Section 86 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 86 deals with a holder of a bill of exchange who accepts less than a plain acceptance: a qualified one, one limited to part of the sum, one that changes the place or time of payment, or one not signed by all the drawees. Previous parties whose consent is not obtained are discharged unless they assent on notice. This article reads the section and its Explanation as per the consolidated text consulted.
If the holder of a bill acquiesces in a qualified acceptance, or one limited to part of the sum, or one that substitutes a different place or time for payment, or one not signed by all the drawees (where they are not partners), all previous parties whose consent is not obtained are discharged as against the holder and those claiming under him, unless on notice from the holder they assent. The Explanation lists four kinds of qualified acceptance.
The rule in the main paragraph
Section 86 begins: "If the holder of a bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance."
The section gives four triggers. A previous party is discharged if the holder acquiesces in an acceptance that is:
- qualified;
- limited to part of the sum mentioned in the bill;
- one that substitutes a different place or time for payment; or
- where the drawees are not partners, not signed by all the drawees.
The effect: all previous parties whose consent is not obtained are discharged "as against the holder and those claiming under him". The escape: "unless on notice given by the holder they assent to such acceptance". So the holder has a route to avoid the discharge: give notice and obtain assent.
Who a drawee is, and what acceptance means, is in section 7, covered in drawer, drawee, acceptor and payee. Who can accept a bill is in section 34; see liability of maker and acceptor and who can accept a bill. If you hold a bill and the drawee has accepted on narrower terms than the bill states, a legal consultation before you respond can protect your position against earlier parties.
The Explanation: when an acceptance is qualified
The Explanation says: "An acceptance is qualified" in four cases.
(a) Conditional
"where it is conditional, declaring the payment to be dependent on the happening of an event therein stated".
(b) Part only
"where it undertakes the payment of part only of the sum order to be paid". The word "order" appears in the text as "sum order to be paid" (it reads as "ordered"). We quote the printed words.
(c) Place of payment
"where no place of payment being specified on the order, it undertakes the payment at a specified place, and not otherwise or elsewhere; or where, a place of payment being specified in the order, it undertakes the payment at some other place and not otherwise or elsewhere".
This clause has two limbs:
- the order specifies no place, but the acceptance names a place and not otherwise or elsewhere; or
- the order specifies a place, but the acceptance undertakes payment at some other place and not otherwise or elsewhere.
(d) Time of payment, and a flag on the printed text
"where it undertakes the payment at a time other than that at which under the order or would be legally due."
The printed text of clause (d) is garbled: the words "under the order or would be legally due" seem to have words missing. We quote it as printed and flag the slip. The sense appears to be an acceptance undertaking payment at a time other than the time at which payment would be due under the order or in law, but the copy does not say so, and we do not rewrite the clause.
| Clause | Kind of qualified acceptance | Plain description |
|---|---|---|
| (a) | Conditional | Payment depends on an event stated in the acceptance |
| (b) | Part only | Undertakes payment of part of the sum |
| (c) | Place | Undertakes payment at a specified place only, or at a different place from the one in the order |
| (d) | Time | Undertakes payment at a time other than that due (printed text garbled) |
How the main paragraph and the Explanation fit
The main paragraph lists four triggers, and the Explanation defines "qualified" in four clauses. They overlap. The main paragraph mentions "one limited to part of the sum" and "one which substitutes a different place or time", which also appear in the Explanation as clauses (b), (c) and (d). Read the section as a whole: whichever route applies, the consequence is the same, discharge of previous parties who do not consent, unless they assent on notice.
The partners point is separate. Where the drawees are not partners, an acceptance not signed by all of them is a trigger. Where the drawees are partners, the section does not make that a trigger.
The effect on the holder and previous parties
- For the holder: acquiescing in a narrower acceptance costs him his recourse against previous parties who did not consent. The holder can protect himself by giving notice and getting their assent.
- For previous parties (the drawer and indorsers before the holder): they are discharged if they did not consent and do not assent on notice.
- For the acceptor: the section does not take away his own undertaking in the terms he accepted. The text addresses only the position of previous parties.
For the later consequence of a bill being treated as dishonoured by non-acceptance, see dishonour by non-acceptance and by non-payment. Section 91 says that where the acceptance is qualified the bill may be treated as dishonoured. For a related discharge when the drawee is given extra time, see discharge from liability by cancellation, release or payment.
Example 1: part acceptance. Gandhi Fabrics draws a bill for a stated sum on Haldar Stores. The bill is indorsed to Iqbal Finance. Haldar Stores accepts only part of the sum, and Iqbal Finance takes the part acceptance without asking Gandhi Fabrics. Under section 86, Gandhi Fabrics, a previous party whose consent was not obtained, is discharged as against Iqbal Finance, unless on notice from Iqbal Finance it assents.
Example 2: change of place. The bill states no place of payment. Haldar Stores accepts "payable at the Karol Bagh branch only". That is a qualified acceptance under clause (c). If the holder acquiesces without the previous parties' consent, they are discharged unless they assent on notice.
Example 3: protecting the holder. On receiving the narrower acceptance, Iqbal Finance writes to Gandhi Fabrics and the indorsers, explains the acceptance and asks for assent. If they assent, the discharge in section 86 does not apply to them.
Practical points
- Read the acceptance before taking it. Look for conditions, part amounts, new places, new times and missing signatures.
- Do not acquiesce silently. If the acceptance is narrower than the bill, give notice to previous parties and ask them to assent.
- Keep the notice and the replies. The exception depends on "notice given by the holder" and assent.
- Partners and non-partners. If the drawees are not partners, check that all of them have signed.
Need help with a bill that was accepted on narrower terms?
If a drawee has accepted a bill conditionally, for part only, at a different place or time, or without all drawees signing, a legal consultation can help you decide how to handle notice to previous parties. Bring the bill and the acceptance.
Key takeaways
- Section 86 discharges previous parties whose consent is not obtained if the holder acquiesces in a qualified or limited acceptance.
- The discharge is as against the holder and those claiming under him.
- The holder can avoid it if, on notice from him, the previous parties assent.
- The Explanation lists four kinds of qualified acceptance: conditional, part only, different place, different time.
- A partners-not-signing trigger applies only where the drawees are not partners.
- Clause (d) of the Explanation is garbled in the copy consulted.
Read next
- Cheque payable to order and bank drafts (sections 85-85A)
- Material alteration of a negotiable instrument (sections 87-88)
- Dishonour by non-acceptance and by non-payment (sections 91-92)
- Bill of exchange in export trade
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.