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 Introduction

Endorsement is an important concept in the context of negotiable instruments such as

cheques,, promissory notes, and bills of exchange. It refers to the act of transferring
ownership of the negotiable instrument from one party to another by signing or endorsing
it. This allows the new owner to have the right to collect the funds or enforce the obligation
that the instrument represents.

This report will provide an overview of the endorsement process in negotiable instruments.
It will discuss the different types of endorsements and their legal implications, as well as the
parties involved in the endorsement process. The report will also cover the importance of
endorsement in the negotiation of negotiable instruments, and the risks and challenges
associated with it. Additionally, the report will provide some best practices for endorsement
to ensure compliance with legal requirements and reduce the likelihood of fraud or
disputes.

Overall, the report aims to provide a comprehensive understanding of endorsement in

negotiable instruments, its legal and practical aspects, and how it can impact various
stakeholders involved in the process. By reading this report, readers will be able to gain a
better understanding of the endorsement process and its importance in facilitating the
smooth transfer of ownership of negotiable instruments.
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Question Number(01): What is an endorsement? Explain and illustrate the different kinds
of endorsements.

Answer: Endorsements mean the act of signing or endorsing the back of the instrument to
transfer the ownership rights to another party. Section (15) Negotiable Instruments Act
1881 defines endorsement as follows:
" When the maker or holder of a negotiable 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 annexed thereto or so signs for the same purposes stamped paper intended the same
and is called endorser."
The person who signs the instrument for the negotiations is called the endorser and to
whom the instruments pass is called the endorsee. According to the Negotiable Instruments
Act, endorsements are of the following kinds:
1. Endorsement in Blank: Under section (16), "If the endorser signs his name only, the
endorsement is said to be in blank endorsement". The endorser does not specify the
name of the endorsee with the effect that an endorsement endorsed in blank
becomes payable to the bearer. For example, if a cheque is payable to 'X or order'
and X merely signs on its back, the such endorsement is called an endorsement in
blank.
2. Endorsement in full: Under section(16), "If in addition to his signature, the endorser
adds a direction to pay the amount mentioned in the instrument to, or to the order
of, a specified person, the endorsement is said to be an endorsement in full". The
endorser specifies the name of the endorsee or makes a direction with the
negotiable instruments. For example, If a cheque is payable to 'Mr. Y' with the words
'Pay to Y' or 'Pay to Y or order' such endorsement is called endorsement in full. An
endorsement in blank may be converted into an endorsement in full.
3. Conditional endorsement: Under section(52)," If the endorser of a negotiable
instrument, by express words in the endorsement, makes his liability, or the right of
the endorsee to receive the amount due thereon, dependent on the happening of a
specified event, although the such event may never happen, such endorsement is called
a conditional endorsement.
4. Restrictive Endorsement: Under section(50), "The endorsement may be, by express
words, restrict or exclude the right to negotiate or may merely constitute the
endorsee an agent to endorse the instrument or to receive its contents for the
endorser or for some other specified person, such an endorsement prohibits further
endorsement and is called Restrictive Endorsement. For example, if B endorses an
instrument payable to the bearer as follows, the right of C to further negotiate is
excluded:
● Pay to contents to C only
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● Pay C for my use

● Pay C or order for the account of B
● The within must be credited to C.
5. Endorsement 'Sans Recourse': Under section(52)," An endorser of a negotiable
instrument may, by express words in the endorsement, exclude his own liability
thereon ". For example, if R endorses a cheque as follows:
● Pay to X or order at his own risk.
● Pay to C without recourse to me.
He(R) will not be liable to X or any of the subsequent endorsees if the bank
dishonours a cheque subsequently.
6. Facultative Endorsement: The endorsee must give notice of dishonour of the
instrument to the endorser, but the latter may waive this duty of the endorsee by
writing in the endorsement 'Notice of dishonour waived'. The endorser remains
liable to the endorsee for the non-payment of the instrument.

Question(2): Explain different kinds of endorsements. When and how should cheques be
endorsed?

