Section 122 NI Act: Estoppel against denying signature or capacity of prior party

Negotiable Instruments Act, 1881

Section 122 NI Act at a Glance

Section 122 NI Act bars any indorser of a negotiable instrument, in a suit on the instrument by a subsequent holder, from denying the signature or capacity to contract of any prior party to the instrument.

Section 122 NI Act Bare Act Text

122. Estoppel against denying signature or capacity of prior party.

No indorser of a negotiable instrument shall, in a suit thereon by a subsequent holder, be permitted to deny the signature or capacity to contract of any prior party to the instrument.

Section 122 NI Act in Simple Words

Section 122 NI Act sets out an estoppel that applies to indorsers of a negotiable instrument. In a suit on the instrument brought by a subsequent holder, no indorser is permitted to deny the signature or the capacity to contract of any prior party to that instrument.

Section 122 NI Act applies in a suit brought by any subsequent holder against an indorser. The bar covers both the genuineness of the signature and the contractual capacity of every party prior to that indorser on the negotiable instrument.

When Section 122 NI Act Applies

  • A person is an indorser of a negotiable instrument.
  • A subsequent holder brings a suit on that negotiable instrument.
  • The indorser is not permitted in that suit to deny the signature or the capacity to contract of any prior party to the instrument.

Example of Section 122 NI Act

Naveen makes a promissory note for ₹90,000 payable to Lalitha in Patna, who indorses it to Arjun, and Arjun then indorses it to Geeta in Kanpur. When the note is not paid, Geeta, as a subsequent holder, files a suit on the promissory note against Arjun. In that suit, Arjun tries to claim that Naveen's signature on the note was forged or that Lalitha lacked the capacity to contract. Under Section 122 NI Act, because Arjun is an indorser being sued by a subsequent holder, Arjun is not permitted to deny the signature or capacity to contract of Naveen or Lalitha, who are prior parties to the instrument.

FAQs on Section 122 NI Act

What is Section 122 NI Act?▼

Section 122 NI Act is an estoppel provision that binds indorsers of a negotiable instrument. It states that in a suit on the instrument by a subsequent holder, no indorser is permitted to deny the signature or capacity to contract of any prior party to the instrument.

Does the plaintiff under Section 122 NI Act have to be a holder in due course?▼

No. Unlike Sections 120 and 121 NI Act, which require a suit by a holder in due course, Section 122 NI Act applies in a suit on the instrument by any subsequent holder.

What is an indorser barred from denying under Section 122 NI Act?▼

The signature or capacity to contract of any prior party to the instrument. When sued by a subsequent holder under Section 122 NI Act, the indorser cannot dispute either of those matters regarding any earlier party on the negotiable instrument.

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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) ·