Noting & Protest
Negotiable instruments, such as bills of exchange, promissory notes or cheques are pieces of paper representing the ownership of debts and obligations and are used to settle the debt by an exchange or transfer of credit without the need for cash.
Negotiable instruments may be inland or foreign. A bill of exchange is an inland bill because it is both drawn and payable within the British Isles or drawn within the British Isles on a person resident in the British Isles.
When a negotiable instrument is dishonoured, it should be noted for nonacceptance or nonpayment (as the case may be). This is where the notary presents the dishonoured instrument to the defaulting party for acceptance or payment and recording on the instrument the reason for dishonour.
Noting must take place at a reasonable time of day on the date due date or the next succeeding business day.
A foreign negotiable instrument as opposed to an inland negotiable instrument which is dishonoured, i.e. not accepted or paid by the due date, must be protested in order for action to be taken on it. However there is generally no need to protest an inland negotiable instrument.
Please contact us for further information and in the case of the need for noting and protesting on or before the due date.
The term ‘noting’ may be defined as the recording of the fact of dishonor by a Notary Public upon the negotiable instrument- Where a promissory note or bill of exchange is dishonoured, the holder can, after giving due notice of dishonor, sue the liable parties for the recovery of amount due on the instrument.
But before he files such a suit, he needs some authenticated proof of the fact, to be put up before the court, that the bill or note is actually dishonoured, For this the holder takes the bill or note to the Notary Public who makes a demand for acceptance or payment upon the drawee or acceptor or maker formally and on his refusal to do so notes the same on the bill or note.
Thus ‘noting’ means recording the fact of dishonor on the dishonoured instrument or on a paper attached thereto for the purpose. Noting should be done within a reasonable time after dishonor.
Noting should specify the following on the instrument:
- The fact of the instrument being dishonoured;
- The date of dishonor;
- The reason, if any assigned to the dishonor;
- If the instrument has not been expressly dishonoured, the reason, why it is being treated as dishonoured
- The Notary’s charges for such noting; (f) A reference to the Notary’s register.
Noting is not compulsory under law. If the dishonoured instrument is not ‘noted’, it does not affect the rights of the holder of the instrument in any way. However, it has certain advantages. For instance, it provides an authentic evidence of dishonor.
‘Noting’ is authentic and official proof of presentment and dishonor of a negotiable instrument. The question of noting does not arise in the case of a dishonor of a cheque because in such a case the bank, while refusing payment returns back the cheque giving reasons in writing for the dishonor of the same and that itself acts as an authentic evidence of the fact of dishonor.
Protesting (Sec. 100)
According to Sec. 100, “when the promissory note or bill of exchange has been dishonoured by non- acceptance or non-payment, the holder may, within a reasonable time, cause such dishonor to be noted and certified by a notary public. Such certificate is called a protest.”
Protest or better security: (Sec- 100, Para 2)
“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, within a reasonable time, cause such facts to be noted and certified as aforesaid. Such certificate is called a protest for better security.
Contents of Protest (Sec. 101)
A protest under Section 100 must contain:
1) The instrument itself or a literal transcript of the instrument and of everything written or printed thereupon.
2) The name of the person for whom and against whom the instrument has been protested.
3) The fact and the reasons for dishonor this is a statement that payment or acceptance, or better security, as the case may be, was demanded by the notary public from the person concerned and he refused to give it or did not answer, or that he could not be found.
4) The place and time of dishonor.
5) The signature of the Notary Public.
6) In the case of acceptance for honor or payment for honor, the names of the persons by whom and for whom it is accepted or paid.
Notice of Protest (Sec. 102)
“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 dishonor, in the same manner and subject to the same conditions; but the notice may be given by the notary public who makes the protest.” Protest of Foreign Bill (Sec. 104)
“Foreign bills of exchange must be protested for dishonor when such protest is
required by the law of the place where they are drawn.”
The following are the points of distinction between Noting and Protesting:
- Noting is merely a record of the fact of dishonor. When the notary public issues a certificate stating the particulars regarding the dishonor, it is called a protest.
- Noting is the preliminary step to ‘Protesting’.
- Noting is made on the negotiable instrument by the notary public by way of memorandum while a protest is a formal certificate drawn up later on the basis of noting.
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