Section 49 of the Negotiable Instruments Act,1881.
The holder of a negotiable instrument indorsed in blanks may, without signing his own name, by writing above the indorser’s signature a direction to pay to any other person as indorsee, convert the indorsement in blank into an indorsement in full; and the holder does not thereby incur the responsibility of an indorser.
This section lays down how a blank endorsement is converted into a full endorsement by any holder as sanctioned by the English law. The last clause in the section that the holder who so converts it has not to incur any responsibility is based on the English common law. The holder of any negotiable instrument, endorsed in blank, may put, over the signature of the indorser, a direction to pay any person other than the indorser in blank. By doing so he incurs no liability under the instrument as he has not to put his own signature on it. The holder may also make it payable to himself. The expression ‘other person’ in the section means any person other than the indorser in blank.
The following illustration will make the position clear. A note is made payable to B. B endorses it in blank in favour of C by merely putting his signature on the back. C becomes the holder, C without putting his signature writes over the signature of B “pay to D or order”. By this C converts an endorsement in blank to a full endorsement by B to D. And by so doing he incurs no responsibility. C, if he likes, may make it payable to him or his order by an insertion to that effect.
An instrument not addressed to a drawee can be a bill of exchange, if a third person endorses an acceptance which is not inconsistent with the address. The indorsee thereupon becomes liable and is estopped from contending that he is not the drawee.
In case of a note containing several blank endorsements, the holder may strike out any such indorsement at his option. There is no provision in the Act regarding this but yet such a right exists. The effect of any indorsement being struck out is that all indorsers subsequent to the indorser whose name is struck out are discharged from liability as their remedy against the latter is impaired. But the holder may maintain an action against the drawer without striking out any blank indorsement.