Chapter III - Parties to Notes, Bills and Cheques
Section 27
Section 27: Authority of agents
Section 27 permits instrument acts through an authorised agent, while drawing clear limits around what general business authority and authority to draw bills establish.
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Need advice on Section 27?
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
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.
Key rule and applicability
The principal must have the capacity referred to in section 26, and the agent must be duly authorised and act in the principal’s name. Check authority for the particular instrument act rather than inferring every power from a job title.
Limits and related provisions
General authority to transact business and receive or discharge debts does not itself confer power to accept or indorse bills so as to bind the principal. Authority to draw bills likewise does not, by itself, include authority to indorse.
Hypothetical business example
Hypothetical: a manager has authority to collect receivables and settle routine debts. Before accepting a supplier’s bill on the company’s behalf, the business checks for authority to accept; the general mandate alone does not establish that power under section 27.
Practical decision flow
Identify the principal and confirm the relevant capacity.
Read the mandate for the specific drawing, acceptance or indorsement act.
Preserve the authority evidence and ensure the instrument records the intended representative capacity.
Practical checklist
Do
- Identify the principal and confirm the relevant capacity.
- Read the mandate for the specific drawing, acceptance or indorsement act.
- Preserve the authority evidence and ensure the instrument records the intended representative capacity.
Avoid
- General authority to transact business and receive or discharge debts does not itself confer power to accept or indorse bills so as to bind the principal. Authority to draw bills likewise does not, by itself, include authority to indorse.
Glossary
- Principal
- The person whose name and authority the agent acts under.
- Specific authority
- Authority covering the particular instrument act in question.
Frequently asked questions
Does general debt-collection authority include accepting bills?
Not merely by itself. The section expressly limits that inference.
Does authority to draw a bill automatically allow indorsement?
No. The final paragraph says drawing authority does not of itself import indorsement authority.
Is an agent’s personal liability decided only by this section?
No. Section 28 separately addresses an agent signing without the specified indication about agency or personal responsibility.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026