Introduction to Presentment for Acceptance
Presentment is a type of demand by which a negotiable instrument’s holder can do something based on the directives of the same. It is a form of showing the instrument to the drawee, maker, or acceptor for acceptance and sight or payment. The Negotiable Instrument Act 1881– presentment for acceptance can help you understand this concept with proper elaboration and discernment. The entire procedure of the presentation of negotiable instruments has been outlined for ease of understanding of presentment for acceptance.
After sight, if a bill of exchange is payable and there is no time or place specified for presentment, make sure to be presented to the drawee for further acceptance. After a relevant and reasonable search, if possible, the person who is entitled to the demand acceptance can appear within a reasonable time only after it is drawn. In general, in such a presentment, no parties stand liable to the person making a claim. If the drawee in case of need cannot be found after reasonable search, the bill stands dishonoured.
When a bill is directed to a drawee at a particular location, the same must be presented only in that location, however, in terms of the due date of presentment, if the person fails after reasonable search, the bill is considered as dishonoured. Therefore, the presentment for acceptance is presenting a bill of exchange to the drawee mentioned in the bill. He or she has to agree to pay the bill at any time in the future. It is an act through which we can understand the notification of holding a bill of exchange for the request of acceptance accompanied by the bill.
Also, a promissory note is applicable in terms of the acceptor for the honour. It is payable after a specific period of sight and hence, must be presented to the maker for sight. This is possible only if he or she is found after a reasonable search, by the person who is entitled to the demand payment. Cheques, promissory notes, and bills of exchange must be presented for payment.
Acceptance for Honour
When a bill of exchange has been protested or noted for non-acceptance due to various reasons, and on the other hand, a person accepts it with supra protest for honour on behalf of the drawer or even a person endorsed, he or she is known as the acceptor for the honour. To make it simpler, when a third party like a bank, releases payment for a bill of exchange due to the nonpayment from a buyer (because the buyer refused the acceptance of delivery or simply didn’t want to pay the money), this is known as acceptance for the honour.
This means when a holder of a particular bill presents the same to a drawee for accepting the bill, and the person denies receiving the bill, it is known as a dishonoured bill, and the drawee in case of need should deal with a protested bill for dishonour. In the same situation, if a third person wishes to accept the bill for honour of the indorser or drawee, he or she becomes the acceptor for the honour.
Presentment for Acceptance
There are only some types of bills of exchange that require the terms of acceptance. A bill is only accepted when the drawee signifies his or her consent with an authorized signature on the instrument over the order of the drawer and wishes to pay the due bills. Under the law of the presentment of negotiable instruments, the drawee in case of need has no liability until the bill is accepted. Therefore, the person has to signify the acceptance by providing a valid signature on the bill.
As per section 15, the presentation for acceptance shall be submitted to the payer or its duly authorized agent, in case if the payer dies, its legal representative or its legal receiver or assignee at the time of bankruptcy.
The Bill Should be Presented to the Following Persons:
Drawee or its duly authorized agent.
If there is more than one drawee, to all drawers. In the case of the death of the drawee, to his legal representative.
If the payer is insolvent, it shall be handed over to its formal receiver.
When the original payer refuses to accept the bill of exchange, it shall be raised to the payer when necessary.
The acceptance of honor.
The acceptance presentation shall be made at the payer’s business place or residence during the business hours of the business day before the due date, within a reasonable time after the issuance of the invoice.
The Essentials of Valid Acceptance
The drawee should sign the bill through an authorized agent or on his own. The person becomes liable only after the acceptance of the bill and not before it. The prevention of liability is imposed as the person is yet not a party of the instrument.
When a bill is drawn in a set, the acceptance too must be done part wise. If the third person puts the acceptance over one or more parts, he or she becomes liable to all the parts.
A bill is treated as dishonoured when the drawee is declared bankrupt or dies. It may also be treated as the same when the drawee is fictitious or can't contract by the bill.
