Section 42 NI Act: Acceptance of bill drawn in fictitious name

Negotiable Instruments Act, 1881

Section 42 NI Act at a Glance

Section 42 NI Act holds the acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer's order liable to a holder in due course claiming under an indorsement in the same hand as the drawer's signature.

Section 42 NI Act Bare Act Text

42. Acceptance of bill drawn in fictitious name.
An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer's order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an indorsement by the same hand as the drawer's signature, and purporting to be made by the drawer.

Section 42 NI Act in Simple Words

Section 42 NI Act governs the liability of an acceptor when a bill of exchange is drawn in a fictitious name and is made payable to the drawer's order. The acceptor is not relieved from liability to a holder in due course merely because the drawer's name is fictitious.

Under Section 42 NI Act, the acceptor remains liable to any holder in due course who claims under an indorsement written by the same hand as the drawer's signature and purporting to be made by the drawer.

When Section 42 NI Act Applies

A bill of exchange is drawn in a fictitious name and is payable to the drawer's order.
The acceptor accepts the bill of exchange.
A holder in due course claims on the bill.
The holder in due course claims under an indorsement written by the same hand as the drawer's signature and purporting to be made by the drawer.

Example of Section 42 NI Act

A bill of exchange is drawn in Durgapur in a fictitious drawer's name, payable to the drawer's order, and Manoj accepts the bill. The person who signed the drawer's name also indorses the bill in the same handwriting, purporting to sign as the drawer, and transfers the bill before maturity for consideration to Radhika, who becomes a holder in due course. When Radhika claims payment, Manoj argues that the drawer's name on the bill is fictitious. Under Section 42 NI Act, Manoj is not relieved from liability to Radhika by reason that the drawer's name is fictitious.

FAQs on Section 42 NI Act

What is Section 42 NI Act?▼

Section 42 NI Act deals with the acceptance of a bill of exchange drawn in a fictitious name and payable to the drawer's order. The acceptor is not relieved from liability to a holder in due course claiming under an indorsement written by the same hand as the drawer's signature and purporting to be made by the drawer.

Who can enforce a bill drawn in a fictitious name against the acceptor under Section 42 NI Act?▼

Any holder in due course who claims under an indorsement by the same hand as the drawer's signature and purporting to be made by the drawer.

What kind of indorsement is required for Section 42 NI Act to apply?▼

An indorsement written by the same hand as the drawer's signature and purporting to be made by the drawer. The bill must also be drawn in a fictitious name and payable to the drawer's order.

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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) ·