A Bill of Exchange (BOE), hundi or promissory note is deemed to have been made, accepted, drawn or endorsed on behalf of the company if it is made/drawn by any person acting under its authority – express or implied.
Key Point: The authority may be express (written authorisation, Board resolution) or implied (arising from the position the person holds, e.g., a Finance Director's authority over bill drawing is often implied).
### Limb 2 – Other Formal Deeds [Sub-section (2)]
For deeds OTHER than negotiable instruments, a company may authorise an attorney to execute deeds on its behalf, in India or outside India.
#### Authorisation method depends on whether the company has a Common Seal:
Situation
How Attorney is Authorised
Company has a common seal
By writing under its common seal
Company has no common seal
By 2 Directors OR by 1 Director + 1 Company Secretary (only if the company has appointed a CS)
#### Effect of the Attorney's Signature
Deeds signed by such an attorney on behalf of the company and under his seal shall bind the company and have the same effect as if executed under its common seal.
## Putting It Together: When Does a Negotiable Instrument Bind the Company?
```
Was the BOE / hundi / PN signed by a person:
├── Acting under EXPRESS authority of company? ──> YES, binds company
└── Acting under IMPLIED authority of company? ──> YES, binds company
(e.g., MD signing a routine business cheque)
```
## Why Common Seal Provisions Matter
The Companies (Amendment) Act, 2015 made the common seal optional. Section 22 was amended to provide for an alternative – if there is no seal, two directors (or director + CS) authenticate the authorisation. This keeps the deed-execution process workable for companies that have done away with the seal.
Worked example
### Example 1
Q: Mr. K, the Managing Director of LMN Ltd., draws a bill of exchange for Rs. 5 lakhs in favour of a vendor for goods supplied. Is the company bound by the bill?
A: Yes. The MD acts under implied authority of the company in the ordinary course of business. Section 22(1) deems the BOE to have been drawn on behalf of the company. The company is bound.
### Example 2
Q: XYZ Ltd. has no common seal and wishes to authorise its General Manager (Mr. P) as attorney to execute a lease deed in Singapore. How can the Board grant this authorisation?
A: Since XYZ has no common seal, authorisation must be either by 2 Directors or by 1 Director + 1 Company Secretary (if a CS has been appointed). A simple Board resolution signed by the CEO alone is insufficient.
### Example 3
Q: Pursuant to a Board resolution, an attorney of ABC Ltd. signs a sale deed of immovable property in Mumbai under his personal seal. Is ABC Ltd. bound?
A: Yes. Section 22(2) provides that a deed signed by an attorney on behalf of the company and under his seal binds the company. The company is bound by the sale deed.
⚠️ Common exam mistakes
Believing only Directors can bind the company on a BOE – any person with express OR IMPLIED authority can do so.
Forgetting that for companies without a common seal, authorisation requires TWO signatories (2 Directors OR 1 Director + CS).
Thinking the attorney must use the company's common seal – he can sign 'on behalf of' the company under his OWN seal, and the company is still bound.
Confusing Section 22(1) (negotiable instruments) with Section 22(2) (other deeds) – the modes of authorisation are different.
Bare-Act text Section 22 · Companies Act, 2013 · click to expand
Section 22 – Execution of bills of exchange, etc.
(1) A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if made, accepted, drawn, or endorsed in the name of, or on behalf of or on account of, the company by any person acting under its authority, express or implied.
(2) A company may, by writing under its common seal, if any, authorise any person, either generally or in respect of any specified matters, as its attorney to execute other deeds on its behalf in any place either in or outside India:
Provided that in case a company does not have a common seal, the authorisation under this sub-section shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.
(3) A deed signed by such an attorney on behalf of the company and under his seal shall bind the company.