When the liability of an instrument is discharged under N.I. Act, 1881?

The liability of an instrument is discharged under the following circumstances –

 

i) Where a bill is intentionally cancelled by the holder or his agent, and the cancellation is apparent thereon, the bill is discharged. (Section 82).

 

ii) The holder can discharge the maker, acceptor or endorser by a separate agreement or may do so by conduct which has the effect of discharging a party from his liability. [Section 82(b)]

 

iii) Parties to an instrument are discharged from liability when the amount due on the instrument is paid. Payment can be made by party to the instrument and he can recover the amount from the party primarily liable.

 

iv) If a holder of a bill allows the drawee more than 48 hour, to consider whether he will accept the same, all previous parties not contesting to such allowances are hereby discharged from liability to such holder. (Section 83)

 

v) If a holder of a bill of exchange acquiesces in a qualified acceptance, or one times to part of the sum mentioned in the bill or which substitute 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 are discharged as against the holder unless on notice given by the holder they assent to such acceptance. (Section 86)

 

vi) If a holder of a cheque fails to present it for payment within a reasonable time of its issue and before he actually presents the cheque something happens which prevents the banker from paying the cheque, then the drawer of the cheque is discharged as against the holder provided that he had sufficient balance to meet the cheque when it ought to have been presented. (Section 84)

 

vii) Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties. (Section 87)

 

viii) If a bill of exchange which has been negotiated is, at on or after maturity, held by the acceptor in his own right, all rights of action thereon are extinguished. (Section 90). That is, when a bill of exchange comes back to the acceptor through the process of negotiation and he becomes its holder, at or after maturity, all liability on the instrument comes to an end.