Sections 44-45A 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.
Sections 44 and 45 reduce the sum a holder can recover from a signer when the consideration for the signature was absent or has failed in part, in dealings between parties "standing in immediate relation". Section 45A lets the holder of a lost bill, lost before it is over-due, ask the drawer for another bill of the same tenor. This article reads all three as per the consolidated text consulted. If a demand has been made for the whole amount of an instrument you say was only partly supported by value, a reply to the legal notice should rely on the exact words of these sections.
Where the consideration for a signature consisted of money and was originally absent in part or has subsequently failed in part, the sum a holder in immediate relation with the signer can receive is proportionally reduced (s.44). The same applies where part of the consideration, though not money, is ascertainable in money without collateral enquiry and has failed (s.45). The holder of a bill lost before it is over-due may ask the drawer for another bill of the same tenor, giving security if required, and the drawer may be compelled to give it (s.45A).
Printing notes
Two printing points in the consolidated copy. Section 45 reads "there has been a failure of that party" where the sense is plainly a failure of that part of the consideration; the sentence is reported as printed and no correction is made to the text. Section 45A is printed twice, with identical text; it is read once here.
Section 44: partial absence or failure of money-consideration
The text says: when the consideration for which a person signed a promissory note, bill of exchange or cheque consisted of money, and was originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.
The elements
| Element | Text |
|---|---|
| Consideration | It consisted of money |
| Problem | It was originally absent in part, or has subsequently failed in part |
| Who is affected | A holder standing in immediate relation with the signer |
| Result | The sum he is entitled to receive from the signer is proportionally reduced |
Compare section 43, which says an instrument without consideration, or for a consideration which fails, creates no obligation between the parties (see our article on section 43). Section 44 deals with the partial case: the consideration was money, and only part of it was absent or failed. The recoverable sum falls in proportion.
The Explanation: "immediate relation"
The text says: the drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder.
| Pair | Immediate relation as the text states |
|---|---|
| Drawer of a bill and the acceptor | Yes |
| Maker of a note, bill or cheque and the payee | Yes |
| Indorser and his indorsee | Yes |
| Other signers and a holder | Only by agreement |
"Immediate relation" matters because the reduction is available as between parties who deal directly with each other. The reduction works against "a holder standing in immediate relation with such signer". The text does not say what the position is for a holder who is not in immediate relation; this article does not guess. See our article on sections 8 to 10 for the status of a holder in due course, whose position the Act treats separately.
The illustration
The text gives this illustration. A draws a bill on B for Rs. 500 payable to the order of A. B accepts the bill, but subsequently dishonours it by non-payment. A sues B on the bill. B proves that it was accepted for value as to Rs. 400, and as an accommodation to the plaintiff as to the residue. A can only recover Rs. 400.
Here A is the drawer and B the acceptor, who stand in immediate relation. Of the Rs. 500, only Rs. 400 was supported by value. The balance was an accommodation to A, so there was no consideration for that part. A recovers only Rs. 400. The amounts are those printed in the text and are not current figures.
Example with new names
Zoya draws a bill for a stated sum on Aman, who accepts it. Zoya sues Aman on the bill. Aman shows that money consideration was given for four-fifths of the sum and that the remaining fifth was an accommodation to Zoya. The recoverable sum is reduced in proportion, to four-fifths. This is the same pattern as the printed illustration, with fractions rather than rupee figures.
Section 45: partial failure, consideration not money
The text says: where a part of the consideration for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that party, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.
| Element | Text |
|---|---|
| Consideration | Part of it is not money |
| Condition | That part is ascertainable in money without collateral enquiry |
| Problem | There has been a failure (printed "of that party") |
| Result | The sum recoverable by a holder in immediate relation is proportionally reduced |
The extra condition is "ascertainable in money without collateral enquiry". A part of the consideration that is not money can reduce the sum only if its value in money can be fixed without a side inquiry. The text gives no examples and no test of what counts as collateral enquiry. Where the value cannot be fixed so simply, the section's condition is not met, and the text does not say more.
Example: Bhavna Motors signs a note in return for a promise of delivery of goods at a price that is plainly stated in the contract. Part of the goods are never delivered. The missing part's value is ascertainable in money without any side inquiry because the price is stated. On the text, the sum recoverable by a holder in immediate relation with Bhavna is proportionally reduced.
Section 45A: holder's right to duplicate of lost bill
The text says: where a bill of exchange has been lost before it is over-due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.
The steps
- The bill of exchange is lost before it is over-due.
- The person who was the holder applies to the drawer for another bill of the same tenor.
- The holder gives security to the drawer, if required, to indemnify him against all persons whatever in case the lost bill is found again.
- If the drawer refuses on request, he may be compelled to give the duplicate.
| Point | Text |
|---|---|
| Instrument | A bill of exchange (not a note or cheque) |
| Time of loss | Before it is over-due |
| Who may apply | The person who was the holder |
| To whom | The drawer |
| What may be required | Security to indemnify the drawer against all persons whatever if the bill is found again |
| If the drawer refuses | He may be compelled |
The section speaks only of a bill of exchange and only of loss "before it is over-due". The text does not deal with a bill lost after it is over-due, or with a note or cheque, and this article does not extend it. The text does not say how a drawer is compelled or by whom; it only says he "may be compelled".
For indemnity in the general law of contract, see our article on section 124 of the Indian Contract Act, 1872. A later article in this series covers the related rules in section 81 on indemnity when an instrument is lost.
Example: Chetan Exports, the holder of a bill drawn by Devika Enterprises, loses it in transit before it falls due. Chetan applies to Devika for another bill of the same tenor and offers security against the lost bill turning up. If Devika refuses without reason, section 45A says she may be compelled to give the duplicate.
Need help replying to a claim on a partly unsupported instrument?
If you have been asked to pay the full amount of an instrument and part of the value never reached you, the proportional rule in sections 44 and 45 may be relevant. We can review the documents and prepare a response; see our reply to legal notice service.
Key takeaways
- If money consideration was partly absent or has partly failed, the sum recoverable by a holder in immediate relation with the signer is proportionally reduced.
- Immediate relation covers drawer and acceptor, maker and payee, and indorser and indorsee; other signers only by agreement.
- If non-money consideration is ascertainable in money without collateral enquiry and has partly failed, the same proportional reduction applies.
- The holder of a bill lost before it is over-due may ask the drawer for another bill of the same tenor, giving security if required.
- A drawer who refuses on request may be compelled to give the duplicate.
Read next
- Section 43: instrument made without consideration
- Section 46: delivery of a negotiable instrument
- Sections 40-42: discharge of indorser, forged indorsement and fictitious drawer
- Cheque bounce in business transactions: practical guide
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.