Answer: Endorsements mean the act of signing or endorsing the back of the instrument to
transfer the ownership rights to another party. The person who signs the instrument for the
negotiations is called the endorser and to whom the instruments pass is called the
endorsee.
According to the Negotiable Instruments Act, endorsements are of the following kinds:
1. Endorsement in Blank: Under section (16), "If the endorser signs his name only, the
endorsement is said to be in blank endorsement". The endorser does not specify the
name of the endorsee with the effect that an endorsement endorsed in blank
becomes payable to the bearer. For example, if a cheque is payable to 'X or order'
and X merely signs on its back, the such endorsement is called an endorsement in
blank
2. Endorsement in full: Under section(16), "If in addition to his signature, the endorser
adds a direction to pay the amount mentioned in the instrument to, or to the order
of, a specified person, the endorsement is said to be an endorsement in full". The
endorser specifies the name of the endorsee or makes a direction with the
negotiable instruments. For example, If a cheque is payable to 'Mr. Y' with the words
'Pay to Y' or 'Pay to Y or order' such endorsement is called endorsement in full. An
endorsement in blank may be converted into an endorsement in full
3. Conditional endorsement: Under section(52)," If the endorser of a negotiable
instrument, by express words in the endorsement, makes his liability, or the right of
the endorsee to receive the amount due thereon, dependent on the happening of a
specified event, although the such event may never happen, such endorsement is called
a conditional endorsement
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4. Restrictive Endorsement: Under section(50), "The endorsement may be, by express

words, restrict or exclude the right to negotiate or may merely constitute the
endorsee an agent to endorse the instrument or to receive its contents for the
endorser or for some other specified person, such an endorsement prohibits further
endorsement and is called Restrictive Endorsement. For example, if B endorses an
instrument payable to the bearer as follows, the right of C to further negotiate is
excluded:
● Pay to contents to C only
● Pay C for my use
● Pay C or order for the account of B
● The within must be credited to C
5. Endorsement 'Sans Recourse': Under section(52)," An endorser of a negotiable
instrument may, by express words in the endorsement, exclude his own liability
thereon ". For example, if R endorses a cheque as follows:
● Pay to X or order at his own risk.
● Pay to C without recourse to me
He(R) will not be liable to X or any of the subsequent endorsees if the bank
dishonours a cheque subsequently.
6. Facultative Endorsement: The endorsee must give notice of dishonour of the
instrument to the endorser, but the latter may waive this duty of the endorsee by
writing in the endorsement 'Notice of dishonour waived'. The endorser remains
liable to the endorsee for the non-payment of the instrument
Cheques should be endorsed when you want to transfer the funds to someone else or
deposit the cheque into your own account. Endorsing a cheque involves signing the back of
the cheque. Here are some guidelines on when and how to endorse a cheque:
● If you are depositing the cheque into your own account, you should endorse the
back of the cheque with your signature and account number. You may also need to
write "For deposit only" or "For the deposit to account #xxxx" to ensure that the
funds are deposited into the correct account.
● If you are transferring the funds to someone else, you should endorse the back of
the cheque with your signature and write "Pay to the order of [name of the person
or organization]". This is called a "third-party endorsement".
● If the cheque is made out to a business or organization, it should be endorsed by an
authorized signatory of the organization.
● Always use a pen when endorsing a cheque, as pencil may be easily erased or
smudged.
● Be sure to endorse the cheque on the back in the designated endorsement area,
which is typically located on the left-hand side of the cheque.
● Avoid endorsing a cheque until you are ready to deposit or transfer the funds, as an
endorsed cheque can be cashed by anyone who possesses it.
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Remember that cheque endorsement requirements may vary depending on the financial
institution or jurisdiction, so it's always best to check with your bank or financial institution
for specific guidelines

Question Number 3: Describe the different kinds of endorsement, bringing out clearly
the legal and practical significance of each.

Answer: As per the Negotiable Instruments Act, endorsements are of the following types:

1. Endorsement in Blank - According to section 16, if the endorser signs his name
only. Endorsements are called "blank". The endorser does not mention the name of the
endorsee to the effect that an instrument endorsed in blank becomes payable to the bearer.
Although originally payable to order (Section 54) and no further endorsement is required for
its negotiation. For example, if a check is payable to 'X or to the order' and X signs only on
the back, such an endorsement is called a bare endorsement. Such endorsement makes it a
bearer check by which further negotiable instruments are merely delivered. But if such a
check is crossed, it cannot be paid over the counter of the bank. Even if it is bare endorsed. If
full endorsement is given after blank endorsement, it shall be payable to or to the order of the
person mentioned in the last endorsement.

