary’s clerk who makes the presentment e.g. 'No order’ or 'No- effects’. Before sending out the bill the notary makes a full copy of it in his register and subsequently adds the answer if any. Noting followed by the solemn declaration stated above is called protest. A protest may be made out in duplicate and the second copy is as much primary evidence as the copy first drawn out. No witnesses are required to attest a protest by a notary public but it must be stamped.

Object of Protest by Notary Public

The object of requiring the protest to be made by the Notary Public is that his office is universally recognised not only in the courts of this country but in those of every civilised nation. By the law of Nations he has credit everywhere.

Protest for better security

Where the acceptor becomes bankrupt or insolvent or suspends payment, before maturity of the bill, the holder may cause the bill to be protested for better security against the drawer and indorser. The advantage of this course, beyond the inherent one of having the circumstances placed on the record for the information of the drawer and indorser, is that it enables the bill to be accepted for honour. It is necessary, if it is desired to obtain an acceptance or payment for honour, that the instrument should be protested or at least noted for protest. The expenses, however, of a protest for better security are not recoverable, whereas the expenses for protest for non-acceptance or non-payment are recoverable.

Protest where acceptance is qualified or partial

In the case of a foreign bill which has been accepted in part the bill must be protested as to the balance , but where there is a qualified acceptance the holder is entitled to treat the bill as dishonoured by non-acceptance and the better course is to so treat it and to protest absolutely for non-acceptance according to the tenor of the bill, unless the holder is authorised by antecedent parties to assent to the qualification, otherwise any antecedent party (whether drawer or indorser) who has not authorised, or does not subsequently assent to, the qualification is released from his liability on the bill.

Householder’s Protest

In the case where a protest is necessary but where the services of a notary cannot be obtained at the time and the place when and where they are required, any householder or substantial resident of the place may, in the presence of two witnesses, give a certificate signed by them attesting the dishonour of the instrument and such a certificate will in all respects operate as if it were a notarial protest. This rule of law is not, however, provided in this Act.

Place of Protest

The general rule is that the bill must be protested at the place where it is dishonoured, but when it has been presented through the post office and returned by post dishonoured it may be protested at the place to which it has been returned and on the day of its return, if received during the business hours, and, if not received during the business hours, then not later than on the next business day.

Time

Noting of a dishonoured instrument must take place on the day of dishonour but when it has been duly noted the protest may be extended as of the date of noting.

Excuses of delay

Delay in noting or protesting is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence, but when the cause of delay ceases to operate, the instrument must be noted or protested with reasonable diligence. Protest is dispensed with altogether by circumstances which would dispense with notice of dishonour.

Contents of protest

Section 101 of the Negotiable Instruments Act,1881.

A protest under section 100 must contain

(a) either the instrument itself, or a literal transcript of the instrument and of everything written or printed thereupon;
(b) the name of the person for whom and against whom the instrument has been protested;
(c) a statement that payment or acceptance, or better security, as the case may be, has been demanded of such person by the notary public; the terms of his answer, if any, or a statement that he gave no answer, or that he could not be found;
(d) when the note or bill has been dishonoured, the place and time of dishonour, and, when better security has been refused, the place and time of refusal;
(e) the subscription of the notary public making the protest;
(f) in the event of an acceptance for honour or of a payment for honour, the name of the person by whom, of the person for whom, and the manner in which, such acceptance or payment was offered and effected.

A notary public may make the demand mentioned in clause (c) of this section either in person or by his clerk or, were authorized by agreement or usage, by registered letter.

The last paragraph was added by section 5 of the Negotiable Instruments Act II of 1885.

The section lays down what perfect protest under the foregoing section shall contain and without which the protest will not be regular. A protest, besides being made and signed by a notary, must contain a copy of the instrument and must specify:

  1. the person at whose request the instrument is protested,
  2. the place and date of protest,
  3. the cause or reason for protesting the instrument,
  4. the demand made, and
  5. the answer given, if any, or the fact that the drawee or acceptor could not be found.

Where the instrument is lost or destroyed or is wrongly detained from the person entitled to hold it, protest may be made on a copy or written particulars thereof. A protest may be made out in duplicate and the second copy is as much primary evidence as the copy first drawn out. Besides the above the present section enjoins that the protest should contain also tbe name of the person against whom the instrument has been protested, a statement that payment or acceptance or better security has been demanded by the notary, and the subscription of the notary public making the protest. All the items laid down in the section are essential to the validity of a protest If any of the items be left out the protest will be ineffectual.

Stamp

Under the Indian Stamp Act, Art 50 of Schedule I a protest must bear a stamp of Re 1/-.

Description of the instrument Proper stamp duty
Protest of bill or note, that is to say, any declaration in writing made by a Notary Public, or other person lawfully acting as such, attesting the dishonour of a bill of exchange or promissory note. One rupee.

Notice of protest

Section 102 of the Negotiable Instruments Act,1881.

When a promissory note or bill of exchange is required by law to be protested, notice of such protest must be given instead of notice of dishonour, in the same manner and subject to the same conditions; but the notice may be given by the notary public who makes the protest.

When the law requires that a note or a bill should be protested, it is the notice of such protest and not the notice of dishonour that should be given by the holder to fix the liabilities of the antecedent parties to the note or the bill as the case may be. Protest being necessary in the case of dishonour of a foreign bill, the holder must send notice of protest to all the parties liable on the bill. The parties who are liable on such a bill are entitled to have a notice of protest and not a notice of dishonour. Such a notice can be given either by the holder or by the notary who makes the protest. The section does not say whether a copy of the protest itself should be sent to the party. If the party entitled to a notice is informed that the bill has been dishonoured by non-acceptance or non-payment and has been protested, it is a sufficient notice.

