Section 27 NI Act: Agency

Negotiable Instruments Act, 1881

Section 27 NI Act at a Glance

Section 27 NI Act states that a person capable under Section 26 NI Act may act through a duly authorized agent acting in the principal's name, and limits what a general authority or an authority to draw covers.

Section 27 NI Act Bare Act Text

27. Agency.

Every person capable of binding himself or of being bound, as mentioned in section 26, may so bind himself or be bound by a duly authorized agent acting in his name.

A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal.

An authority to draw bills of exchange does not of itself import an authority to indorse.

Section 27 NI Act in Simple Words

Section 27 NI Act governs agency in relation to negotiable instruments. Under the first paragraph of Section 27 NI Act, every person who is capable of binding that person or of being bound, as mentioned in Section 26 NI Act, may bind that person or be bound by a duly authorized agent acting in that person's name.

Under the second paragraph of Section 27 NI Act, a general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind the principal.

Under the third paragraph of Section 27 NI Act, an authority given to an agent to draw bills of exchange does not by itself import an authority to indorse bills of exchange.

When Section 27 NI Act Applies

  • The principal is a person capable of binding that person or being bound as mentioned in Section 26 NI Act.
  • The agent is duly authorized and acts in the principal's name.
  • A general authority to transact business and to receive and discharge debts does not give the agent power to accept or indorse bills of exchange to bind the principal.
  • An authority to draw bills of exchange does not of itself import an authority to indorse.

Example of Section 27 NI Act

Geeta, a merchant in Gwalior, gives Amit a general authority to transact business and to receive and discharge debts for Geeta. While managing the shop, Amit accepts a bill of exchange for ₹80,000 in Geeta's name without any specific authority to accept bills of exchange. Under Section 27 NI Act, a general authority to transact business and to receive and discharge debts does not give an agent the power of accepting or indorsing bills of exchange so as to bind the principal. Because Amit holds only that general authority, the acceptance does not bind Geeta.

FAQs on Section 27 NI Act

What is Section 27 NI Act?▼

Section 27 NI Act states when a person may bind that person or be bound on a negotiable instrument through a duly authorized agent acting in the principal's name. Section 27 NI Act also limits what a general business authority or an authority to draw bills of exchange covers.

How can an agent bind a principal under Section 27 NI Act?▼

By being duly authorized and acting in the principal's name. Under Section 27 NI Act, every person capable of binding that person or being bound as mentioned in Section 26 NI Act may do so through a duly authorized agent acting in the principal's name.

Does a general authority to transact business and receive and discharge debts allow an agent to accept or indorse bills of exchange under Section 27 NI Act?▼

No. Section 27 NI Act states that a general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind the principal.

If an agent has authority to draw bills of exchange, does that automatically include authority to indorse under Section 27 NI Act?▼

No. Section 27 NI Act states that an authority to draw bills of exchange does not of itself import an authority to indorse.

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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) ·