Signing of an instrument on back, face or slip annexed to it for the purpose of negotiation. It can be endorsed by Drawer/ Maker, Holder or Payee is called endorsement under Negotiable Instruments Act, 1881.
Person making endorsement is called ‘Endorser’ and to whom endorsement is made is called ‘Endorsee’.
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- Endorsement under negotiable Instrument Act, 1881
Types of endorsement under Negotiable Instrument Act, 1881:
If the endorser signs his name only, the endorsement is said to be in blank and it becomes payable to bearer.
Blank endorsement can be converted to full endorsement by writing name of endorsee. This can be done by holder without his signatures by writing name above the endorser’s signatures.
Special or Full endorsement
If the endorser also directs to pay to a certain person or to his order, endorsement is said to be be ‘in full’ or special endorsement. Eg. “Pay to Mr. Kuber or order”.
The endorser puts some condition alongwith endorsement. Say, pay to Miss Zira or order on her attaining the age of 21 years.
When the endorser restricts further negotiation of instrument. For example if it is written that ‘Pay to Mr. Kuber only’.
In case, part payment of bill has been made and a note to that effect has been given in the instrument, it can be endorsed only for the balance unpaid amount. Otherwise, a NI can be endorsed for full amount and not for partial amount.
Sans Recourse endorsement
The endorser excludes his liability and in case of dishonor, endorser will not be liable for payment.
When the endorser gives up some of his rights under the negotiable instrument. Eg. “Pay Mr. Rajiv or order, notice of dishonour waived”. In this case the endorsee is not required to notice of dishonour in case of dishonor and the endorser will be liable to the endorsee for the non-payment of the instrument, even if notice of dishonour has been given to him.
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