Negotiable Instruments Act 1881 - Chapter III

Sections 31 and 32 of Negotiable Instruments Act 1881: Liability of Drawee, Maker and Acceptor

Sections 31 and 32 of the Negotiable Instruments Act, 1881 define important payment obligations of parties to cheques, promissory notes and bills of exchange. Section 31 concerns the drawee of a cheque, ordinarily the banker on whom the cheque is drawn. Section 32 concerns the maker of a promissory note and the acceptor of a bill of exchange.

In brief: Section 31 protects the drawer where the drawee has sufficient funds properly applicable to the cheque but defaults in payment. Section 32 fixes the primary payment obligation of the maker of a promissory note and the acceptor of a bill of exchange, subject to any contract to the contrary.

Section 31 - Liability of Drawee of Cheque

Statutory provision: The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to payment of the cheque must pay it when duly required to do so. If the drawee defaults, the drawee must compensate the drawer for loss or damage caused by that default.

Meaning and scope of Section 31

Section 31 deals with the relationship between the drawer of a cheque and its drawee. A cheque is a bill of exchange drawn on a specified banker and payable on demand. The obligation under Section 31 arises where the drawee has sufficient funds of the drawer, those funds are properly applicable to the cheque, and payment is duly required.

The statutory compensation under Section 31 is expressed in favour of the drawer for loss or damage caused by the drawee's default. The provision should therefore be distinguished from the separate statutory remedy available to a payee or holder in a cheque dishonour prosecution under Section 138 of the Negotiable Instruments Act, where its legal requirements are satisfied.

Essential elements of liability under Section 31

There must be a cheque drawn on the drawee.
The drawee must hold sufficient funds of the drawer.
The funds must be properly applicable to payment of that cheque.
The cheque must be duly presented or payment must otherwise be duly required according to law.
If payment is wrongfully refused, compensation is linked to the loss or damage caused to the drawer by the default.

Section 32 - Liability of Maker of Note and Acceptor of Bill

Statutory provision: In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount at maturity according to the apparent tenor of the note or acceptance respectively. An acceptor of a bill at or after maturity is bound to pay the amount to the holder on demand.

On default, the maker or acceptor is bound to compensate any party to the note or bill for loss or damage sustained and caused by the default.

Maker of a promissory note

A promissory note is defined in Section 4 of the Negotiable Instruments Act, 1881. In substance, it is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument, subject to the statutory definition.

Under Section 32, the maker bears the obligation to pay the amount at maturity according to the apparent tenor of the promissory note, unless there is a contract to the contrary.

Acceptor of a bill of exchange

A bill of exchange is defined in Section 5 of the Act as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument, subject to the statutory definition.

Where a bill is accepted before maturity, the acceptor is bound to pay at maturity according to the apparent tenor of the acceptance. Where acceptance takes place at or after maturity, Section 32 requires payment to the holder on demand.

Effect of default under Section 32

If the maker or acceptor defaults in the payment required by Section 32, that party is bound to compensate a party to the note or bill for loss or damage sustained by that party and caused by the default. The statutory words also make the liability subject to a contract to the contrary.

Difference between Sections 31 and 32

Section 31 addresses the duty of the drawee of a cheque where sufficient funds of the drawer are held and properly applicable to payment. Section 32, by contrast, deals with the payment liability of the maker of a promissory note and the acceptor of a bill of exchange. Both provisions concern liability arising from failure to make payment, but they operate upon different parties and instruments.

Official text and legal reference

The authoritative Central Act may be checked on the official India Code - Negotiable Instruments Act, 1881. Users should verify the current statutory text and any applicable judicial interpretation for a particular transaction or dispute.

Page reviewed and updated: 3 October 2026. This article is a general legal reference and does not substitute for advice on the facts of a particular case.