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Indorsement for part of sum due

Section 56 of the Negotiable Instruments Act,1881.

No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; but where such amount has been partly paid a note to that effect may be indorsed on the instrument, which may then be negotiated for the balance.

The section prohibits the transfer of only a portion of the amount payable under a negotiable instrument but is no bar to a transfer of the whole-balance payable at the time under the instrument to one or more persons jointly. A partial endorsement would cause inconvenience to prior parties, cause multiplicity of actions and interfere with the free circulation of the instrument.

Effect of full and partial endorsement

To be valid the endorsement must be for the full amount due and not for a part, although the full amount due at the time may be only a part of the whole originally covered by the instrument, some amount having been paid before. If an endorsement is made only for a part of the amount due at the time, or if the endorsement is for the full amount but it is made to two persons severally and not jointly so that each becomes entitled to a part, the endorsement offends against this section and is invalid. If a portion has been already paid, there must be an endorsement to that effect on the instrument. If such payment is not endorsed the transferee can recover the whole amount of the instrument. When payment of a certain amount has been made and the payment has not been endorsed on the note but the note as indorsed in favour of B for the balance, due after the payment, the indorsement is invalid as being for a part only. Where, however, the holder of a note after realising some money, which was not endorsed on the note, fraudulently, negotiated it for full value, it was held that the endorsee could recover the full value as the person paying enabled the fraud to be committed by not insisting on the payment being endorsed. Similar will be the result if the amount is paid in full but the bill is allowed to remain with the holder without endorsement of the payment and the holder, taking advantage of the position, fraudulently endorses the same. An instalment note cannot be endorsed except for the whole amount irrespective of any instalment. Endorsement of the whole amount to one person in parts is invalid. Under a partial endorsement, right of suit does not arise as the endorsement is invalid as a negotiation. But the endorsee may recover the amount for which the endorsement is made and has a lien on the note for such amount.

Created on 2021/02/17 07:45 by LawPage • Last modified on 2021/02/17 07:45 by LawPage