Dishonour by non-acceptance (Section 91, the Negotiable Instruments Act, 1881): A bill
may be dishonoured either by non-acceptance or by non-payment. A dishonour by non-
acceptance may take place in any one of the following circumstances:
(i) when the drawee either does not accept the bill within forty-eight hours of presentment or
refuse to accept it;
(ii) when one of several drawees, not being partners, makes default in acceptance;
(iii) when the drawee gives a acceptance;
(iv) when presentment for acceptance is excused and the bill remains unaccepted; and
(v) when the drawee is incompetent to contract.

An instrument is dishonoured by non-payment when the party primarily liable e.g., the
acceptor of a bill, the maker of a note or the drawee of a cheque, make default in payment.
An instrument is also dishonoured for non-payment when presentment for payment excused
and the instrument, when overdue, remains unpaid, under section 76 of the Act.
Dishonour of cheque for insufficiency, etc. of funds in the account: Where any cheque
drawn by a person on an account maintained by him with a banker for payment is dishonoured
due to insufficiency of funds, he shall be punished with imprisonment for a term which may
extend to one year or with fine which may extend to twice the amount of the cheque or with
both [Section 138 of the Negotiable Instruments Act, 1881].
Provided that nothing in this section shall apply unless:
(i) such cheque should have been presented to the bank within a period of 3 months of the
date of drawn or within the period of its validity, whichever is earlier.
(ii) The payee or holder in due course of such cheque had made a demand in writing for the
payment of the said amount of money from the drawer 30 days of the receipt of
information by him from the bank regarding the return of the cheque unpaid; and
(iii) The drawer of the cheque had failed to pay the money to the payee or holder in due
course of the cheque within 15 days for the written demand for payment.