Chapter III - Parties to Notes, Bills and Cheques
Section 40
Section 40: Discharge after impairing an indorser’s remedy
Section 40 protects an indorser when a holder, without that indorser’s consent, destroys or impairs recourse against a prior party.
On this page
Need advice on Section 40?
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
Where the holder of a negotiable instrument, without the consent of the indorser, destroys or impairs the indorser’s remedy against a prior party, the indorser is discharged from liability to the holder to the same extent as if the instrument had been paid at maturity.
Illustration: A is the holder of a bill of exchange made payable to the order of B, which contains the following indorsements in blank:— First indorsement, “B”. Second indorsement, “Peter Williams”. Third indorsement, “Wright & Co.” Fourth indorsement, “John Rozario”. This bill A puts in suit against John Rozario and strikes out, without John Rozario's consent, the indorsements by Peter Williams and Wright & Co. A is not entitled to recover anything from John Rozario.
Key rule and applicability
The relevant conduct is impairment or destruction of the indorser’s remedy against an earlier party. Without consent, the stated discharge from liability to the holder is to the same extent as if the instrument had been paid at maturity.
Limits and related provisions
The provision is about the holder’s interference with a specific indorser’s remedy; do not describe every clerical change as automatically extinguishing every party’s rights. Identify the affected remedy, consent position and statutory consequence.
Hypothetical business example
Hypothetical: before suing a later indorser, a holder removes earlier indorsements without the later indorser’s consent. The holder must assess section 40’s discharge rule and the resulting loss of recourse instead of assuming the editing is harmless.
Practical decision flow
Preserve the original and altered indorsement chain.
Identify the prior-party remedy said to be destroyed or impaired.
Establish the indorser’s consent position and assess the resulting discharge in the particular claim.
Practical checklist
Do
- Preserve the original and altered indorsement chain.
- Identify the prior-party remedy said to be destroyed or impaired.
- Establish the indorser’s consent position and assess the resulting discharge in the particular claim.
Avoid
- The provision is about the holder’s interference with a specific indorser’s remedy; do not describe every clerical change as automatically extinguishing every party’s rights. Identify the affected remedy, consent position and statutory consequence.
Glossary
- Prior-party remedy
- The recourse the indorser had against an earlier party.
- Impairment
- The reduction or destruction of that remedy by the holder’s conduct.
Frequently asked questions
Is the indorser’s consent relevant?
Yes. The rule expressly concerns conduct without that consent.
Whose remedy is protected?
The indorser’s remedy against a prior party.
Does the statutory illustration involve removed indorsements?
Yes. It illustrates the consequence of striking out specified earlier indorsements without the sued indorser’s consent.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026