Sunday, November 23, 2014

Negotiable Instruments Act: Endorsement and Its kinds

Endorsement is the act of signing a cheque for the purpose of transferring it to somebody else. Under Negotiable Instruments Act it means the writing of one’s name on the back of the instrument or any paper attached to it with the intention of transferring the rights therein.
 A bearer cheque can be transferred by mere delivery but an order cheque is transferred by endorsement and delivery. Endorsements are usually made on the back of the cheque, though they can be made on its face as well. If, however, no space is left on the instrument, it may be made on a separate paper attached to it.
Endorsements are of various kinds, the most important being as follow:
a.       Blank or general endorsement: A blank or general endorsement is one in which the endorser simply puts down his signature. The name of the endorsee, it should be noticed is not put down. The effect of such an endorsement is to make the cheque a bearer cheque. The property in the cheque can now be transferred by mere delivery, no endorsement being required. Thus an order cheque can be made a bearer cheque by putting down a blank endorsement.

b.      Special endorsement: Special or full endorsement is that which contains not only the name of the endorser but also the name of the endorsee. The effect of special endorsement is that the endorsee must endorse it again if he wants to transfer the property in the cheque to somebody else.
c.       Restrictive endorsement: When an endorsement restricts the negotiability or transferability of proprietorship of a cheque, it is known as restrictive endorsement.

d.      Partial endorsement: A partial endorsement is one which means to transfer the cheque only for a part of its value. For instance a cheque for Rs. 500 may be endorsed only for Rs.300. Legally such an endorsement is invalid.