Section 36 NI Act: Liability of prior parties to holder in due course

Negotiable Instruments Act, 1881

Section 36 NI Act at a Glance

Section 36 NI Act makes every prior party to a negotiable instrument liable on the instrument to a holder in due course. This liability continues until the negotiable instrument is duly satisfied.

Section 36 NI Act Bare Act Text

36. Liability of prior parties to holder in due course.

Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.

Section 36 NI Act in Simple Words

Section 36 NI Act defines the extent of liability that prior parties on a negotiable instrument owe to a holder in due course.

Under Section 36 NI Act, every prior party to a negotiable instrument is liable on that instrument to a holder in due course. That liability continues until the instrument is duly satisfied.

When Section 36 NI Act Applies

  • The claimant is a holder in due course of a negotiable instrument.
  • The person sought to be held liable is a prior party to the negotiable instrument.
  • The negotiable instrument has not yet been duly satisfied.

Example of Section 36 NI Act

Jatin in Bikaner draws a bill of exchange for ₹1,00,000 on Sunil, who accepts it, payable to Kusum. Kusum indorses the bill to Arjun, and before the amount becomes payable, Arjun indorses it for consideration to Mary, who takes it without sufficient cause to believe there is any defect in Arjun's title, so Mary is a holder in due course. Under Section 36 NI Act, Jatin, Sunil, Kusum, and Arjun, as prior parties to the bill, are each liable on the instrument to Mary until the bill is duly satisfied.

FAQs on Section 36 NI Act

What is Section 36 NI Act?▼

Section 36 NI Act states the liability of prior parties on a negotiable instrument towards a holder in due course. Every prior party to a negotiable instrument remains liable on it to a holder in due course until the instrument is duly satisfied.

When does the liability of prior parties to a holder in due course end under Section 36 NI Act?▼

When the instrument is duly satisfied. Section 36 NI Act keeps every prior party liable on the negotiable instrument to a holder in due course until due satisfaction.

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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) ·