2. Endorsement in Full - If, in addition to his signature, the endorser adds a direction to
pay the money specified in the instrument to a particular person or to his order, the
endorsement is called a 'complete endorsement' (Section 16). If in the above example X adds
the words "pay to Y" or "pay or order to Y", then such endorsement is called a full
endorsement. The instrument would then be payable to Y or to his order and would require
approval by Y for further negotiation.

A blank endorsement may be converted to a full endorsement. The holder of a negotiable

instrument endorsed in blank may, without signing his own name, convert the endorsement in
blank into a full endorsement by writing a direction to pay to another person above the
signature of the endorser, and the holder thereby incurs the liability of an endorser (section
49).

For example, if a check is endorsed in blank by Y signing X behind it, the holder can
convert the blank endorsement into a full endorsement by writing "Pay to Z or order" above
X's signature. Thus Z would become the endorser, but Y would not be liable to him as an
endorser as his name was not included in the entire endorsement. If the check is dishonored,
Z can hold all parties other than Y liable on the check.
3. Conditional Endorsement -
If the endorser of a negotiable instrument, by express words in the endorsement, creates his
liability. or the endorser's right to receive the amount due thereon. Conditional on the
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happening of a certain event, though such event may never happen, such an endorsement is
called a conditional endorsement (Section 52). Such an endorser gets the following rights:

(a) He may make his liability on the instrument conditional upon the happening of a
specified event. He shall not be liable to the subsequent holder unless the specified event
occurs. In such cases the endorser may sue the other parties to the instrument before the
specified event takes place.
(b) He may authorize the approval of the instrument conditional on the happening of a
specified event.
For example, " X If he returns from Bombay." Thus X is entitled to payment only on the
occurrence of a specified event, i.e., if he returns from Bombay. If the event does not occur,
the endorsee cannot sue either party. Conditional endorsements do not pay.

4. Restrictive Endorsement - Generally, an endorser of a negotiable instrument is fully

capable of further negotiation but Section 50 allows for limited endorsement which takes
away the negotiable power of such instruments. "An endorsement, by express words. may
limit or exclude the right to negotiate or merely constitute an agent to endorse the instrument
or accept its contents for the endorsee or any other specified person," prohibiting such
endorsement from further endorsements and ' is called 'restrictive sanction'.
For example, if B endorses an instrument payable to bearer as follows, C's right to further
negotiation is excluded:
(a) Pay the contents to X only
(b) Pay X for my use
(c) Pay X or order for the account of Y
(d) The within must be credited to X But the following endorsements are not restrictive
endorsements.

5. Endorsement 'Sans Recourse' - An endorser of a negotiable instrument may, by express

words in the endorsement, exclude his own liability thereon (Section 52).
For example, if endorses a cheque as follows:
(i) Pay to Z or order at his own risk (ii) Pay to C without recourse to me.

he (R) will not be liable to X or any of the subsequent endorsees if the bank dishonors the
cheque subsequently. They may sue any party prior to such an endorser. But if an endorser
who so excludes his liability afterwards becomes the holder of the instrument, all
intermediate endorsers are liable to him.
For example, R has excluded his personal liability by endorsing the cheque "without
recourse". He transfers it to B. B endorses it to C, who endorses it back to R. Thus R shall
have the rights as endorsee against B and C, who endorsed the instrument, before it came
back to R.
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6. Facultative Endorsement- The endorsee must give notice of dishonor of the instrument to
the endorser, but the latter may waive this duty of the endorsee by writing in the endorsement
'Notice of dishonor waived'. The endorser remains liable to the endorsee for the non-payment
of the instrument.

For example, 'X' has dishonored an instrument of 'Y' by giving notice, but the latter may
waive this duty of the Y by writing in the endorsement 'Notice of dishonor waived'. X
remains liable to the Y for the non-payment of the instrument.

Legal effects of an endorsement:

Endorsement of a bill or check of exchange has various significances. It has the following
legal effects:
(a) It transfers property in the negotiable instruments.
(b) It gives the right to sue the bill acceptor for recovery of the amount due.
(c) It entitles the endorser and above to recover from persons dishonored.
(d) It entitles the holder to further negotiations at his discretion.

Question Number 4: Describe the essential of a valid endorsement and describe with
illustrations the various kinds of endorsements.

