Chapter III - Parties to Notes, Bills and Cheques
Section 44
Section 44: Partial absence or failure of money consideration
Section 44 proportionally reduces recovery where money consideration is partly absent or fails in part and the holder stands in immediate relation with the signer.
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Need advice on Section 44?
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 consideration for which a person signed a promissory note, bill of exchange or cheque consisted of money, and was originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.
Explanation.—The drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder.
Illustration: A draws a bill on B for Rs. 500 payable to the order of A, B accepts the bill, but subsequently dishonours it by non-payment. A sues B on the bill, B proves that it was accepted for value as to Rs. 400, and as an accommodation to the plaintiff as to the residue. A can only recover Rs. 400.
Key rule and applicability
The rule requires money consideration and the specified immediate relationship. The explanation identifies drawer–acceptor, maker–payee and indorser–indorsee relationships and permits other signers to stand in such a relation by agreement.
Limits and related provisions
Do not apply the reduction indiscriminately to every remote holder. Establish the relationship and the actual proportion of absent or failed money consideration rather than simply deducting an alleged commercial loss.
Hypothetical business example
Hypothetical: a note’s payee seeks the face amount from its maker, but part of the money consideration was never supplied. The parties quantify that missing portion and assess the proportional reduction under the immediate-relation rule.
Practical decision flow
Identify the money consideration and the part originally absent or later failed.
Establish the holder’s immediate relationship with the signer.
Calculate and evidence the proportional reduction relevant to that claim.
Practical checklist
Do
- Identify the money consideration and the part originally absent or later failed.
- Establish the holder’s immediate relationship with the signer.
- Calculate and evidence the proportional reduction relevant to that claim.
Avoid
- Do not apply the reduction indiscriminately to every remote holder. Establish the relationship and the actual proportion of absent or failed money consideration rather than simply deducting an alleged commercial loss.
Glossary
- Immediate relation
- The relationships identified by the explanation or established by agreement as permitted.
- Proportional reduction
- The reduction matching the relevant partial absence or failure of consideration.
Frequently asked questions
Does this section concern money consideration?
Yes. Section 45 separately addresses qualifying non-money consideration.
Are indorser and indorsee in the stated immediate relationship?
Yes. The explanation expressly identifies that pair.
Is the whole amount necessarily eliminated?
No. The rule calls for a proportional reduction in the described circumstances.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026