Estoppel of the Acceptor of a Bill of Exchange, Bailee or Licensee (s. 123) — BSA (Law of Evidence) Notes

Estoppel of the Acceptor of a Bill of Exchange, Bailee or Licensee (s. 123)

A bill of exchange passes from hand to hand on trust. When a trader “accepts” a bill drawn on him, the whole commercial world takes that acceptance as his word that the bill is good. So the law will not later let him wriggle out by saying “the man who drew this on me had no authority to do so.” But there is one thing he can still say — that the bill is a forgery, never really drawn by that person at all. That single “but” is the entire examinable point of s. 123.

Section 123 (old IEA s. 117) creates three commercial estoppels; the exam tests the first.

The rule for the acceptor of a bill. The acceptor of a bill of exchange shall not be permitted to deny that the drawer had authority to draw the bill or to endorse it. By accepting, he vouches for the drawer’s authority, and cannot afterwards dispute it against a holder.

The crucial exception. He may deny that the bill was really drawn by the person by whom it purports to have been drawn — that is, he may still plead forgery. The estoppel covers the drawer’s authority, never the genuineness of the drawing itself.

So draw the line clearly:

Denying the drawer had authority to draw/endorse → barred (estopped).
Denying the bill was genuinely drawn by that person (forgery) → allowed.

The other two limbs of s. 123 (worth a line each):

The acceptor of a bill payable to the order of a named payee shall not deny the payee’s capacity, at the date of the bill, to endorse it.
A bailee or licensee shall not deny that his bailor or licensor had, at the time the bailment or licence began, authority to make the bailment or grant the licence — though a bailee who delivers the goods back to the true owner may plead that the bailor had no title.

🔑 The one word that decides every s. 123 problem is the difference between authority and genuineness. Authority to draw = the acceptor is estopped. Whether the drawing itself was forged = the acceptor is free to prove it.

🧩 WORKED EXAMPLE — authority vs forgery

Facts. (i) X draws a bill on Y for Rs. 10,000 payable to Z; Y accepts, then refuses to pay Z, saying “X had no authority to draw this bill on me.” (ii) On a different bill, B is sued as acceptor and pleads “this bill was never really drawn by A at all — A’s signature is forged.”

Rule. The acceptor of a bill may not deny the drawer’s authority to draw or endorse (s. 123), but he may deny that the bill was genuinely drawn by the person it purports to be drawn by.

Apply. In (i) Y is attacking the drawer’s authority — precisely what s. 123 forbids. Y is estopped; he must pay Z. In (ii) B is not disputing authority but alleging a forgery — that the drawing itself is not genuine. That falls within the exception, so B is not estopped and may prove the forgery.

Conclusion. Y loses (authority cannot be denied); B may defend (genuineness can be challenged). The two problems look identical but split on the authority/forgery line.

Decoy. In (ii) the tempting answer is “an acceptor can never deny the drawing → B is estopped.” That over-reads s. 123; the section bars denial of authority, not of genuineness.

Section 123, BSA 2023: “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 licensee 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.”

In Simple Terms: If you accept a bill of exchange, you cannot later say the person who drew it on you had no right to draw it — you vouched for that when you accepted. But you can still prove the bill is a forgery, that it was never truly drawn by that person. Authority is settled against you; genuineness is not.

flowchart TD
    ROOT["Acceptor of a bill (s. 123)"]:::root
    ROOT --> Q1{"What is the acceptor denying?"}
    Q1 -->|"Drawer had NO AUTHORITY<br/>to draw / endorse"| BAR["ESTOPPED — cannot deny<br/>(must pay)"]:::diamond
    Q1 -->|"Bill was FORGED / not really<br/>drawn by that person"| OK["NOT estopped —<br/>may prove forgery (Explanation 1)"]:::leaf
    ROOT --> OTHER["Also: acceptor cannot deny payee's<br/>capacity to endorse; bailee/licensee<br/>cannot deny bailor's/licensor's authority"]:::leaf
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    classDef diamond fill:#FDECEA,stroke:#B22222,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

Sanderson vs Collman (1842) — the acceptor of a bill is estopped from denying the drawer’s authority to draw or endorse it, consistent with the rule now in s. 123.
Braja Kishore Dixit vs Purna Chandra (1957) — applied the estoppel of the acceptor: having accepted, he cannot dispute the drawer’s authority against a holder for value.
Imperial Bank of India vs Bengal National Bank — a party who has represented the regularity of a negotiable instrument by his acceptance is bound by that representation as to authority, though not as to forgery.

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