Chapter XIII - Special Rules of Evidence
Section 122
Section 122: Estoppel against denying signature or capacity of prior party
Section 122 restricts an indorser’s denial of a prior party’s signature or capacity when sued by a subsequent holder.
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Need advice on Section 122?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Applicability and limits
Map the sequence of parties. The person facing this restriction must be an indorser; the claimant must be a subsequent holder and the disputed signature or capacity must belong to a prior party.
The provision names a subsequent holder without adding the words holder in due course. Its stated bar is against the indorser and should not be generalised into a rule that every party loses every defence.
Hypothetical example
Hypothetical: a trader indorses a bill to a later holder and is then sued on it. Section 122 restricts the trader’s attempt to deny a prior party’s signature or contractual capacity.
Evidence and decision flow
Prepare the instrument’s sequence of makers, payees and indorsers.
Confirm that the claimant is subsequent to the defendant indorser.
Identify whether the proposed denial concerns a prior party’s signature or capacity.
Practical checklist
Do
- Prepare the instrument’s sequence of makers, payees and indorsers.
- Confirm that the claimant is subsequent to the defendant indorser.
- Identify whether the proposed denial concerns a prior party’s signature or capacity.
Avoid
- The provision names a subsequent holder without adding the words holder in due course. Its stated bar is against the indorser and should not be generalised into a rule that every party loses every defence.
Glossary
- Prior party
- A party earlier in the instrument’s relevant chain.
- Subsequent holder
- A holder later in that chain than the indorser being sued.
Frequently asked questions
Does the text require a holder in due course?
It says a subsequent holder; do not replace that wording with a different threshold.
Whose denial is restricted?
The indorser sued on the instrument.
What two issues does the bar identify?
A prior party’s signature and capacity to contract.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026