Negotiable Instruments Act, 1881 · Chapter III: P A R T I E S T O N O T E S, B I L L S A N D C H E Q U E S .
Section 38: Prior party a principal in respect of each subsequent party
In plain words
Among the parties liable as sureties, each earlier party is also, unless agreed otherwise, a principal debtor towards each later party.
Example: A draws a bill on B, who accepts, and it is indorsed A to C, C to D, D to E. As between E and B, B is principal debtor and A, C and D are sureties. As between E and A, A is principal debtor.
A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.
Official text
As between the parties so liable as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a principal debtor in respect of each subsequent party.
Illustration
A draws a bill payable to his own order on B, who accepts. A afterwards indorses the bill to C, C to D, and D to E. As between E and B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C and D are his sureties. As between E and C, C is the principal debtor and D is his surety.
Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.
Supreme Court judgments citing the section 38
No Supreme Court judgment in our database cites this section yet.