Chapter III - Parties to Notes, Bills and Cheques
Section 39
Section 39: Reservation of rights against sureties
Section 39 allows a holder of an accepted bill to expressly preserve rights against other parties when making a contract with the acceptor of the kind described in the provision.
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Need advice on Section 39?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
When the holder of an accepted bill of exchange enters into any contract with the acceptor which, under section 134 or 135 of the Indian Contract Act, 1872 (9 of 1872), would discharge the other parties, the holder may expressly reserve his right to charge the other parties, and in such case they are not discharged.
Key rule and applicability
The setting is an accepted bill and a holder–acceptor contract that would otherwise discharge other parties under section 134 or 135 of the Contract Act. Express reservation of the right to charge those parties prevents the stated discharge.
Limits and related provisions
Do not assume any extension, settlement or release automatically preserves recourse. Identify the applicable Contract Act discharge rule and the actual express reservation; the provision is not a general waiver of every other defence.
Hypothetical business example
Hypothetical: a holder considers an arrangement with the acceptor that would otherwise engage a stated Contract Act discharge rule. Before signing, it reviews an express reservation of recourse against the other bill parties under section 39.
Practical decision flow
Confirm that the instrument is an accepted bill of exchange.
Assess whether the proposed acceptor agreement engages section 134 or 135 of the Contract Act.
Draft and retain an express reservation of rights if relying on section 39 to preserve recourse.
Practical checklist
Do
- Confirm that the instrument is an accepted bill of exchange.
- Assess whether the proposed acceptor agreement engages section 134 or 135 of the Contract Act.
- Draft and retain an express reservation of rights if relying on section 39 to preserve recourse.
Avoid
- Do not assume any extension, settlement or release automatically preserves recourse. Identify the applicable Contract Act discharge rule and the actual express reservation; the provision is not a general waiver of every other defence.
Glossary
- Reservation of rights
- An express preservation of the right to charge other parties.
- Discharge
- Release from the liability addressed by the applicable provision.
Frequently asked questions
Is an express reservation required?
Yes. Section 39 uses the words expressly reserve the right to charge the other parties.
Does the provision concern every instrument?
Its stated setting is an accepted bill of exchange.
Does it remove all other possible defences?
No. It prevents the described discharge where its conditions are met; other issues require separate analysis.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026