Endorsement under the Negotiable Instruments Act 1881 is the act of signing a negotiable instrument — on its back, face, or an annexed slip — by the holder for the purpose of transferring title to another person. Defined in Section 15 of the NI Act, endorsement is one of the most frequently examined topics in JAIIB (Principles & Practices of Banking) and bank promotion tests. There are 7 recognised types, each governed by a specific section of the Act.

What Is Endorsement? — Section 15, NI Act 1881

Section 15 of the Negotiable Instruments Act 1881 defines endorsement as follows: when the maker or holder of a negotiable instrument signs the same — otherwise than as maker — on the back, face, or on a slip of paper annexed to it, for the purpose of negotiation, they are said to endorse the instrument and are called the Endorser. The person to whom the instrument is endorsed is called the Endorsee.

Endorsement applies to all negotiable instruments: cheques, promissory notes, and bills of exchange. Under Section 48, a promissory note, bill of exchange or cheque payable to order is negotiable by endorsement and delivery. The endorser must sign — a mere delivery without signature is not valid endorsement (it is only valid transfer for bearer instruments under Section 47).

7 Types of Endorsement — Section-wise Reference Table

Each Type Explained

1. Blank Endorsement — Section 16

When the endorser signs their name only, without naming any endorsee, it is a blank endorsement (also called general endorsement). Under Section 16, a blank-endorsed instrument becomes payable to bearer — it can be transferred by mere delivery without any further endorsement, like a bearer cheque. Example: Ramesh endorses a cheque payable to him by simply signing on the back.

Conversion to Special (Section 49): Any holder of a blank-endorsed instrument may convert it to a special endorsement by writing the name of a person as endorsee above the endorser's signature — without requiring the original endorser's fresh signature. This is an important JAIIB distinction.

2. Special / Full Endorsement — Section 16

When the endorser specifies the name of the endorsee along with their signature, it is a special or full endorsement. Example: “Pay to Mr. Kuber or order — signed Ramesh.” The instrument can only be further negotiated by Mr. Kuber (or his order). A special endorsement makes the instrument non-transferable by mere delivery.

3. Restrictive Endorsement — Section 50

A restrictive endorsement under Section 50 restricts or prohibits the further negotiation of the instrument. The endorsee can receive payment but cannot transfer it further. Example: “Pay to Mr. Kuber only” or “Pay to Mr. Kuber for my use.” This type is used when the endorser wants the instrument to be collected by a specific person without allowing further circulation.

4. Conditional Endorsement — Section 52

A conditional endorsement under Section 52 makes the payment dependent on the occurrence of a specified event. Example: “Pay to Miss Zira or order on her attaining the age of 21 years.” Key JAIIB exam point: The payer (the drawee bank or the party paying the instrument) is not required to verify or wait for the condition — they can pay the instrument ignoring the condition entirely. The condition is binding only as between the endorser and the endorsee.

5. Sans Recourse Endorsement — Section 52

Under Section 52, an endorser may expressly exclude their own liability on the instrument. This is called a sans recourse endorsement (without recourse). Example: “Pay to Mr. Rajiv or order, without recourse to me — signed Ramesh.” If the instrument is dishonoured, the holder cannot sue Ramesh (the endorser) — they can only proceed against the drawer/acceptor. Collecting banks frequently use sans recourse endorsements when handling instruments on behalf of customers.

6. Partial Endorsement — Section 56 (Invalid)

Section 56 of the NI Act explicitly provides that no writing purporting to transfer only a part of the amount due on a negotiable instrument is valid for negotiation. A partial endorsement (e.g., endorsing a ₹10,000 cheque for ₹6,000 only) is therefore not effective. Exception: Where part payment has already been made and a note to that effect has been endorsed on the instrument (by the holder), the instrument may then be endorsed for the remaining unpaid balance only.

7. Facultative Endorsement

A facultative endorsement is one where the endorser gives up or waives one of their statutory rights under the NI Act. The most common waiver is the right to receive notice of dishonour. Example: “Pay to Mr. Rajiv or order, notice of dishonour waived — signed Ramesh.” In this case, if the instrument is dishonoured and the holder fails to give notice of dishonour to Ramesh, Ramesh is still liable — because he waived his right to such notice. This is the opposite of the normal rule where an endorser is discharged if notice of dishonour is not given.

Frequently Asked Questions

Related: NI Act Study Material for Bank Promotion | Dishonour of Cheque — Section 138 NI Act | Promissory Note vs Bill of Exchange