Section 41 NI Act: Acceptor bound, although, indorsement forged

Negotiable Instruments Act, 1881

Section 41 NI Act at a Glance

Section 41 NI Act keeps the acceptor of an already indorsed bill of exchange liable even when the indorsement is forged, if the acceptor knew or had reason to believe that the indorsement was forged when accepting the bill.

Section 41 NI Act Bare Act Text

41. Acceptor bound, although, indorsement forged.

An acceptor of a bill of exchange already indorsed is not relieved from liability by reason that such indorsement is forged, if he knew or had reason to believe the indorsement to be forged when he accepted the bill.

Section 41 NI Act in Simple Words

Section 41 NI Act deals with the liability of an acceptor who accepts a bill of exchange that already bears an indorsement. If that indorsement is forged, the acceptor is not relieved from liability on the bill by reason of the forgery when the condition in Section 41 NI Act is met.

The acceptor remains bound if, at the time of accepting the bill of exchange, the acceptor knew or had reason to believe that the existing indorsement was forged. In that case, the forged indorsement does not relieve the acceptor from liability.

When Section 41 NI Act Applies

  • A bill of exchange is already indorsed before acceptance.
  • That indorsement on the bill is forged.
  • The acceptor accepts the bill of exchange.
  • When accepting the bill, the acceptor knew or had reason to believe that the indorsement was forged.

Example of Section 41 NI Act

A bill of exchange already bears an indorsement in the name of Simran when the bill is presented to Abdul in Gorakhpur for acceptance. Abdul knows at the time of acceptance that Simran's indorsement on the bill is forged, yet Abdul accepts the bill. When payment is claimed on the bill, Abdul refuses to pay on the ground that Simran's indorsement was forged. Under Section 41 NI Act, Abdul is not relieved from liability because Abdul knew the indorsement was forged when Abdul accepted the bill.

FAQs on Section 41 NI Act

What is Section 41 NI Act?▼

Section 41 NI Act states when an acceptor remains liable on a bill of exchange despite a forged indorsement. If the bill was already indorsed and the acceptor knew or had reason to believe that the indorsement was forged when accepting the bill, the acceptor is not relieved from liability by reason of that forgery.

Can an acceptor refuse payment because of a forged indorsement that the acceptor knew about when accepting the bill?▼

No. Under Section 41 NI Act, an acceptor of a bill of exchange already indorsed is not relieved from liability by reason that the indorsement is forged if the acceptor knew or had reason to believe the indorsement was forged at the time of acceptance.

Does Section 41 NI Act require the acceptor to have certain knowledge of the forgery?▼

No. Section 41 NI Act applies both when the acceptor knew that the indorsement was forged and when the acceptor had reason to believe that the indorsement was forged when accepting the bill.

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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) ·