Section 82 NI Act: Discharge from liability

Negotiable Instruments Act, 1881

Section 82 NI Act at a Glance

Section 82 NI Act sets out three ways the maker, acceptor, or indorser of a negotiable instrument is discharged from liability: by cancellation of an acceptor's or indorser's name, by release, or by payment in due course on a bearer or blank-indorsed instrument.

Section 82 NI Act Bare Act Text

82. Discharge from liability.

The maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon—

(a) by cancellation.—to a holder thereof who cancels such acceptor's or indorser's name with intent to discharge him, and to all parties claiming under such holder;

(b) by release.—to a holder thereof who otherwise discharges such maker, acceptor or indorser, and to all parties deriving title under such holder after notice of such discharge;

(c) by payment.—to all parties thereto, if the instrument is payable to bearer, or has been indorsed in blank, and such maker, acceptor or indorser makes payment in due course of the amount due thereon.

Section 82 NI Act in Simple Words

Section 82 NI Act specifies three ways in which the maker, acceptor, or indorser of a negotiable instrument is discharged from liability on the instrument.

Under Section 82(a) NI Act (discharge by cancellation), the acceptor or indorser is discharged from liability to a holder who cancels that acceptor's or indorser's name with the intent to discharge that party, and to all parties claiming under that holder.

Under Section 82(b) NI Act (discharge by release), the maker, acceptor, or indorser is discharged from liability to a holder who otherwise discharges that maker, acceptor, or indorser, and to all parties who derive title under that holder after notice of the discharge.

Under Section 82(c) NI Act (discharge by payment), the maker, acceptor, or indorser is discharged from liability to all parties to the instrument if the instrument is payable to bearer, or has been indorsed in blank, and that maker, acceptor, or indorser makes payment in due course of the amount due on the instrument.

When Section 82 NI Act Applies

  • Cancellation under Section 82(a) NI Act: a holder cancels the acceptor's or indorser's name with intent to discharge that party, discharging that party to the holder and all parties claiming under that holder.
  • Release under Section 82(b) NI Act: a holder otherwise discharges the maker, acceptor, or indorser, discharging that party to the holder and all parties deriving title under that holder after notice of the discharge.
  • Payment under Section 82(c) NI Act: the instrument is payable to bearer or indorsed in blank, and the maker, acceptor, or indorser makes payment in due course of the amount due, discharging that party to all parties to the instrument.

Example of Section 82 NI Act

Sarita is the holder of a bill of exchange for ₹60,000 accepted by Nikhil and indorsed by Vivek in Durgapur. Intending to discharge Vivek from liability, Sarita cancels Vivek's name on the bill and later transfers the bill to Karan. Under Section 82(a) NI Act, because Sarita cancelled Vivek's name with the intent to discharge Vivek, Vivek is discharged from liability both to Sarita and to Karan, who claims under Sarita.

FAQs on Section 82 NI Act

What is Section 82 NI Act?▼

Section 82 NI Act lists three ways in which the maker, acceptor, or indorser of a negotiable instrument is discharged from liability on the instrument. These three ways are cancellation under clause (a), release under clause (b), and payment in due course on an instrument payable to bearer or indorsed in blank under clause (c).

When does cancellation of a name discharge a party under Section 82(a) NI Act?▼

When the holder cancels the acceptor's or indorser's name with intent to discharge that party. Once cancelled with that intent, the acceptor or indorser is discharged from liability to that holder and to all parties claiming under that holder.

Against whom does a release operate under Section 82(b) NI Act?▼

The maker, acceptor or indorser is discharged from liability to the holder who otherwise discharges that party, and to all parties deriving title under that holder after notice of the discharge. Clause (a), on cancellation, has no notice condition: it covers all parties claiming under the holder.

When does payment discharge a party against all parties under Section 82(c) NI Act?▼

When the instrument is payable to bearer or has been indorsed in blank, and the maker, acceptor, or indorser makes payment in due course of the amount due on it. Meeting these conditions discharges the paying party from liability to all parties to the instrument.

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