Negotiable Instruments Act Section 82 — Discharge from liability
CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES
General
Summary
A person who makes, accepts, or endorses a negotiable instrument is freed from their legal responsibility on it in three situations. First, if the holder of the instrument deliberately cancels that person's name on the document, that person is released from liability to that holder and to anyone who later claims through that holder. Second, if the holder otherwise releases that person from the obligation, that person is freed from liability to that holder and to anyone who gets rights under the holder after being told about the release. Third, if the instrument is payable to the bearer or has been endorsed in blank, and the maker, acceptor, or endorser pays the full amount due in the proper manner, then all parties to the instrument are freed from liability.
Official Text
The maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon—
(a) by cancellation.—to a holder thereof who cancels such acceptor's or indorser’s name with intent to discharge him, and to all parties claiming under such holder;
(b) by release.—to a holder thereof who otherwise discharges such maker, acceptor or indorser, and to all parties deriving title under such holder after notice of such discharge;
(c) by payment.—to all parties thereto, if the instrument is payable to bearer, or has been indorsed in blank, and such maker, acceptor or indorser makes payment in due course of the amount due thereon.