One of the special characteristic of a
negotiable instrument is its negotiability. Negotiability means that the title
of property in the instrument can we transferred to another person. According
to the section 14 of the Negotiable Instrument Act 1882, when a promissory note,
bill of exchange or cheque is transferred to another person so as to constitute
that person the holder of the instrument is said to be negotiated. The instrument
can be negotiated by simple delivery or by an endorsement and delivery. A
negotiable instrument if payable to bearer can be negotiated by merely delivery
whereas instrument payable to order can be negotiated by endorsement followed
by the delivery.
endorsement is defined in Section 15 as when the maker or holder of the
instrument signs the same, otherwise than as such maker, for the purpose of
negotiation, on the back or face thereof or on a slip of paper as an annexure
thereto or so signs for the same purpose a stamped paper intended to be
completed as a negotiable instrument is said to have endorsed the same and is
called the endorser.
 Now if
the endorsement is made by the maker, it has to be done by his signatures other
than the signature as a Maker and with intention to create a negotiation.
 If the
endorsement is done by the holder, he should sign in any manner as provided in
the act with the intention of creating negotiation. It may be noted here that
an instrument can be negotiated further even by an agent or authorized person
of the holder of instrument.

Important Points about Negotiation &

1. Negotiation cannot be done on part amount. Suppose
a cheque is drawn for Rs. 10000 endorsement cannot be done for Rs. 7000 or any
amount less than 10000.
2. If the holders are joint, the negotiation can
be complete only if both the holders put their signature with an intent of
3. The negotiation must be complete before the
payment of the instrument.
4. The legal representative of an instrument
cannot make delivery of the instrument and complete negotiation even if the
same is signed by the deceased before his death.
5. The spellings of the person negotiating the
instrument must match with those of the holder. If a cheque is payable to Mr.
Avinash Srivastava and his original name is Avinash Srivastava he has to sign
as Avinash Srivastava, though he can along with put his signature as Avinash
6. If the complete name of the holder is given
he should sign complete like Avinash Srivastava and not A Srivastava.
7. Prefix and suffix are not to be included
otherwise the same will make the endorsement invalid. For example Dr. Ram Charan
Mishra will sign as Ram Charan Mishra however he can write after his signatures
8. If the endorsement is made by an illiterate
person, it must be witnessed by one literate person.
9. A person who signs in block letters cannot
make endorsement and is not a valid endorsement.
10. In case holder of instrument is a partnership
firm, the authorized person or partner should sign the instrument in his
capacity and on behalf of partnership firm.
       Example: for and on behalf of message xyz Enterprises
                       Avinash Srivastava                     
                       Or per pro XYZ

                       Avinash Srivastava
Similarly an agent can endorse the instrument
for his principal by writing on behalf of, or per pro, for and on behalf of.

11.  If the holder of the instrument is a joint
stock company, trust etc. the authorized signatory should sign the instrument
in his capacity as per authority.
       Example: for XYZ company limited
                       Avinash Srivastava
                       Managing Director
12. If the endorsement is made on behalf of a
company which is in liquidation, and official receiver is appointed thereof,
the endorsement will be.
                        For XYZ company limited
in liquidation

                        Avinash Srivastava
                        Official liquidator
13. If the executor is appointed for deceased
estate, he can endorse as follows:
                         Avinash Srivastava
                         Executor of the
late Ram Charan Mishra
14. If there are two executors they should sign
as follows
                         For self and for
executive of the late Shri Ram Charan Mishra
                         Avinash Srivastava

 Kinds of endorsement

1. Endorsement in blank: If holder of the instrument signs on the instrument without specifying anything
it is called blank endorsement. The instrument so endorsed now becomes payable
to bearer and no further endorsement is required for its negotiation.

2. Endorsement in full: The holder of the instrument in addition to his signature adds direction
for payment it is said to be endorsement in full. Say the holder of instrument Mr.
A may sign on the instrument as endorser with direction to make payment to Mr.

3. Conversion of endorsement in Blank to
endorsement in full:
The holder of an instrument bearing blank
endorsement can make the direction on the instrument above the signature of the
previous endorsee (i.e. the endorser of the blank endorsement) and complete the
endorsement without incurring any liability on himself or making himself liable
to any party.

4. Conditional Endorsements: Endorsement in which the payment is to be made on the occurrence of an
event is called conditional endorsement. For example Mr. Writes above his
signatures pay Y after he comes to India. Though conditional endorsements do
not make instrument non-negotiable they are generally not used.

5. Restrictive Endorsement: An endorsement which restricts the rights of negotiation further is called
restrictive endorsement. Like pay to Mr. Avinash Srivastava only. Pay to Mr.
Avinash for my use only. These endorsements make it restrictive and Mr. Avinash
in possession and as holder of the instrument cannot further negotiate it.

6. Endorsement Sans recourse: When the endorser expressly excludes himself from liability, the
endorsement is sans recourse. Mr. A, holder of instrument can make endorsement
like pay to Mr. Avinash at his own risk or pay to Mr. Avinash without recourse
to me.

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