Introduction
If you accept a bill of exchange, take goods into your custody as a bailee, or move onto property as a licensee, can you later turn around and claim that the person who gave you that role never actually had the authority to give it? Section 123 says no — and it says so in two closely related situations at once.
This article opens a new run through Chapter VIII ("Of Estoppel") of the Bharatiya Sakshya Adhiniyam, 2023 (BSA), a short but commercially important chapter of just three sections. Following the same backward convention used for Chapters IX and X, generation starts here at Section 123 — the highest-numbered section in the chapter — and will move down to Section 122 and finally Section 121 next. Section 123 governs two everyday commercial relationships: the acceptor of a bill of exchange, and the bailee or licensee who takes goods or property from someone else's hands. Both are barred from later denying the authority behind the transaction they accepted the benefit of — with two narrow, carefully drawn exceptions.
123. Estoppel of acceptor of bill of exchange, bailee or licensee.
No acceptor of a bill of exchange shall be permitted to deny that the drawer had authority to draw such bill or to endorse it; nor shall any bailee or licensee be permitted to deny that his bailor or licensor had, at the time when the bailment or licence commenced, authority to make such bailment or grant such licence.
Explanation 1.—The acceptor of a bill of exchange may deny that the bill was really drawn by the person by whom it purports to have been drawn.
Explanation 2.—If a bailee delivers the goods bailed to a person other than the bailor, he may prove that such person had a right to them as against the bailor.
Section 123 Explained: Two Roles, One Estoppel Principle
Section 123 covers two situations that look different on the surface — negotiable instruments and bailment — but rest on identical logic. In both, a person has stepped into a role that only makes sense because someone else represented that they had the authority to create it: a drawer claiming authority to draw a bill, a bailor claiming authority to hand over goods, a licensor claiming authority to grant entry onto property. Once the acceptor, bailee, or licensee has taken the benefit of that role, the law will not let them turn around mid-dispute and say the authority behind it was never really there. That would let them enjoy the transaction and disown its foundation in the same breath.
The estoppel is narrow and functional. It does not settle who actually owns the underlying property or instrument — it simply stops the acceptor, bailee, or licensee from using a denial of authority as a weapon against the very person they transacted with.
| Aspect | Section 117, Indian Evidence Act, 1872 | Section 123, BSA, 2023 |
|---|---|---|
| Main provision | Estoppel of acceptor, bailee, and licensee | Identical wording, unchanged |
| Explanation 1 (bill of exchange) | Acceptor may deny the bill was really drawn by the purported drawer | Identical, unchanged |
| Explanation 2 (bailment) | Bailee delivering to a third party may prove that party's superior right | Identical, unchanged |
The First Limb: Estoppel of the Acceptor of a Bill of Exchange
A bill of exchange only works as a commercial instrument because the parties who handle it can rely on each other's signatures. When a person accepts a bill — signalling they will honour the payment obligation it represents — Section 123 stops them from later claiming the drawer had no authority to draw or endorse it. If acceptors could escape liability simply by disputing the drawer's authority after the fact, no bill of exchange would be safe to negotiate, discount, or rely on in the ordinary course of business.
Explanation 1 draws a careful line the acceptor is not stopped from crossing. The estoppel covers only the drawer's authority to draw or endorse — not whether the named drawer actually drew the bill at all. If the acceptor can show the bill was forged, or that someone impersonated the drawer entirely, that is a denial of genuineness, not of authority, and Section 123 leaves that defence open.
Worked Example One: A Forged Signature
A company accepts a bill of exchange that purports to be drawn by its regular supplier. Later, the company discovers the supplier's signature was forged by an unrelated third party who had no connection to the supplier at all. Under Explanation 1, the acceptor can raise this defence — it is not disputing the supplier's authority to draw bills, it is disputing that the supplier drew this one at all. Had the company instead argued only that the supplier lacked authority to draw the bill (while accepting the supplier did sign it), Section 123 would have barred that argument outright.
The Second Limb: Estoppel of the Bailee and Licensee
The same logic governs bailment and licence. Once a bailee takes goods into custody, or a licensee is let onto immovable property, neither can later deny that the bailor or licensor had authority — at the moment the arrangement began — to hand over the goods or grant entry. A warehouse operator who has accepted goods for storage cannot, when the depositor later demands them back, suddenly claim the depositor never had the right to deposit them in the first place. The bailee's own conduct in accepting the goods forecloses that argument.
Explanation 2 supplies the one situation where a bailee is not trapped by this rule: if the bailee ends up delivering the goods to someone other than the original bailor, the bailee may prove that this third person actually had a better right to the goods than the bailor did. This protects a bailee who is caught between a bailor's claim and a genuine superior title — for instance, the true owner of goods that were bailed by someone without full ownership rights — without opening the door to bailees inventing disputes about authority whenever it is convenient.
Worked Example Two: The True Owner Steps In
A logistics company holds a consignment of goods bailed to it by a trader. Midway through storage, the actual owner of the goods — from whom the trader had obtained them without full title — produces documents proving superior ownership and demands delivery. The logistics company delivers the goods to the true owner instead of the trader. When the trader later sues for wrongful delivery, Explanation 2 allows the logistics company to prove the true owner's superior right as its defence, rather than being estopped from ever questioning the trader's authority.
Why This Matters in Practice
For banks and commercial parties handling negotiable instruments, Section 123 is what makes accepting a bill of exchange a reliable act — the acceptor cannot later wriggle out of liability by disputing the drawer's authority, only by disputing the drawer's genuineness. For warehousing, logistics, and custodial businesses, the section defines exactly when a bailee can safely resist a bailor's claim: almost never, except where a genuinely superior claimant has already stepped in. For property licensors and licensees, it reinforces that a licence, once accepted, cannot be undone by the licensee's own convenient change of position on where the authority to grant it came from.
Key Takeaways
- Two roles, one rule: Section 123 estops both the acceptor of a bill of exchange and the bailee or licensee from denying the authority behind the transaction they accepted.
- Unchanged since 1872: The section is a verbatim carry-over of Section 117 of the Indian Evidence Act, including both Explanations, with no substantive drafting change.
- Authority vs. genuineness: An acceptor can still deny a bill was genuinely drawn by the named drawer (Explanation 1) — just not that the drawer had authority, if genuineness is conceded.
- The true-owner exception: A bailee who delivers goods to a third party may justify that delivery by proving the third party's superior right (Explanation 2).
- Section 123 opens Chapter VIII ("Of Estoppel") — Sections 122 and 121 follow next, applying and then generalising the same underlying principle.
Conclusion
Section 123 sets the tone for Chapter VIII by showing estoppel at its most practical: a rule that keeps commercial and custodial relationships trustworthy by refusing to let a party disown the very authority their own acceptance depended on. It sits alongside Section 122's tenant-and-licensee estoppel and Section 121's general statement of the doctrine, together forming a compact but foundational chapter of the BSA. As this run moves next to Section 122, the same logic reappears in the more familiar context of landlords and tenants — with one notable legislative addition not found in the 1872 Act.