Negotiable instruments act
ganesh
(Querist) 10 August 2011
This query is : Resolved
whether a person endorse the cheque given by a third party in favour of a nationalised bank( SBI) without any date, sign and etc., what is the procedure for endorsement of cheque in favour of a bank? mere delivery of cheque is enough under section 50 of NI act.
Advocate Rajkumarlaxman
(Expert) 11 August 2011
See what sec 50 states
Section 50 in The Negotiable Instruments Act, 1881
50. Effect of indorsement. The indorsement of a negotiable instrument followed by delivery transfers to the indorsee the property therein with the right of further negotiation; but the indorsement may, by express words, restrict or exclude such right, or may merely constitute the indorsee an agent to indorse the instrument, or to reeive its contents for the indorser, or for some other specified person.
Illustrations B signs the following indorsements on different negotiable instruments payable to bearer:-
(a) " Pay the contents to C only".
(b) " Pay C for my use."
(c) " Pay C or order for the account of B".
(d) " The within must be credited to C".
1. Subs. by Act 8 of 1919, s. 4, for" payable to the order of a specified person, or to a specified person or order,".
These indorsements exclude the right of further negotiation by C.
(e) " Pay C."
(f) " Pay C value in account with the Oriental Bank."
(g) Pay the contents to C, being part of the consideration in a certain deed of assignment executed by C to the indorser and others." These indorsements do not exclude the right of further negotiation by C.
Reading would make you understand the same under what conditions and terms would be cheque endorsed to other person or party
R.Ramachandran
(Expert) 11 August 2011
Dear Mr. Ganesh,
Suppose A has given a cheque in favour of B. Then B can endorse the cheque in favour of C.
The endorsement has to be done on the back of the instrument. The endorsement should clearly say "Pay to....."
Then the signature of B. If it is an Accounts Payee Cheque, then the endorsement should also be Accounts Payee.
Quite often, and without any valid reason, the banks are not encouraging the endorsement. To hide their discomfiture, they put several illogical conditions. It had happened to be personally and I had overcome such hurdles.
For instance, they said that I cannot endorse. When I said then what is the meaning of the Negotiable Instruments - they did not have an answer.
Then they said that I should authenticate the signature of the original drawer. I said where is the need. (I gave an example, if I deposit a cheque without any endorsement, I am not required to authenticate the signature of the drawyer. Then where is the need for such authentication when it is mere endorsement? Again they had no answer.
Then they said that you yourself have to sign the pay in slip. I said that a Chqeue can be deposited into an account by anyone by filling up the pay-in slip and it need not necessarily be signed by the endorsee or the payee. After much argument they said they are not convinced.
I said that I am depositing the cheque duly endorsed, whether to honour the endorsement or not is your botheration. If you return it to me without honouring, then you have to give me adequate reasons and quote the provisions from the N.I. Act.
They credited the endorsed cheque in my favour after a delay of 10 days.
The long and short of the story is that our bankers are not quite conversant with the endorsement of cheques.