Answer :

Essentials of a Valid Endorsement:

The following are the essentials of a valid endorsement:

(a) Endorsement must be on the back or face of the instrument. If no space is left on the
instrument, it must be made on a separate paper attached to it.
(b) It should be made in ink. An endorsement in pencil or rubber stamp is invalid.
(c) It must be made by the marker or holder of the instrument. A stranger cannot endorse it.
(d) It must be signed by the endorser.
(e) It must be completed by delivery of the instrument.
(f) It must be an endorsement of the entire bill. A partial endorsement does not operate as a
valid endorsement.

As per the Negotiable Instruments Act, endorsements are of the following types:

1. Endorsement in Blank - According to section 16, if the endorser signs his name
only. Endorsements are called "blank". The endorser does not mention the name of the
endorsee to the effect that an instrument endorsed in blank becomes payable to the bearer.
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Although originally payable to order (Section 54) and no further endorsement is required for
its negotiation. For example, if a check is payable to 'X or to the order' and X signs only on
the back, such an endorsement is called a bare endorsement. Such endorsement makes it a
bearer check by which further negotiable instruments are merely delivered. But if such a
check is crossed, it cannot be paid over the counter of the bank. Even if it is bare endorsed. If
full endorsement is given after blank endorsement, it shall be payable to or to the order of the
person mentioned in the last endorsement.

2. Endorsement in Full - If, in addition to his signature, the endorser adds a direction to
pay the money specified in the instrument to a particular person or to his order, the
endorsement is called a 'complete endorsement' (Section 16). If in the above example X adds
the words "pay to Y" or "pay or order to Y", then such endorsement is called a full
endorsement. The instrument would then be payable to Y or to his order and would require
approval by Y for further negotiation.

A blank endorsement may be converted to a full endorsement. The holder of a negotiable

instrument endorsed in blank may, without signing his own name, convert the endorsement in
blank into a full endorsement by writing a direction to pay to another person above the
signature of the endorser, and the holder thereby incurs the liability of an endorser (section
49).

For example, if a check is endorsed in blank by Y signing X behind it, the holder can
convert the blank endorsement into a full endorsement by writing "Pay to Z or order" above
X's signature. Thus Z would become the endorser, but Y would not be liable to him as an
endorser as his name was not included in the entire endorsement. If the check is dishonored,
Z can hold all parties other than Y liable on the check.

3. Conditional Endorsement -
If the endorser of a negotiable instrument, by express words in the endorsement, creates his
liability. or the endorser's right to receive the amount due thereon. Conditional on the
happening of a certain event, though such event may never happen, such an endorsement is
called a conditional endorsement (Section 52). Such an endorser gets the following rights:

(a) He may make his liability on the instrument conditional upon the happening of a
specified event. He shall not be liable to the subsequent holder unless the specified event
occurs. In such cases the endorser may sue the other parties to the instrument before the
specified event takes place.
(b) He may authorize the approval of the instrument conditional on the happening of a
specified event.
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For example, " X If he returns from Bombay." Thus X is entitled to payment only on the
occurrence of a specified event, i.e., if he returns from Bombay. If the event does not occur,
the endorsee cannot sue either party. Conditional endorsements do not pay.

4. Restrictive Endorsement - Generally, an endorser of a negotiable instrument is fully

capable of further negotiation but Section 50 allows for limited endorsement which takes
away the negotiable power of such instruments. "An endorsement, by express words. may
limit or exclude the right to negotiate or merely constitute an agent to endorse the instrument
or accept its contents for the endorsee or any other specified person," prohibiting such
endorsement from further endorsements and ' is called 'restrictive sanction'.
For example, if B endorses an instrument payable to bearer as follows, C's right to further
negotiation is excluded:
(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 But the following endorsements are not restrictive
endorsements.

5. Endorsement 'Sans Recourse' - An endorser of a negotiable instrument may, by express

words in the endorsement, exclude his own liability thereon (Section 52).
For example, if endorses a cheque as follows:
(i) Pay to X or order at his own risk (ii) Pay to C without recourse to me.

he (R) will not be liable to X or any of the subsequent endorsees if the bank dishonors the
cheque subsequently. They may sue any party prior to such an endorser. But if an endorser
who so excludes his liability afterwards becomes the holder of the instrument, all
intermediate endorsers are liable to him.
For example, R has excluded his personal liability by endorsing the cheque "without
recourse". He transfers it to B. B endorses it to C, who endorses it back to R. Thus R shall
have the rights as endorsee against B and C, who endorsed the instrument, before it came
back to R.

