Report No. 69

Chapter 59

Estoppel of Acceptor of Bill, Bailee or Licensee

Section 117

59.1. Introductory.-

In section 116, which we have discussed so far, the estoppel dealt with rests on agreement. The next section-section 117-also deals with three other instances of estoppel by agreement, namely, (i) against the acceptor of a bill of exchange, (ii) against a bailee, and (iii) against a licensee. In all the three cases there is an express or implied agreement which forms the basis of the relationship created by the parties.

The principal provision in the section reads-

"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 licensee be permitted to deny that his bailor or licensor had, at the time when the bailment or license commenced, authority to make such bailment or grant such license."

There are two Explanations appended to the section, which we shall deal with later.

59.2. Acceptor of a bill of exchange.-

To take up, first, the estoppel against the acceptor of a bill of exchange. The acceptance of a bill of exchange amounts to an undertaking to pay to the order of the drawer, but the transaction would be idle if, after having so undertaken, the acceptor were allowed to set up that the drawer had no authority to draw the bill.1 He is, therefore, precluded from doing so, for to allow him to do so would be to allow him to contradict that which the act of acceptance really imports.

1. Rup Chand v. Sarbeswar Chandra, (1906) 10 CWN 747: ILR 33 Cal 914.

59.3. To elaborate the matter, the acceptance of a bill of exchange is deemed a conclusive admission, as against the acceptor, of the drawer's capacity to draw: and, if the bill is to be payable to the order of the drawer, then of his capacity to endorse If it is drawn by "procuration", then it is also a conclusive admission of the authority of the agent to draw the bill in the name of the principal. But, there is no admission on the part of the acceptor, of the signature of the payee-even where the payee is the same party as the drawer, or of the signature of any other indorser; and this is so, even though, at the time of the acceptance, the endorsements were already contained on the bill.

59.4. First Explanation.-

There are two Explanations to the section. Under the first Explanation. "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." It may be noted that this Explanation is a departure from the English law. In England, the acceptor is bound to know his correspondent's signature.

59.5. Portion relating to acceptor.-

That portion of section 117 which relates to the acceptor was discussed in a previous Report of the Law Commission,1 and a recommendation was made that the matter should be incorporated in the Negotiable Instruments Act.2 But this recommendation may be carried out only after the necessary legislation is passed to revise the Negotiable Instruments Act. It may be noted that no such legislation has yet been initiated.

1. 11th Report of the Law Commission (Negotiable Instruments Act), para. 164, last sub-paragraph (summarised in Appendix III).

2. The provision to be recommended to be inserted in the Negotiable Instruments Act is in the 11th Report, draft section 104.

59.6. Provisions in the Negotiable Instruments Act.-

To complete this discussion, in so far as it relates to bills of exchange, we may state that there are certain provisions creating estoppel, in relation to negotiable instruments, in the Negotiable Instruments Act.1

1. Sections 120, 121 and 122, Negotiable Instruments Act, 1881.

59.7. Bailee and licensee.-

So much as regards the acceptor of a bill of exchange. The estoppel of bailee and licensee, dealt with in the latter half of the section, is analogous to that of landlord and tenant, and is based on a similar principle. In particular, the estoppel against a bailee has great practical utility. For example, where a car is delivered for repairs by X to Y, Y is estopped from questioning the title of X,1 because of this part of the section.

1. Calcutta Credit Corporation v. Prince Peter of Greece, AIR 1964 Cal 374 (377), para. 9: 68 CWN 554.

59.8. Second Explanation.-

The second Explanation to the section provides that 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.1 This relaxation of estoppel is, in a sense, analogous to eviction by paramount title in the case of a landlord and tenant-which also has a similar effect of relaxing the tenant's estoppel and leaving the matter at large.

1. As to English law see Biddle v. Pond, (1805) 6 B&S 225, approved in Rogers Sons & Co. v. Lambert & Co., (1891) 1 KB 318 (325).

59.9. Licencee of patents and trademarks.-

The position of a licensee of a patent who under a licence, is working a right for which another has a patent, is analogous1 to the position of tenant and landlord, and the licensee is bound in the same way:2 he cannot question the validity of the patent during the continuance of the license, though he may show what the limits of the patent are.3 A right to use a trademark may be created by license. Such a licensee is also estopped from denying the licensor's title or the validity of the license, even though he attempts to repudiate the contract.4

No changes are required in this part of the section.

1. For an exception in England, see Davies (Ex-parte), (1881) 19 Ch D 86.

2. Clark v. Addie, 1 App Ca 423; D.H.R Moses (in re:), 1887 ILR 15 Cal 244.

3. As to estoppel against patentee, see further,

(a) Cropper v. Smith, 26 Ch D 700;

(b) Proctor v. Bennis, 36 Ch D 749.

4. Jagarnath v. Creswel, 1913 ILR 40 Cal 814, affirmed in Hannah v. Jagarnath, 1914 ILR 42 Cal 262 (Trademarks).

59.10. Agency.-

It may be noted that the Evidence Act is silent as to estoppel arising from agency. The law of agency is dealt with in the Contract Act1 but that Act does not deal with estoppel between principal and agent, though it has a provision2 dealing with "pretended agency" which would operate in favour of third persons. It may, however, be stated that ordinarily, an agent is not permitted to set up the adverse title of a third person in order to defeat the rights of the principal, or to dispute the title of the principal.

1. Sections 148-186, Contract Act.

2. Section 235, Contract Act.

59.11. As was observed1 by Woodroffe J., sections 115 and 116 are not exhaustive of the law of estoppel. Hence the sections may be applied by analogy, to parties not mentioned therein. On that basis, the agent would be estopped to the extent mentioned above. We respectfully agree with Woodroffe's view and do not suggest any change.

1. Rup Chand v. Sarveshwar, 1906 ILR 33 Cal 915 (921).

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