Section 98 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 98 lists the situations in which a holder, or a party passing the instrument back along the chain, need not give notice of dishonour at all. As per the consolidated text consulted, there are seven such situations, lettered (a) to (g), and any one of them is enough.
Notice of dishonour is the ordinary step a holder takes to charge the earlier parties on a dishonoured note, bill or cheque. Section 98 says no notice of dishonour is necessary in seven listed cases, for example when the party entitled to notice has dispensed with it, when the drawer has countermanded payment, or when the party entitled to notice promises unconditionally to pay. This is the general notice of dishonour of the Act, not the demand notice of Section 138, which has its own rule.
What kind of notice is this?
Before reading the clauses, be clear about which notice Section 98 deals with. The Act requires a holder who wants to charge an earlier party on a dishonoured instrument to give that party notice that the instrument was dishonoured. Who gives it and how is covered in Sections 93 and 94, and passing it on in Sections 95 to 97. Section 98 is the list of exceptions.
This is a different thing from the demand notice a payee sends to a drawer after a cheque is returned, which is part of the cheque-dishonour offence. That notice is dealt with in Section 138 of the Act, and Section 98 does not switch it off. Do not read "no notice is necessary" in Section 98 as permission to skip the Section 138 demand. The two provisions work on different questions: Section 98 is about charging parties to the instrument with liability on it, while Section 138 sets out its own conditions for the offence. If you are preparing a cheque-bounce demand, start with our guide on time limits under Section 138. Where a notice has to be drafted, whichever kind it is, legal notice drafting support can keep the wording tied to the text.
The text says: "No notice of dishonour is necessary" in the cases below. A note on spelling: the Act writes "indorse" and "indorsement", while "endorse" is the common spelling; this article uses the Act's form.
The seven cases in Section 98
The text is a single sentence with clauses (a) to (g) run together. Broken out, it reads as follows.
| Clause | When no notice of dishonour is necessary |
|---|---|
| (a) | when it is dispensed with by the party entitled thereto |
| (b) | in order to charge the drawer, when he has countermanded payment |
| (c) | when the party charged could not suffer damage for want of notice |
| (d) | when the party entitled to notice cannot after due search be found; or the party bound to give notice is, for any other reason, unable without any fault of his own to give it |
| (e) | to charge the drawers, when the acceptor is also a drawer |
| (f) | in the case of a promissory note which is not negotiable |
| (g) | when the party entitled to notice, knowing the facts, promises unconditionally to pay the amount due on the instrument |
Clause by clause
(a) Dispensed with. The party who would be entitled to the notice may waive it. The text does not say in what form the waiver must be made, and it does not prescribe a form, so the safest practical course is to have any waiver recorded in writing.
(b) Drawer has countermanded payment. This applies "in order to charge the drawer". A drawer who has told the bank not to pay cannot say he was prejudiced by not being told that payment failed. Note the limit: clause (b) speaks only of charging the drawer. It does not, on its face, remove the need for notice to other parties such as indorsers.
(c) No damage from want of notice. If the party charged could not suffer damage for want of notice, notice is not necessary. The clause turns on damage, so the question is what the party would have done differently had it been told.
(d) Party cannot be found, or giver is unable. This has two limbs joined by a semicolon. The first is that the party entitled to notice cannot, after due search, be found. The second is that the party bound to give notice is, for any other reason, unable, without any fault of his own, to give it. Both limbs contain a built-in test: "due search" in the first and "without any fault of his own" in the second.
(e) Acceptor is also a drawer. To charge the drawers, no notice is needed when the acceptor is also a drawer. The reasoning is that such a person already knows of the dishonour from his own position as acceptor.
(f) Promissory note which is not negotiable. Notice of dishonour is not necessary for a promissory note that is not negotiable.
(g) Unconditional promise to pay. If the party entitled to notice, knowing the facts, promises unconditionally to pay the amount due, no notice is necessary. Two things must be present: knowledge of the facts and an unconditional promise.
Two examples
Example 1 (clause (b)). Meera Traders draws a cheque on a bank in favour of Kunal Supplies and the next morning tells her bank not to pay it. The cheque is returned unpaid. Kunal Supplies wants to hold Meera Traders liable on the cheque as drawer. Under clause (b), notice of dishonour is not necessary to charge the drawer, because the drawer herself stopped payment.
Example 2 (clause (g)). A bill of exchange accepted by Raman & Sons is dishonoured, and the holder's indorser, Pooja Agencies, learns the facts and writes that it will pay the full amount due. Because Pooja Agencies, knowing the facts, has promised unconditionally to pay, clause (g) means no notice of dishonour is necessary to charge it. Had the promise carried a condition, clause (g) would not apply.
Points to watch
- The burden of showing the exception. The text does not say who must prove that an exception applies. It is silent on proof, so a holder who plans to rely on Section 98 should keep the papers that support it, such as the countermand letter, the search record or the written promise.
- Exceptions are for notice only. Section 98 does not remove the need to present the instrument where presentment is required, and it does not decide whether the underlying instrument was valid. It only removes the requirement of notice of dishonour.
- Notice of protest. Where a note or bill must be protested, notice of protest takes the place of notice of dishonour under the Act. See Sections 101 and 102.
- Timing. Where notice is needed, the time limits for giving it are in Sections 105 to 107.
Need help with a dishonoured instrument and notice?
If an instrument you hold has been dishonoured and you are not sure whether notice was required, or you need a notice drafted carefully, our team can review the papers with you. See our legal notice drafting service for how we work. It is better to settle this question before limits run out than after.
Key takeaways
- Section 98 lists seven cases, (a) to (g), where no notice of dishonour is necessary.
- Waiver, countermand of payment by the drawer, absence of damage, a party who cannot be found or a giver who cannot give notice without fault, an acceptor who is also a drawer, a non-negotiable promissory note, and an unconditional promise to pay are the seven cases.
- Clause (b) helps only in charging the drawer.
- Section 98 is the general notice of dishonour; the Section 138 demand notice is separate and is not removed by it.
- Keep written proof of the facts that bring you within a clause.
Read next
- Sections 93 and 94: who gives notice of dishonour and how
- Sections 105 to 107: reasonable time for presentment and notice of dishonour
- Sections 91 and 92: dishonour by non-acceptance and by non-payment
- Section 138: cheque bounce (dishonour of cheque)
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.