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Section 42: Acceptance of bill drawn in fictitious name

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1881
Section 41 All 148 Sections of Negotiable Instruments Act Section 43

Legal Commentary & Landmark Judgments: Section 42

Section 42 governs acceptance of a bill drawn in a fictitious name, enacting that an acceptor is bound to pay a holder in due course if the bill is indorsed in the same hand as the drawer's signature.

  • Fictitious Drawer: Applies where the bill is drawn in the name of a fictitious person or entity.
  • Matching Indorsement Signature: The bill must be indorsed by the same handwriting or signature as that of the purported drawer.
  • Protection for Holder in Due Course: The acceptor cannot raise the fictitious nature of the drawer as a defense against a bona fide holder in due course.
Key Landmark Precedents:
  • Vagliano Brothers v. Bank of England (1891): The foundational authority on fictitious payees and drawers, ruling that 'fictitious' includes real persons introduced as non-existent commercial actors.
  • Cooper v. Meyer (1830) 10 B & C 468: Held that the acceptor admits the capacity of the drawer to draw and indorse, and is bound to pay the holder in due course.
Courtroom Practice & Strategic Litigation Guidance:

In complex financial fraud or trade finance disputes involving shell entities or fictitious corporate drawers, Section 42 prevents the accepting bank or corporate buyer from disclaiming liability if the bill is held by an innocent financier or discounting house.

Section 41 All 148 Sections of Negotiable Instruments Act Section 43