Section 32 NI Act: Liability of maker of note and acceptor of bill

Negotiable Instruments Act, 1881

Section 32 NI Act at a Glance

Section 32 NI Act requires a promissory note maker and a bill acceptor before maturity to pay at maturity, and an acceptor at or after maturity to pay on demand. In default, the maker or acceptor must compensate any party for resulting loss.

Section 32 NI Act Bare Act Text

32. Liability of maker of note and acceptor of bill.
In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand.
In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.

Section 32 NI Act in Simple Words

Section 32 NI Act defines the payment obligation and default liability of the maker of a promissory note and the acceptor of a bill of exchange. The rules in the first paragraph apply in the absence of a contract to the contrary.

Under the first paragraph of Section 32 NI Act, the maker of a promissory note is bound to pay the amount of the note at maturity according to the apparent tenor of the note. Similarly, a person who accepts a bill of exchange before maturity is bound to pay the amount of the bill at maturity according to the apparent tenor of the acceptance. However, if a person accepts a bill of exchange at or after maturity, that acceptor is bound to pay the amount of the bill to the holder on demand.

Under the second paragraph of Section 32 NI Act, if the maker of the promissory note or the acceptor of the bill of exchange defaults in making payment as required, that maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by that party and caused by the default.

When Section 32 NI Act Applies

There is no contract to the contrary between the parties.
The maker of a promissory note must pay the amount at maturity according to the apparent tenor of the note.
The acceptor of a bill of exchange before maturity must pay the amount at maturity according to the apparent tenor of the acceptance.
The acceptor of a bill of exchange at or after maturity must pay the amount to the holder on demand.
In default of payment, the maker or acceptor must compensate any party to the note or bill for any loss or damage sustained by that party and caused by the default.

Example of Section 32 NI Act

Rahul in Vijayawada makes a promissory note promising to pay ₹50,000 to Leela after 60 days, with no contract to the contrary. Leela indorses the note to Ajay. At maturity, Rahul defaults in paying the ₹50,000 according to the apparent tenor of the note, causing loss to both Leela and Ajay. Under Section 32 NI Act, Rahul, as the maker of the promissory note, is bound to pay at maturity and, because of the default, must compensate any party to the note for the loss or damage sustained and caused by that default.

When Section 32 NI Act Does Not Apply

There is a contract to the contrary governing the liability of the maker of the promissory note or the acceptor of the bill of exchange.

FAQs on Section 32 NI Act

What is Section 32 NI Act?▼

Section 32 NI Act states that, unless there is a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange must pay the amount at maturity according to the apparent tenor of the note or acceptance, while an acceptor at or after maturity must pay the holder on demand. If the maker or acceptor defaults in payment, the maker or acceptor must compensate any party to the note or bill for any loss or damage caused by the default.

When must an acceptor who accepts a bill of exchange at or after maturity pay the amount under Section 32 NI Act?▼

On demand. Unless there is a contract to the contrary, Section 32 NI Act requires the acceptor of a bill of exchange at or after maturity to pay the amount to the holder on demand.

Who can claim compensation if the maker or acceptor defaults under Section 32 NI Act?▼

Any party to the promissory note or bill of exchange. Under the second paragraph of Section 32 NI Act, the defaulting maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by that party and caused by the default.

Can parties agree to terms different from the payment rules in Section 32 NI Act?▼

Yes. The payment rules in the first paragraph of Section 32 NI Act apply in the absence of a contract to the contrary.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·