Section 40 in The Negotiable Instruments Act, 1881
40. Discharge of indorser’s liability.—
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.IllustrationA 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.
