2. Introduction
Endorsement means signature of the holder (An
individual who has lawfully received possession)
made with object of transferring the document.
The signature & message on the back of a cheque to
either cash it, deposit it or to handover the rights of
the cheque to someone else.
3. Who may endorse
The payee of an instrument is the rightful person to make
the first endorsement. Thereafter, the instrument may be
endorsed by any party who has become the holder of the
instrument (sec.15).
4. Effect of Endorsement
⢠The endorsement of a negotiable instrument followed
by delivery transfers to the endorsee the property
therein with the right of further negotiation.
⢠The endorsement may restrict or exclude such right.
⢠The endorsement may constitute the endorsee an
agent.
5. Essential Elements of Endorsement
⢠Ordinarily endorsement is made on the face of the
instrument but it may be made on its back also.
However, if there is no space left on the instrument
itself, an endorsement may be made on an attached
slip of paper. Such a slip is known as Allonge.
⢠If the instrument is made with an intention of
transferring the instrument but only the signature is
made thereon without any other words, it is said to
be endorsement in blank.
⢠No particular words are necessary for an
endorsement in full.
6. ď˝ An endorsement must be genuine and not fraud.
ď˝ If the payeeâs or the endorseeâs name is spelt
wrongly, he should sign the name as spelt in the
instrument and write the correct spelling within
brackets.
ď˝ A negotiable instrument endorsed in blank is payable
to the bearer thereof even though originally payable
to order (sec 54). But this does not apply to crossed
cheques.
ď˝ The endorsement must be signed by the holder or his
duly authorised agent.
7. ď˝ The maker, acceptor or endorser may, before the
instrument is delivered, cancel or revoke his
signature, but not afterwards.
ď˝ Endorsements should be signed in ink.
ď˝ Where the endorser is authorised to send the
instrument by post, it is deemed to have been
delivered to the endorsee as soon as it is posted.
ď˝ Complimentary prefix like Shri or Smt is usually not
written in negotiable instrument.
8. ď˝ In case of an illiterate person, he may endorse the
instrument by putting his thumb impression of his left
hand endorsed by witnesses who must also sign.
ď˝ It is presumed that the endorsement appearing on a
negotiable instrument were made in the same order in
which they appear thereon (sec.118(e)).
ď˝ It must be completed by the delivery of the
instrument.
9. Types of Endorsement
1. Blank or general endorsement
2. Endorsement in full or special endorsement
3. Restrictive endorsement
4. Partial Endorsement
5. Conditional endorsement
6. Facultative endorsement
10. If the endorser signs his name only and does not
specify the name of the endorsee, the endorsement is
said to be in blank Sec. 16(1). The effect of a blank
endorsement is to convert the order instrument into
bearer instrument (Sec. 54), which may be transferred
merely by delivery. This type of endorsement is
payable to the bearer.
15. ď˝ Sans recourse endorsement: (sec 52) When the
endorser expressly excludes his own liability on the negotiable
instrument to the endorsee or any subsequent holder in case of
dishonor of the instrument, the endorsement is known as âsans
recourseâ endorsement.
Eg: Pay A or order Sans recourse
ď Liability dependent upon a contingency: An
endorser may endorse the instrument in such a way that his
liability depends upon the happening of a specified event
which may or may not happen.
Eg: Pay A or order on the arrival of the ship Nancy at Mumbai.
17. Where an endorser does not want the endorsee or any
subsequent holder of the instrument to incur any
expenses, on his account on the instrument, the
endorsement is said to be âSans fraisâ.
18. Where an endorser, after he has negotiated an
instrument again becomes its holder before
its maturity, the instrument is said to be
negotiated back to that holder.
Eg: A bill is drawn payable A by order. A
endorses it to B, B to C, C to D and D to E and
again to A.
19. ď˝ A fake endorsement is one in which signature of any of the party is fake
which makes the instrument invalid.
ď˝ All endorsement should be made in ink only.
ď˝ An endorsement in block letters is not necessary.
ď˝ It has been held that a type written endorsement is valid under the Act.
Even, endorsement in printed character can be accepted but can be
duplicated very easily.
ď˝ An rubber-stamp endorsement is as valid if accompanied by the hand
written signature of an authorized officer.
ď˝ Where an endorsement happens to be in a language which the banker is not
expected to know, then, the paying banker can refuse the payment for its
confirmation. But, he should give valid reasons for the same.