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Instrument indorsed in blank

Section 54 of the Negotiable Instruments Act,1881.

Subject to the provisions hereinafter contained as to crossed cheques, a negotiable instrument indorsed in blank is payable to the bearer thereof even although originally payable to order.

It is open to any endorsee as being the payee named in the endorsement, just as it was open to the original payee, to endorse an instrument payable to order in blank and so make it payable to bearer. Thus, an instrument originally payable to order, if endorsed in blank, can become a bearer instrument as there is no distinction between an instrument endorsed in blank and one payable to bearer. A bill payable to a certain person, if crossed, cannot be paid to bearer but will be paid to the payee named. As the section relates only to the endorsement in blank and not to the making of a negotiable instrument payable to bearer, it applies to promissory notes as well notwithstanding the provisions of the Paper Currency Act now the Reserve Bank Act. The reason is that the provisions of the aforesaid Act bar the making of a note payable to bearer on demand but do not bar an indorsement in blank of a note payable to order on demand although the ultimate effect of such endorsement will be the same as the making of a note payable to bearer on demand.