Report No. 11
164. Sections 118-120.-
No change has been proposed in sections 118-120. We have however inserted a new provision1 relating to the estoppel of the acceptor of a bill in the light of section 54(2) (a) of the English Act. At present, the primary rule as to the acceptor's estoppel is contained in the Evidence Act instead of in the Negotiable Instruments Act. Section 117 of the Evidence Act, 1872 provides-
1. Section 104, ibid.
"No acceptor of a bill of exchange shall be permitted to deny that the drawer had authority to draw such a bill or to endorse it.
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.....
When the Negotiable Instruments Act was enacted subsequently, it was presumably considered unnecessary to repeat the principle in that Act. But since the above rule of evidence is a special rule relating to negotiable instruments and Chapter XIII of the Negotiable Instruments Act contains various rules of evidence relating to such instruments, purporting to be exhaustive, it would seem proper to transfer the above rule from the Evidence Act to the Negotiable Instruments Act.
The substance of the said provision in the Evidence Act is that the acceptor of a bill is prevented from denying the drawer's authority to draw the bill or to indorse it but he may deny that the bill was really drawn by the person by whom it purports to have been drawn. In other words, he may show that the drawer was a fictitious person or that the signature was not genuine. Section 54(2) of the English Act provides that the acceptor is precluded from denying to a holder in due course the existence of the drawer, the genuineness of the signature after acceptance would introduce to draw the bill.
Thus, while under the English law the acceptor is prevented also from denying the genuineness of the signature of the drawer, under the Indian law it is otherwise. We are of the view however that at the time of acceptance, the drawer should satisfy himself whether the drawer's signature is genuine or not. To permit him to deny the genuineness of his signature and his capacity and authority uncertainty into the law and innocent parties would be made to suffer. The English principle being just and equitable, should be preferred to the provision in section 117 of the Evidence Act.
We have, accordingly, adopted a provision1 on the lines of the English Act and recommended that the provision in the Evidence Act should be deleted in so far as it relates to the acceptor.
1. Section 104 of App I.