6. Facultative Endorsement- The endorsee must give notice of dishonor of the instrument to
the endorser, but the latter may waive this duty of the endorsee by writing in the endorsement
'Notice of dishonor waived'. The endorser remains liable to the endorsee for the non-payment
of the instrument.

For example, 'X' has dishonored an instrument of 'Y' by giving notice, but the latter may
waive this duty of the Y by writing in the endorsement 'Notice of dishonor waived'. X
remains liable to the Y for the non-payment of the instrument.
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Question Number (5): What are the different kind of endorsements?Explain and
illustrate the effect of partial endorsement.

Solution:
An endorsement is a signature, stamp, or other mark on a negotiable instrument such as a
cheque, indicating that the person whose name appears on the instrument has authorized the
transfer of ownership to someone else.
There are several different types of endorsements, including:

Blank endorsement: This type of endorsement is made by simply signing the back of the
cheque with no further instructions. The cheque can then be cashed or deposited by anyone
who possesses it.

Restrictive endorsement: This type of endorsement limits how the cheque can be used. For
example, a cheque may be endorsed "For Deposit Only" which means it can only be
deposited into the payee's account.

Special endorsement: This type of endorsement specifies the person or entity to whom the
cheque should be payable. For example, a cheque made payable to John Smith can be
specially endorsed to Mary Brown by John Smith signing the back of the cheque and writing
"Pay to the order of Mary Brown".

Conditional endorsement: This type of endorsement depends on certain conditions being

met before the cheque can be used. For example, a cheque may be endorsed "For Deposit if
John Smith delivers goods as promised".
Partial endorsement is when only part of the amount payable on a cheque is endorsed. This is
generally not accepted by banks or financial institutions, as it is considered a form of
alteration of the cheque, and can lead to disputes over the validity of the endorsement. For
example, if a cheque is written for $500 and only $300 is endorsed, the bank may refuse to
cash or deposit the cheque until it has been properly endorsed for the full amount.
Additionally, if the cheque is endorsed by multiple parties and only one of them partially
endorses it, this can create confusion and potential legal issues if the other parties dispute the
endorsement. Therefore, it is generally advisable to endorse a cheque for the full amount
payable.
Question -06:Define endorsement. Explain types of endorsements. What are the general
principles governing endorsements?
Solution:
Endorsement in the context of cheques refers to the act of signing or marking the back of a
cheque to transfer ownership or to authorize someone else to collect the payment on the
cheque. In simpler terms, it is the act of endorsing or giving one's approval or support to a
cheque.
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There are several types of endorsements:

1.Blank Endorsement: In this type of endorsement, the payee signs the back of the cheque
without specifying any particular endorsee. The cheque becomes payable to whoever
presents it for payment.

2. Endorsement in blank: This type of endorsement is when the cheque payee signs their
name on the back of the cheque, but doesn't specify the name of the person or entity to
whom they are transferring the cheque. This type of endorsement effectively turns the
cheque into a bearer instrument, which means that anyone who possesses the cheque can
cash it.

3.Endorsement 'sans recourse': This type of endorsement is used to limit the endorser's
liability in case the cheque is dishonored or not paid. The French phrase 'sans recourse'
means 'without recourse', so this type of endorsement essentially means that the endorser is
not responsible if the cheque bounces.

4.Facultative Endorsement: This type of endorsement is where the endorser specifies the
name of the person or entity to whom they are transferring the cheque. It is also known as a
special endorsement. This type of endorsement restricts the transfer of the cheque to the
specified person or entity, and it requires their endorsement in order to further transfer the
cheque.
5.Special Endorsement: In a special endorsement, the payee writes the name of the person
or entity to whom they are transferring the cheque, and then signs it. The cheque can only be
paid to the specified endorsee.

6..Restrictive Endorsement: In a restrictive endorsement, the payee writes "For Deposit

Only" or "Account Payee Only" on the back of the cheque, along with their signature. This
type of endorsement restricts the negotiability of the cheque to the payee's account only.