Notice of protest when excused

The rules that govern notice of dishonour also govern notice of protest. It, therefore, follows that the conditions under which a notice of dishonour is excused will also excuse a notice of protest, e.g. by express or implied waiver. When a person promises to pay the amount subsequent to the dishonour of the instrument, notice of protest is waived and he remains liable without any such notice, as by the promise to pay he admits his liability , he admits everything which is necessary to render him liable.1) We have already noticed that circumstances over which a holder has no control and which are not due to his default, misconduct or negligence will excuse delay in giving notice of dishonour. And similar circumstances will excuse delay in giving notice of protest. But as soon as such circumstances will cease to exist notice of protest will have to be given. It is not clear whether there is any excuse in favour of a holder in due course, when a prior holder has failed to protest, on account of dishonour by non-acceptance. But, as under the section the rules relating to dishonour apply to protest, it is submitted, that such an excuse exists in favour of a subsequent holder in due course.

Protest for non-payment after dishonour by non-acceptance

Section 103 of the Negotiable Instruments Act,1881.

All bills of exchange drawn payable at some other place than the place mentioned as the residence of the drawee, and which are dishonoured by non-acceptance, may, without further presentment to the drawee, be protested for non-payment, in the place specified for payment, unless paid before or at maturity.

When a bill drawn payable at the place of business or residence of some person other than the drawee has been dishonoured by non-acceptance, it must be protested for non-payment at the place where it is expressed to be payable and no further presentment for payment to, or demand on the drawee is necessary. This section, however, says that the bill may be protested for in the place where it is made payable, that is to say, protesting at the place where it is made payable is left to the discretion of the holder. It is not compulsory, as under the English law, to protest at that place. The holder at his option may protest where the drawee resides unless the payment has been made at or before maturity. In any case no further presentment is necessary.

Protest of foreign bills

Section 104 of the Negotiable Instruments Act,1881.

Foreign bills of exchange must be protested for dishonour when such protest is required by the law of the place where they are drawn.

This section deals only with the foreign bills and not with foreign promissory notes. Protest is, therefore, necessary for foreign bills only and not for foreign promissory notes or inland bills.

Foreign bills

It is foreign bills only that require protest. Foreign bills may be of three classes, e.g.

  1. Bills drawn outside India and made payable at or drawn upon a person resident at a place outside India,
  2. Bills drawn outside India and made payable in India or drawn upon a person resident therein,
  3. Bills drawn in India but made payable outside India or drawn upon a person resident outside India and not made payable in India.

Therefore, the view that a bill of exchange, drawn upon a resident in India is an inland bill wherever it may have been drawn and no protest is necessary2) is prima facie incorrect. In coming to this conclusion the learned Judge says that the place of drawing is immaterial, a view hardly consistent with the wording of section 11 or with the English law on which the observation is sought to be based.

It is submitted, therefore, that if a bill is drawn outside India upon a person in British India, protest is necessary as the bill is a foreign bill. Protest is necessary only in the case of a foreign bill appearing on its face to be such. Where such a bill has been dishonoured by non-acceptance it must be protested for non-acceptance, but where it has not been so dishonoured but is dishonoured by non-payment it must be duly protested for non-payment, otherwise, the drawers and indorsers are discharged. But a bill which is in reality a foreign bill but does not on the face of it appear to be so, need not be protested in the case of dishonour. A bill which has been protested for non-acceptance may subsequently be protested for non-payment.

Reason of the rule

Under the law of many countries protest for dishonour by non-acceptance or non-payment is absolutely necessary and, therefore, to avoid risks by having uniformity in international transactions, the present section requires protest in case of foreign bills. But it is not all foreign bills which require protest for dishonour. It is only when the law of the place where such bills are drawn requires protest, that a protest is necessary under the Indian law. Besides the above there is another reason of protest in case of foreign, bills. It affords an authentic and satisfactory evidence of dishonour to the drawer who from his residence abroad might experience a difficulty in making proper enquiries on the subject and be compelled to rely on the representation of the holder.

It also furnishes an indorsee with the best evidence to charge an antecedent party abroad, for foreign courts give credit to the act of the public functionary in the same manner as a protest under the seal of a foreign notary is evidence in our courts of the dishonour of a bill payable abroad. The use, and indeed the necessity of protest on foreign bills of exchange, in order to prove in many cases the regularity of proceedings thereupon, is too obvious to warrant us in dispensing with such an instrument in any case where the custom of merchants, as reported in the authorities of law, appears to have required it. Protest is essential as the holder cannot prove dishonour but can prove protest only. On proof of protest court shall presume the fact of dishonour.

When noting equivalent to protest

Section 104A of the Negotiable Instruments Act,1881.

For the purposes of this Act, where a bill of note is required to be protested within a specified time or before some further proceeding is taken it is sufficient that the bill has been noted for protest before the expiration of the specified time or the taking of the proceeding; and the formal protest may be extended at any time thereafter as of the date of the noting.

This section was added by section 6 of the Amending Act of 1885.

Noting within the time allowed by law is essential and protest may follow any time after that and before suit. Here noting is equivalent to protest. Where an instrument is required by the statute to be protested before some further proceeding is taken, it is sufficient that the instrument has been noted for protest before the taking of that proceeding and the formal protest may be extended at any time thereafter as of the date of noting. Protest when drawn up relates back to the date of noting.

1)
Gibbon vs Cogion, (1809) 2 Camp, 188
2)
Kidston vs Seth Bros, 57 Cal 730

Created on 2021/03/01 10:04 by LawPage • Last modified on 2021/04/09 22:26 (external edit)