The maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon:
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;
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;
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.
Legal Commentary & Landmark Judgments: Section 82
Section 82 enumerates the three statutory modes by which the maker, acceptor, or indorser of a negotiable instrument is discharged from liability: by cancellation, by release, or by payment.
In compromise settlements of Section 138 cases or recovery suits, ensure the deed of settlement explicitly invokes Section 82: record that the liability is discharged by payment, and file the deed in court for compounding under Section 147.