7..Conditional Endorsement: A conditional endorsement places a condition on the payment

of the cheque. For example, the payee may endorse the cheque with a condition that it will
be paid only if certain conditions are met.
The general principles governing endorsements on cheques are:
1.The endorsement must be made on the back of the cheque.
2.The endorsement must be made by the person or entity to whom the cheque is
payable.
3.The endorsement must be made in ink.
4.The endorsement must be clear and legible.
5.The endorsement must be made within the designated space on the back of the
cheque. 6.The type of endorsement must be clearly specified, i.e., blank, special,
restrictive, or conditional.
7.The endorsement must be authorized by the payee or the endorsee.
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Question Number:-07:
(a)What are the implications of an endorsement on a cheque?
(b)Spell out the appropriate endorsements for cheques drawn payable to the following:
1. Lock.stock and Barrel Ltd.(in liquidation)
2. The Gymkhana Club
3. Commissioner of Income Tax
4. Messrs Lila Ram Natwarlal
5. N P Chakrabarty
6. Cash
7. John paget and Co Ltd
8. Miss Kamla Arora

Solution:(a)
An endorsement on a cheque is a signature or other written instruction on the back of the
cheque that transfers ownership of the cheque and its value to another party. The
implications of an endorsement on a cheque depend on the type of endorsement and the
context in which it is used. Here are some general implications of an endorsement:

1.Endorsement makes the cheque negotiable: An endorsement turns a cheque into

a negotiable instrument, which means that it can be transferred to another party and
used as a form of payment.

2.Endorsement can limit further negotiation: An endorsement may specify that

the cheque is only payable to a specific person or entity, which can limit further
negotiation of the cheque.
3.Endorsement can restrict use: An endorsement can include specific instructions
on how the cheque should be used, such as deposit only or for a specific purpose.

4.Liability of endorser: An endorsement may make the endorser liable for the value
of the cheque if it is dishonored by the bank.

5.Multiple endorsements: If a cheque has multiple endorsements, each endorsement

must be valid and authorized by the previous endorser, or the cheque may be
considered invalid.
Overall, endorsements are important because they allow cheques to be transferred and used
as a form of payment. However, it is important to understand the implications of
endorsements and use them appropriately to avoid any legal or financial issues. Solution:
(b)
1.Lock, stock and Barrel Ltd. (in liquidation):
Endorsement: "For deposit only - Lock, stock and Barrel Ltd. (in liquidation)"
2.The Gymkhana Club:
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Endorsement: "Pay to the order of [name of the bank] for deposit to account of The
Gymkhana Club"
3.Commissioner of Income Tax:
Endorsement: "Account payee only - Commissioner of Income Tax"
4.Messrs Lila Ram Natwarlal:
Endorsement: "Pay to the order of Messrs Lila Ram Natwarlal"
5.N P Chakrabarty:
Endorsement: "Pay to the order of N P Chakrabarty"
6.Cash:
Endorsement: "Pay to the order of Cash"
(Note: This is not a recommended endorsement, as it makes the cheque payable to anyone
who holds it and is not secure.)
7.John Paget and Co Ltd:
Endorsement: "Pay to the order of John Paget and Co Ltd"
8.Miss Kamla Arora:
Endorsement: "Pay to the order of Miss Kamla Arora"

Question-08:
(a)Define endorsement?What are the different classes of endorsement? Give examples.
(b)What do you understand by a per pro endorsement?As a paying banker, how would
you deal with a cheque bearing such an endorsement if it is received(1)through clearing,
and (2) across the counter

Answer:

An endorsement is a signature or written instruction on the back of a cheque, indicating that

the person who originally received the cheque endorses or transfers it to someone else.
Endorsements are necessary when a cheque needs to be transferred or cashed by someone
other than the original recipient.
There are three different classes of endorsements:

1.Blank Endorsement: A blank endorsement is simply the signature of the original payee
written on the back of the cheque. This type of endorsement creates a bearer cheque, which
means that whoever holds the cheque can cash it.
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Example: If the original payee, John Doe, writes his signature on the back of the cheque, he
has made a blank endorsement.

2.Special Endorsement: A special endorsement is an endorsement in which the original

payee specifies the name of the person to whom the cheque is being transferred. This type of
endorsement creates an order cheque, which means that only the specified person can cash
the cheque.

