Sections 35-36 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 35 says an indorser who indorses and delivers a negotiable instrument before maturity is bound to compensate every subsequent holder if the instrument is dishonoured, unless he has excluded or made conditional his liability or a contract says otherwise. Section 36 says every prior party to a negotiable instrument is liable on it to a holder in due course until it is duly satisfied. This article reads both as per the consolidated text consulted. The Act spells it "indorser"; "endorser" is the common spelling. If you are chasing the parties on a dishonoured instrument, a recovery suit may follow after notice.
In the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without expressly excluding or making conditional his own liability, is bound to every subsequent holder to compensate for loss caused by dishonour, provided due notice of dishonour has been given to, or received by, him. Every indorser after dishonour is liable as upon an instrument payable on demand. Every prior party is liable to a holder in due course until the instrument is duly satisfied.
Section 35: liability of indorser
The text says: in the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without, in such indorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonour, provided due notice of dishonour has been given to, or received by, such indorser as hereinafter provided. Every indorser after dishonour is liable as upon an instrument payable on demand.
The elements of the first sentence
| Element | Text |
|---|---|
| Starting point | In the absence of a contract to the contrary |
| Act | Indorses and delivers a negotiable instrument before maturity |
| No exclusion | Without, in such indorsement, expressly excluding or making conditional his own liability |
| Whom he is bound to | Every subsequent holder |
| Trigger | Dishonour by the drawee, acceptor or maker |
| Duty | Compensate the holder for loss or damage caused by the dishonour |
| Condition | Due notice of dishonour given to, or received by, the indorser as provided later |
Indorse and deliver
Both words matter. Indorsement is a signature for negotiation (see our article on sections 14 to 16); delivery completes the transfer. The section speaks of an indorsement and delivery "before maturity".
Excluding or conditioning liability
The indorser can protect himself, but only "in such indorsement" and "expressly". So an indorser who does not want to be liable must say so in the indorsement itself. A private understanding outside the indorsement does not fall within the words. The text does not prescribe a form of words. A later article on sections 51 and 52 explains indorsement without recourse.
Notice of dishonour
As with the drawer under section 30, the indorser's liability depends on due notice of dishonour being given to, or received by him "as hereinafter provided". The rules are in later sections (see our article on sections 93 and 94). A holder who wishes to claim from an indorser must make sure notice reaches that indorser. This is the general notice of dishonour of this part of the Act, not the demand notice under section 138; see our post on section 138 for that separate provision.
The second sentence: indorser after dishonour
"Every indorser after dishonour is liable as upon an instrument payable on demand." A person who indorses an instrument that has already been dishonoured is liable as if the instrument were payable on demand. The text does not go further; for example, it does not say what compensation applies.
Example with invented names
Yash Distributors receives a cheque from a customer and, before it is presented, indorses it in full to Zenith Metals and delivers it. Yash does not write any words excluding or conditioning its liability. The cheque is dishonoured by the drawee bank. Yash is bound to compensate Zenith, as the subsequent holder, for loss caused by the dishonour, provided due notice of dishonour has been given to, or received by, Yash. Had Yash written in its indorsement that it excluded its own liability, the section's liability would not arise because of the express exclusion.
Section 36: liability of prior parties
The text says: every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.
What it says
- Who is liable. "Every prior party". The section does not list them. A prior party is a party who came earlier in the chain than the holder.
- To whom. A holder in due course, defined in section 9 (see our article on sections 8 to 10).
- For how long. "Until the instrument is duly satisfied". The text does not say what "duly satisfied" requires; later sections on discharge deal with it.
Reading section 36 with section 35
Section 35 is about an indorser's duty to a subsequent holder and carries the conditions of notice and no exclusion. Section 36 states a general liability of prior parties to a holder in due course. The text consulted does not say how the two interact when the conditions of section 35 are not met, and this article does not guess. A holder in due course who wants to claim should check both sections and the later provisions on notice and discharge.
| Point | Section 35 | Section 36 |
|---|---|---|
| Person liable | Indorser | Every prior party |
| Owed to | Every subsequent holder | A holder in due course |
| Conditions | Indorsement and delivery before maturity; no express exclusion; due notice of dishonour | The instrument has not been duly satisfied |
| Contract to the contrary | Allowed ("in the absence of a contract to the contrary") | Not mentioned in the text |
The last row is a plain comparison of what the two sections say: section 35 opens with "in the absence of a contract to the contrary"; section 36 does not.
Practical steps for a holder
- Identify the chain of parties: drawer or maker, indorsers, and who among them is a prior party to you.
- Check each indorsement for any express exclusion or condition.
- Give notice of dishonour to each party you want to hold, as the Act provides, and keep proof.
- Check whether you qualify as a holder in due course; it affects section 36.
Need help collecting from indorsers or prior parties?
If a dishonoured instrument has passed through several hands, the order of claims and the notices matter. We can review the chain and advise on the next step; see our recovery suit service.
Key takeaways
- An indorser who indorses and delivers before maturity is bound to every subsequent holder to compensate for loss caused by dishonour, unless a contract says otherwise.
- The indorser can avoid this only by expressly excluding or making conditional his liability in the indorsement itself.
- The indorser's liability depends on due notice of dishonour being given to, or received by, him.
- An indorser after dishonour is liable as upon an instrument payable on demand.
- Every prior party is liable to a holder in due course until the instrument is duly satisfied.
Read next
- Sections 32-34: liability of maker and acceptor, and who can accept a bill
- Sections 37-39: principal debtors, sureties and suretyship
- Sections 30-31: liability of drawer and of the drawee bank of a cheque
- Section 138: cheque bounce
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.