Section 40 - Discharge of indorser's liability - Negotiable Instruments Act, 1881

Discharge of indorser's liability. 40. 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 indorsement by Peter Williams and Wright Co. A is not entitled to recover anything from John Rozario.