Example: If John Doe writes on the back of the cheque "Pay to the order of Jane Smith" and
signs his name, he has made a special endorsement.
3.Restrictive Endorsement: A restrictive endorsement is an endorsement that restricts
further negotiation of the cheque. This type of endorsement can be used to ensure that the
cheque is only deposited into a specific account, or to restrict the use of the funds in some
other way.

Example: If John Doe writes on the back of the cheque "For deposit only to account
#123456" and signs his name, he has made a restrictive endorsement.
Solution:(b)
A per pro endorsement on a cheque is a type of endorsement where the payee endorses the
cheque over to a third party, but with limited liability. The term "per pro" is short for "per
procurationem," which means "by agency of." Essentially, the payee is endorsing the cheque
on behalf of someone else, and is not assuming full responsibility for the cheque.
As a paying banker, the treatment of a cheque bearing a per pro endorsement would depend
on whether it was received through clearing or across the counter.
If the cheque was received through clearing, the paying banker would need to examine the
endorsement carefully to ensure that it is valid. If the endorsement is deemed valid, the
banker would process the cheque and credit the account of the third party who the cheque
was endorsed to.
If the cheque was received across the counter, the paying banker would again need to
examine the endorsement to ensure that it is valid. Once the endorsement is verified, the
banker would credit the account of the third party who the cheque was endorsed to, or pay
the amount of the cheque in cash to that party.
It's worth noting that per pro endorsements are less common these days, and many banks
may be cautious when dealing with cheques bearing this type of endorsement. If there are
any concerns or questions about the endorsement, the paying banker may choose to seek
further guidance or clarification before processing the cheque
 P a g e | 15

Question Number:-09:
Give the correct forms of endorsement for cheques made payable to the order of:
1. Dr Ram Chandar MBBS
2. XYZ Co Ltd
3. Krishna (illiterate)
4. Secretary,Jaipur Club

Solution:
For a cheque made payable to Dr Ram Chandar MBBS, the endorsement should read: "Pay
to the order of [insert name], [insert signature], [insert date]"
For a cheque made payable to XYZ Co Ltd,
the endorsement should read: "For deposit only, XYZ Co Ltd, [insert signature], [insert
date]"
For a cheque made payable to Krishna (illiterate), the endorsement should read: "For deposit
only, [insert thumbprint or mark], [insert date], [insert witness signature]"
For a cheque made payable to Secretary, Jaipur Club, the endorsement should read: "For
deposit only, Jaipur Club, [insert signature], [insert date]"

Question 10: (a)Examine the following endorsements on 'order' cheques and say
whether they are correct or incorrect. Where they are incorrect, why and give the
correct endorsements.

Payee Endorsement
(i) Bombay Commercial Co Ltd. W. Stephenson,Secretary, Bombay
Commercial Co Ltd
(ii) Messrs Smith J and S Smith

(iii) Dr Praful Ghosh D Praful Ghosh

(iv) Trustees of Late A John
For Self and Co- Trustees of Late
A

John. H Brown
(v) Mrs Robertson Annie Robertson

Answer :
The endorsements on 'order' cheques according to the query is examining below :
(i) The endorsement between Bombay Commercial Co Ltd. and W.Stephenson,
Secretary, Bombay Commercial Co Ltd is correct. Because the endorser of an joint stock
company should be director, manager, secretary, or accountant. Here Mr. W. Stephenson is
the secretary of the company, that's why the endorsement is valid.
 P a g e | 16

(ii) The endorsement between Messrs Smith and J and S Smith is not correct. The 'order'
cheques merely not acceptable here.

Cause - An endorsement cannot occure for two person. May be it can occur partially but not
for a lot of person.
Correct Endorsement - If the endorsement holds between Messrs Smith and J Smith or S
Smith, it will be correct.
(iii) Yes, this endorsement is also correct. Because Dr Praful Ghosh and D Praful Ghosh is
totally different general person. So, one person definitely can endorse a instrument to
another person.

(iv) The endorsement between these parties is also correct. Because here late of A John,
his trustee can be the endorser and endorse the instrument to the others endorsee by taking all
there endorsement sign along with his sign also. And that has been occurred here, that's why
it’s valid. (v) This endorsement betwwen Mrs Robertson and Annie Robertson is correct
because it has been held simoly between two person which is a valid endorsement.

