Estoppel of acceptor of bill of exchange, bailee or licensee
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Summary
When a person accepts a bill of exchange, or acts as a bailee or licensee, they cannot deny that the drawer, bailor or licensor had authority to draw the bill, make the bailment, or grant the licence when it began. That stops the recipient from challenging the giver's power to authorise the transaction. Limited exceptions allow the acceptor to deny who actually drew the bill, and a bailee who handed goods to a third person may prove that third person had a right to them.
Example
Aditya accepts a bill of exchange presented as drawn and endorsed by Karan. Aditya cannot later deny that Karan had authority to draw or endorse the bill, so he must treat that authority as valid. However Aditya may still prove the bill was not actually drawn by Karan.
Bare Act
Enacted textNo 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.
Explanations
(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.
(2) If a bailee delivers the goods bailed to a person other than the bailor, the may prove that such person had a right to them as against the bailor.
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