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negotiable-instruments:when-presentment-unnecessary

When presentment unnecessary

Section 76 of the Negotiable Instruments Act,1881.

No presentment for payment is necessary, and the instrument is dishonoured at the due date for presentment, in any of the following cases:

(a) if the maker, drawee or acceptor intentionally prevents the presentment of the instrument, or if the instrument being payable at his place of business, he closes such place on a business day during the usual business hours, or if the instrument being payable at some other specified place, neither he nor any person authorized to pay it attends at such place during the usual business hours, or if the instrument not being payable at any specified place, he cannot after due search be found;

(b) as against any party sought to be charged therewith, if he has engaged to pay notwithstanding non-presentment;

(c) as against any party if, after maturity, with knowledge that the instrument has not been presented— he makes a part payment on account of the amount due on the instrument, or promises to pay the amount due thereon in whole or in part, or otherwise waives his right to take advantage of any default in presentment for payment;

(d) as against the drawer, if the drawer could not suffer damage from the want of such presentment.

The ordinary rule is that a pronote, bill of exchange or cheque must be presented for payment to the maker, acceptor or drawee by or on behalf of the holder to charge the other parties to the instruments with liability. This section lays down under what circumstances such presentment is dispensed with. It is noticeable that, in the circumstances under which non-presentment is excused, the party entitled to the necessary presentment must do some overt acts disentitling him to claim presentation.

When presentment not possible

The maker, acceptor, or the drawee must do something to prevent the holder from presenting it, as where a hundi is lost and a duplicate is not supplied. In such a case presentment is unnecessary. When presentation is made impossible by the maker, the acceptor or the drawee, by the closing of his place of business where the instrument is made payable, or by his having no residence, known address or place of business or by his absence, or that of his agent from the place where it is made payable during usual business hours, no presentment is necessary.

Again, where a note is payable at a specified place and on presentment there no person, authorised to pay or refuse payment, is found1) or where the holder went to the house mentioned in the instrument but found it shut up and no one was there2) it was held to be valid presentment.

Where, the instrument is not payable at any specified place, and the maker, acceptor or drawee to whom personally, in the circumstances, the presentment is to be made, is not found after due search, that is to say, when there is no person to whom presentment can be made, no presentment is necessary. It is not sufficient in such cases to prove that the holder found the door of the maker’s house closed. Even mere enquiry is not sufficient. The holder must prove that the maker could not be found after reasonable search and enquiry from persons likely to know eg., the indorsers or parties to the instrument when they can be found. The holder must go to the place and make an attempt to make the presentment and cannot plead, as an excuse for non-presentment, that he has reason to believe that the bill will not, on presentment, be paid, or that the maker has been adjudicated an insolvent, or that the drawer has asked the drawee not to pay.

Waiver of presentment

It is a common place of law that a person can waive his right. When a party sought to be charged with an instrument has a right to presentment he can very well waive that right of his by express words in the instrument as, ‘presentment waived,’ and engage to pay the amount without presentment. But such engagement must be entered into prior to maturity. Even a parol promise by the endorser to pay the note constitutes an engagement to pay notwithstanding non-presentment. Mere demand of money does not amount to presentment. The holder must exhibit the bill to the person from whom he demands payment and offer to deliver it on payment.

Waiver after default of presentment

This clause specifies the cases of implied waiver. When after maturity there has been no presentment the party sought to be charged with the instrument can claim a discharge on the ground of non-presentment. But such a party will be deemed to have waived such a claim and will be liable to pay in spite of non-presentment if, with the knowledge of such default of presentment of the holder, he does not plead non-presentment or makes part payment of the amount due on the instrument, or promises in writing or otherwise to pay unconditionally such amount wholly or in part, or waives his right in any other way precluding him from taking advantage of such plea of non-presentment. A part payment or acknowledgment of liability of the amount due under the instrument after maturity prima facie shows that the instrument was presented for payment. Such waiver can be inferred from the conduct of the drawer or the endorser and can take place at any time before or after maturity and even through an agent.

Where drawer and drawee same

Presentment for payment is dispensed with, under this clause, as against the drawer if he cannot suffer any damage for want of such non-presentment. When the drawer and the drawee of a hundi are the same person no presentation on the due date is necessary as the drawer cannot suffer damage from the want of presentment. But presentment will be necessary even in such a case if it is intended to charge the indorser in due course.

The provisions of this clause are an exception to the general rule that presentment for payment is necessary and the burden of proving that the drawer could not suffer damage on account of non-presentment to the acceptor lies on the person who claims that his case comes within the exception and wishes to make the drawer liable in spite of non-presentment.

It is important to note that the words used are “drawer could not suffer” and not has not suffered damage. Where the drawer dishonestly denies payment of consideration and pleads that the endorsements are forgeries or made in collusion with the payee he cannot plead that due to want of presentation of the bill to the drawee he (the drawer) has suffered any damage. In such a case the holder in due course need not prove that the drawer did not suffer any damage on account of non-presentment. This clause applies where the drawer has no funds with the drawee at the time the bill is being drawn or has no reasonable expectation that the drawee will accept for his accommodation, or where the drawee is fictitious or incompetent to contract, or where the drawer has settled his accounts with the drawee before the suit by the payee and has realised his dues, so that the drawer suffers no loss by non-presentment by the payee. Presentment for payment implies previous acceptance. Therefore, when a bill is dishonoured by non-acceptance question of presentment for payment does not arise.

Applicability to promissory note

Throughout the Act a clear distinction has been made between the words 'maker' and ‘drawer’ the former being used in a more general sense as applying to promissory notes, negotiable instruments and cheques, while the word ‘drawer’ is restricted to bills of exchange and cheques only and is nowhere used in connection with promissory notes. Therefore, the operation of this clause is limited to bills of exchange and cheques and does include the maker of a pronote.

But in some cases it has been held that the word ‘drawer’ in this clause includes the maker of a pronote and, therefore, the clause applies to a promissory note also. It is submitted that having regard to the distinction observed in the use of the aforesaid words in the body of the Act the other view appears to be more reasonable.

Miscellaneous

The principle of exemption is applicable to an endorser also although he has not been included in the section. But where the intention was that the last holder was to take the bill, previous endorser cannot be made liable without notice of dishonour. Whether presentment for payment is or is not necessary to charge a guarantor has given rise to a difference of opinion. It has been held that ordinarily presentment is not necessary in such cases as the guarantor is the debtor of the holder and it is his duty to seek the creditor and pay the debt when it falls due. But according to Daniel, the guarantor is entitled to notice of non-payment within a reasonable time after default and even if presentment is not made or the notice is not given the guarantor will not be discharged if he has not suffered any loss.3)

There is, however, a difference between the guarantor of the principal debtor e.g. the maker or the acceptor and the guarantor of a surety e.g. the drawer or the endorser. While in the former case no demand upon the maker or acceptor is necessary to make the guarantor liable, such demand upon the maker or acceptor is essential in the latter case.

1)
Howe vs Bowes
2)
Hine vs Aliev
3)
Daniel Sec 1787