FAQs on Negotiable Instruments: Presentment for Acceptance
1. What are the essential rules for a valid presentment for acceptance as per the Negotiable Instruments Act, 1881? This is an expected 5-mark question in board exams.
For a presentment for acceptance to be considered valid under the CBSE curriculum for the 2025-26 session, the following rules must be followed:
- To Whom: The bill must be presented to the drawee or their authorised agent. In case of the drawee's death, it must be presented to their legal representative. If the drawee is insolvent, it is presented to the official receiver.
- Multiple Drawees: If a bill is drawn on multiple drawees who are not partners, it must be presented to all of them unless one has the authority to accept on behalf of all.
- Time: The presentment must be made on a business day during business hours.
- Place: It should be made at the drawee’s place of business or residence.
- Reasonable Time: For bills payable after sight, presentment must occur within a reasonable time after being drawn.
2. Under what circumstances is presentment for acceptance legally excused? List any four points relevant for a 3-mark question.
A holder is excused from presenting a bill for acceptance under the following circumstances, and the bill can be treated as dishonoured:
- When the drawee cannot be found after a reasonable and diligent search.
- When the drawee is a fictitious person or is legally incapable of contracting (e.g., a minor).
- When the drawee has died or become insolvent, and the bill is presented to the legal representative or official assignee.
- Even if the presentment is irregular, acceptance has been refused on some other ground.
3. Explain the concept of 'Acceptance for Honour'. Why is this provision important in commercial practice?
Acceptance for Honour occurs when a bill of exchange, after being dishonoured by non-acceptance and noted or protested, is accepted by a third person to protect the honour of the drawer or any endorser. The person accepting becomes an 'acceptor for honour'.
This provision is important because it prevents the bill from being fully dishonoured, thereby saving the credit and reputation of the original parties involved. It ensures the transaction can still proceed, providing a safety net in business dealings.
4. Distinguish between a General Acceptance and a Qualified Acceptance. When can a holder treat a bill as dishonoured in case of a qualified acceptance?
The key difference lies in the conditions attached:
- General Acceptance: This is an absolute and unconditional acceptance of the bill as drawn. The drawee simply signs their name with the word 'Accepted'.
- Qualified Acceptance: This is an acceptance made subject to a condition or qualification. For example, making payment dependent on an event, accepting for only part of the sum, or changing the time or place of payment.
A holder has the right to refuse a qualified acceptance. If they do not consent to it, they can treat the bill as dishonoured by non-acceptance and take action against the drawer and prior endorsers.
5. What is the fundamental difference between 'Presentment for Acceptance' and 'Presentment for Payment'?
The core difference lies in their purpose and timing:
- Presentment for Acceptance: The primary purpose is to get the drawee's formal agreement to pay the bill. This act makes the drawee a liable party (the acceptor) and, for bills payable 'after sight', it fixes the maturity date. It is done before the bill is due for payment.
- Presentment for Payment: The purpose is to demand and receive the money due on the instrument from the liable party (maker, drawee, or acceptor). This is done on the maturity date of the instrument to discharge the parties from liability.
6. What are the legal consequences for the holder of a bill of exchange if they fail to present it for acceptance when it is legally required?
Failure to present a bill for acceptance when it is mandatory (e.g., a bill payable a certain period 'after sight') has significant legal consequences. If the holder does not make such presentment, the drawer and all prior endorsers are discharged from their liability to that holder. The holder essentially loses their right to claim payment from anyone except the drawee, who is not yet liable as they have not accepted the bill.
7. Is presentment for acceptance required for a promissory note according to the CBSE 2025-26 syllabus?
No, a promissory note generally does not require presentment for acceptance. The maker of the note is the primary debtor and is already liable from the moment the note is made. However, there is a key exception: if a promissory note is payable a certain period 'after sight', it must be presented to the maker for 'sighting'. This is not for acceptance of liability, but to allow the maker to see the note, sign it, and thereby fix the date from which the maturity period begins.
