XII Banking - Question 20 - Circumstances a Bill of Exchange is Dishonoured

Q.5. Under what circumstances a bill of exchange is dishonoured

When a bill of exchange is drawn in the favour of a specified person or firm, it is not necessary that the bill will be accepted. Due to some complexities the drawee does not accept the bill. The circumstances under which a bill of exchange is dishonoured are as follows.


Dishonour By Non-Acceptance

When a bill of exchange is drawn against the drawee and the drawee defuses to accept the same, this refused is called dishonour by non-acceptance.


Dishonour By Non-Payment

When the bill is presented to the drawee for its payment, sometimes the drawee fails to pays it. This failure of the drawee to the payment of the bill dishonours the bill by non-payment. In such a situation the drawer of the bill holds the complete right to take lawful action against the drawer.