CS Professional · Banking and Insurance - Laws and Practice · Payment and Collection of Cheques and Other Negotiable Instruments
Gupta Agro made a promissory note payable to bearer in favour of Hari Seeds, which transferred it by delivery to Iqbal. Iqbal later demanded payment on maturity, and Gupta Agro paid him the full amount due in due course. Hari Seeds had also transferred it earlier to Jai by indorsement in blank, and Jai had indorsed it onward before Iqbal got it. Which statement is correct?
Gupta Agro is discharged from liability to all parties. Under Section 82(c), when an instrument is payable to bearer or indorsed in blank and the maker pays the amount due in due course, the discharge operates in favour of all parties to the instrument.
- AGupta Agro is discharged from liability to all parties to the noteCorrect
- BGupta Agro is discharged only against Iqbal, and Jai may still claim
- CGupta Agro is discharged only if the note is cancelled by Iqbal
- DGupta Agro remains liable to Hari Seeds until it indorses the note
Explanation
Section 82(c) discharges a maker, acceptor or indorser by payment to all parties if the instrument is payable to bearer or indorsed in blank and payment is made in due course of the amount due. The note is bearer, so payment to Iqbal discharges Gupta Agro against all parties. Option two wrongly limits the discharge to the payee.
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