Endorsement under negotiable Instrument Act, 1881
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’.
- Negotiable Instrument Act
- Banking Regulation Act
- KYC and AML
- Statutory Ratios and Rates- CRR, SLR, Bank Rate, Repo Rate etc.
- Difference between Promissory Note and Bill of Exchange
- Dishonor of cheque for insufficiency of funds (Section 138 of NI Act)
- Endorsement under negotiable Instrument Act, 1881
Types of endorsement under Negotiable Instrument Act, 1881: Blank endorsement: 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 endorsementIf 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”.
Conditional endorsementThe endorser puts some condition alongwith endorsement. Say, pay to Miss Zira or order on her attaining the age of 21 years.
Restrictive endorsement: When the endorser restricts further negotiation of instrument. For example if it is written that ‘Pay to Mr. Kuber only’. Partial endorsement: 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. Facultative endorsementWhen 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.
Study Material for Bank Promotion – Negotiable Instruments Act
What is endorsement of a negotiable instrument?
Endorsement is the act of signing on the back of a negotiable instrument by the holder to transfer the title to another person.
What are the types of endorsement under the NI Act 1881?
The main types are: (1) Blank/General Endorsement, (2) Special/Full Endorsement, (3) Restrictive Endorsement, (4) Conditional Endorsement, and (5) Sans Recourse Endorsement.
What is a blank endorsement?
In a blank endorsement the endorser signs only their name without specifying the endorsee. The instrument becomes payable to bearer and can be transferred by mere delivery.
What is sans recourse endorsement?
In a sans recourse endorsement, the endorser excludes their own liability. If the instrument is dishonoured, subsequent holders cannot claim against this endorser.
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