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Report No. 185

Section 117

This Section deals with 'Estoppel of acceptor of bill of exchange, bailee, or licensee'. It reads as follows:

"117. No acceptor of a bill of exchange shall be permitted to deny that the drawer had authority to draw such bill or to endorse it; nor shall any bailee or licnesee be permitted to deny that his bailor or licensor had, at the time when the bailment or licence commenced, authority to make such bailment or grant such licence.

Explanation (1.- The acceptor of a bill of exchange may deny that the bill was really drawn by the person by whom it purports to have been drawn.

Explanation (2.- If a bailee delivers the goods bailed to a person other than the bailor, he may prove that such person had a right to them as against the bailor."

The first part of the Section refers to an identical principle in vogue in England but the first Explanation differs from English law in the sense that the acceptor is not permitted to show that the signature of the drawer is a forgery for he is held to be bound to know his own correspondent's signature (Sanderson v. Collman (1842) 11. LJPC. 270). This Section is supplemented by Sections 41 and 42 of the Negotiable Instruments Act, 1881.

By Section 41, an acceptor is bound by a forged document, if he knew or had reason to believe the endorsement to be forged. By Section 42, an acceptor is liable though the bill is drawn in a fictitious name. By Section 20 of that Act, the maker and acceptor are estopped from denying the capacity of the payee to endorse. By Section 122 of that Act, the endorser is estopped from denying the signature or capacity of prior party. (Sarkar, 15th Ed, 1999, para 1948).

In Sadasuk v. Kishen: AIR 1918 PC 146, it was held that in an action upon a bill of exchange or pronote against a person whose name properly appears as party to the instrument, it is not open either by way of claim or defence to show that the signatory was in reality acting for an undisclosed principal.

So far as bailment is concerned, the relevant provisions of Sections 148 to 181 of the Contract Act, 1872 would be relevant. Section 167 refers to the right of a third party to claim the goods bailed.

Licences under this Section are different from the licence referred to in Section 116. Here, the reference is to licensees of patent or trade marks from their owners.

In the 69th Report, it was pointed out (see para 59.5) that in the 11th Report of the Commission (at p. 66, para 164) it was recommended that the portion of Section 117 which relates to the acceptor of a bill of exchange, be transferred to the Negotiable Instruments Act as Section 104. (See also page 113, draft of Section 104 and p 151 of Appendix III of the 11th Report). But, in the 69th Report there is no positive recommendation for such transfer. No doubt in para 59.7, the 69th Report states that no amendment is required in the remaining part of the Section.

We do not think that it is necessary to shift the first part of Section 117 to the Negotiable Instruments Act. For that matter, there are presumptions relating to landlord and tenant and other relationships of bailees, etc. contatined in the Evidence Act and if there is no need to transfer them to the Transfer of Property Act or the Contract Act, there is equally no need to transfer the first part of Section 117 to the Negotiable Instrument Act.

We, therefore, do not recommend any amendment to Section 117.

Review of the Indian Evidence Act, 1872 Back

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