Section 120 NI Act: Estoppel against denying original validity of instrument

Negotiable Instruments Act, 1881

Section 120 NI Act at a Glance

Section 120 NI Act bars the maker of a promissory note, the drawer of a bill or cheque, and an acceptor for the drawer's honour from denying the instrument's original validity in a suit by a holder in due course.

Section 120 NI Act Bare Act Text

120. Estoppel against denying original validity of instrument.

No maker of a promissory note, and no drawer of a bill of exchange or cheque, and no acceptor of a bill of exchange for the honour of the drawer shall, in a suit thereon by a holder in due course, be permitted to deny the validity of the instrument as originally made or drawn.

Section 120 NI Act in Simple Words

Section 120 NI Act creates an estoppel regarding the original validity of an instrument. When a holder in due course files a suit on an instrument, the parties named in Section 120 NI Act are not permitted to deny the validity of that instrument as originally made or drawn.

This bar under Section 120 NI Act applies to three categories of parties: the maker of a promissory note, the drawer of a bill of exchange or cheque, and the acceptor of a bill of exchange for the honour of the drawer.

When Section 120 NI Act Applies

  • A holder in due course brings a suit on a promissory note, bill of exchange, or cheque.
  • The party defending is the maker of the promissory note, the drawer of the bill of exchange or cheque, or the acceptor of the bill of exchange for the honour of the drawer.
  • That party is not permitted to deny the validity of the instrument as originally made or drawn.

Example of Section 120 NI Act

Nasreen in Surat draws a cheque for ₹60,000 payable to Pooja, and Pooja indorses the cheque to Prakash in Nagpur, who becomes its holder in due course. When the cheque is dishonoured, Prakash files a suit on the cheque against Nasreen. Under Section 120 NI Act, because Prakash is a holder in due course and Nasreen is the drawer of the cheque, Nasreen is not permitted in that suit to deny the validity of the cheque as originally drawn.

FAQs on Section 120 NI Act

What is Section 120 NI Act?▼

Section 120 NI Act is an estoppel provision that protects a holder in due course suing on an instrument. It bars the maker of a promissory note, the drawer of a bill of exchange or cheque, and the acceptor of a bill for the honour of the drawer from denying the validity of the instrument as originally made or drawn.

Who is barred from denying the original validity of an instrument under Section 120 NI Act?▼

The maker of a promissory note, the drawer of a bill of exchange or cheque, and the acceptor of a bill of exchange for the honour of the drawer. Section 120 NI Act stops these three parties from denying the instrument's validity as originally made or drawn.

Does the bar in Section 120 NI Act apply in every suit on an instrument?▼

No. Section 120 NI Act applies only in a suit on the instrument brought by a holder in due course.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·