Section 86 NI Act: Parties not consenting discharged by qualified or limited acceptance
Negotiable Instruments Act, 1881
Section 86 NI Act at a Glance
Section 86 NI Act states that when the holder of a bill of exchange acquiesces in a qualified or limited acceptance, previous non-consenting parties are discharged unless they assent on notice from the holder. Its Explanation defines when an acceptance is qualified.
Section 86 NI Act Bare Act Text
86. Parties not consenting discharged by qualified or limited acceptance.
If the holder of a bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance.
Explanation.—An acceptance is qualified—
(a) where it is conditional, declaring the payment to be dependent on the happening of an event therein stated;
(b) where it undertakes the payment of part only of the sum ordered to be paid;
(c) where no place of payment being specified on the order, it undertakes the payment at a specified place, and not otherwise or elsewhere; or where, a place of payment being specified in the order, it undertakes the payment at some other place and not otherwise or elsewhere;
(d) where it undertakes the payment at a time other than that at which under the order it would be legally due.
Section 86 NI Act in Simple Words
Section 86 NI Act explains the effect on prior parties when the holder of a bill of exchange takes a qualified or limited acceptance. It applies if the holder acquiesces in a qualified acceptance, an acceptance limited to part of the sum mentioned in the bill, an acceptance that substitutes a different place or time for payment, or, where the drawees are not partners, an acceptance that is not signed by all the drawees.
When the holder acquiesces in such an acceptance, all previous parties whose consent is not obtained to that acceptance are discharged as against the holder and those claiming under the holder. Those previous parties are not discharged, however, if on notice given by the holder they assent to such acceptance.
The Explanation to Section 86 NI Act lists four cases in which an acceptance is qualified. Under clause (a), an acceptance is qualified where it is conditional, declaring payment to be dependent on the happening of an event stated in the acceptance. Under clause (b), it is qualified where it undertakes the payment of part only of the sum ordered to be paid.
Under clause (c) of the Explanation to Section 86 NI Act, an acceptance is qualified where no place of payment is specified on the order and the acceptance undertakes payment at a specified place, and not otherwise or elsewhere; or where a place of payment is specified in the order and the acceptance undertakes payment at some other place, and not otherwise or elsewhere. Under clause (d), an acceptance is qualified where it undertakes payment at a time other than that at which under the order it would be legally due.
When Section 86 NI Act Applies
- The holder of a bill of exchange acquiesces in a qualified acceptance, an acceptance limited to part of the sum in the bill, an acceptance substituting a different place or time for payment, or (where the drawees are not partners) an acceptance not signed by all the drawees.
- Previous parties to the bill of exchange have not consented to that acceptance.
- Those previous parties do not assent to the acceptance on notice given by the holder.
- All such non-consenting previous parties are discharged as against the holder and those claiming under the holder.
Example of Section 86 NI Act
FAQs on Section 86 NI Act
What is Section 86 NI Act?▼
Section 86 NI Act states that if the holder of a bill of exchange acquiesces in a qualified or limited acceptance, all previous parties whose consent is not obtained are discharged as against the holder and those claiming under the holder. Those previous parties are not discharged if they assent to the acceptance on notice given by the holder.
When is an acceptance considered qualified under the Explanation to Section 86 NI Act?▼
Under the Explanation to Section 86 NI Act, an acceptance is qualified if it is conditional on a stated event, undertakes payment of only part of the sum ordered, or undertakes payment at a time other than when legally due under the order. Under clause (c), it is also qualified if it undertakes payment at a specified place or a different place and not otherwise or elsewhere.
What happens under Section 86 NI Act if there are multiple drawees who are not partners and not all of them sign the acceptance?▼
If the drawees are not partners and the holder acquiesces in an acceptance not signed by all the drawees, all previous parties whose consent is not obtained are discharged as against the holder and those claiming under the holder, unless they assent on notice given by the holder.
When are previous parties not discharged by a qualified acceptance under Section 86 NI Act?▼
Previous parties are not discharged if their consent is obtained to the qualified acceptance, or if they assent to the acceptance on notice given by the holder.
When does an acceptance that specifies a place of payment become qualified under Section 86 Explanation (c) NI Act?▼
Under Section 86 Explanation (c) NI Act, it becomes qualified only when it undertakes payment at a specified place (where no place was specified on the order) or at some other place (where a place was specified in the order) and states that payment will be made there and not otherwise or elsewhere.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·