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negotiable-instruments:negotiation-by-indorsement

Negotiation by indorsement

Section 48 of the Negotiable Instruments Act,1881.

Subject to the provisions of section 58, a promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof.

This section which is also, like the previous one, to be read subject to section 58 of this Act, deals with the mode of transfer of negotiable instrument payable to order and is the result of an amendment by Act VIII of 1919. According to this section negotiable instruments payable to order are transferable by indorsement and delivery. Neither the one nor the other done singly will be sufficient to complete the negotiation. Verbal assignment of instruments payable to order is not recognised by Law Merchant.

Where a note payable to the order of B is delivered by B without endorsement to C the latter does not become a holder as the negotiation is not valid even though C has paid good consideration for it. In such circumstances C only acquires the ordinary right, title and interest of B and not the superior right of a holder in due course. The right of a holder in due course cannot be acquired except in accordance with the provisions of this Act. The right to sue as a holder in his own name cannot pass without endorsement, nor can he negotiate it to a third party. If there are more payees than one all must endorse it.

A bill payable to B or order is delivered by B to C without endorsement. The mere fact of delivery does not warrant the inference that B authorised C to endorse it in his name nor is the latter competent to put on the bill the name of the transferor.

Alternative mode of transfer, difference

This section is not exhaustive as to the mode of transfer of negotiable instruments. It only lays down the mode of transfer of such instruments according to the rules of Law Merchant. It leaves untouched the ordinary law relating to the transfer of a chose-in-action which undoubtedly the negotiable instruments are. A transfer under the ordinary law (Transfer of property Act Section 130) will entitle the transferee, as has been stated before, to the right, title and interest of the transferor and not to the superior rights of a holder in due course which the transfer under this Act alone can confer. Such transfer must be in writing except in places where the TP Act is not in forcem There the transfer may be oral.

Where an instrument was transferred without endorsement or deed of assignment the transfer was not good in law either as a negotiable instrument or as a chose in action. Bui sale in a court auction entitles the purchaser to sue upon the note though there is no endorsement on it. Indorsement of a non-negotiable pronote coupled with delivery takes effect as an assignment of a chose in action. But where it is assigned conditionally as a secuiity for his debt the assignee cannot sue in his own name. The payee of a pronote assigns all his properties including the note to A without indorsement. A or his assignee cannot sue upon the note as holders though they can compel by suit the transferor to indorse it and, after indorsement, proceed against the maker. Where the endorsement on a promissory note is of the ordinary kind, and it is not so worded as to transfer the debt itself nor has any stamp duty been paid on the endorsement, the endorsee cannot sue the non-executant coparceners on the ground of their liability under the Hindu Law.

Created on 2021/02/16 06:25 by LawPage • Last modified on 2021/02/16 06:25 by LawPage