Question Number (11). What are the requisites of a valid endorsement? Explain the
different kinds of endorsements with suitable example.
Answer:
An endorsement means sign by the endorser on the back of any negotiable instrument for
transfer his interest and property to the endorsee. There are some requisites which must be
maintained to recognized as a vaild endorsement.
1. Signature of the endorser: Negotiable instrument must be signed by its maker or
holder. If a bill of exchange or cheque is payable to two person, this endorsement
should be sign both of them and endorser should remember that their signature
can’t be in block letters otherwise it will be considered as an irregular
endorsement.

2. Spelling: The name of the endorsers should spells his name in the same way as his
name appears on the cheque or the bill as its payee or endorsee. If his name is
mis-spelt or his degination the payee or the banker may considers him as a wrong
person. Thereafter he may also put his proper signature. If he likes to do so

For Example: “ Sudipta Das ‘’

“ Sudipto Das”

If the payee’s name is wrongly spelt as “Sudipta Das” instead of “Sudipto Das”. It
must be in the same handwriting. Writing the correct name will not be regular
endorsement.
 P a g e | 17

3. No addition or omission of initial of the name: The name of endorser can neither
be added nor be omitted. For Example a cheque payable to P.K Haldar this name
should not be endorsed as P.Halder or K. Halder . It should be endorsed in as the
name P.K Halder.

4. Prefixes and Suffixes to be excluded: Prefixes and suffiex means to add extra
word such as Dr. , Major, Mrs. , Miss. ,etc. An endorser may indicate his title or
rank after his Signature.

For Example: Major Abdul Lotif = Abdul Lotif , Major.

M.D. Korshed Alam = Korshed Alam, M.D.

** At present, Negotiable instrument work like a currency. Those instrument transfer from
one person to another person by endorsement . According to the Negotiable Instrument Act ,
Endorsement are of the following kinds:
1. Endorsement in Blank: When the endoser doesn’t specify the name of endorsee and
sign on the back of this instrument and this endorsement is called endorsement in
blank. In this endorsement, the interest of the endorsee may be hampered because
there is no need for further endorsement .
For Example, If a cheque is payable to ‘Rofiq or his order’ and Rofiq merely
signs on its back. Such endorsement is called endorsement in blank.
2. Endorsement in Full: According to Section 16,” If in addition to his signature, the
endorser adds a direction to pay the amount mentioned in the instrument to, or the
order of , a specified person, the endorsement is said to be endorsement in full.
Endorsement in blank easily converted into the endorsement in full. The holder of a
negotiable instrument endorsed in blan may without signing his own name, by
writing above the endorser’s signature a direction to pay to any other person and
the holder doesn’t thereby incur the responsibility of an endorser.

For Example: A cheque is endorsed in blank by Taijul by signing on its back. Ratul,
its holder may converted the endorsement in blank into an endorsement in full by
writing above Taijul’s signature” pay to Rohim or order” and thus Rohim wil became
the endorsee. But, Ratul was not liable for any default. Rohim can can make all
other parties not Ratul .

3. Conditional Endorsement: Conditional endorsement dependent on the happening

of a specified event. The holder make his liability on the instrument conditional on
the happening of a particular event. He will not be liable to the subsequent holder if
the specified event doesn’t take place. Now, Such endorsement are not used
4. Restrictive Endorsement: The endorsement may restrict or exclude the right to
negotiate or may merely constitute the endorsee an agent to endorse the
instrument or receive its contents for the endorsr or for some other specified person
 P a g e | 18

 Pay the contents to C only

 Pay C value in account of X Bank
 The within must be credited to C
 Pay C for my use
5. Endorsement ‘Sans Recourse’: These endorsement express the liability of the
endorser. Using these endorsement endorser exclude his own liabilities.
This types of endorse as follow:
 Pay to X or order at his own risk
 Pay to C without recourse to me
6. Facultative Endorsement: When the endorser expressly gives up some of his rights
under the negotiable instrument, the endorsement is called a facultative
endorsement.
For example: “Pay X or order, notice of dishonor Waived”

Question Number (12): Define the term 'endorsement'. what are the requisites of a valid
endorsement? Give the correct forms of endorsements for cheques payable to the order
of the following payee:
I) Miss Roshan Bawliwals(now married) II)
The trustees of the late Mr. Marshall.
III) The Arora Mills Co. Ltd.. in voluntary liquidation.
IV) The Jolly Volly-ball Club.

Answer: Endorsement is a term used in finance and banking that refers to the transfer of
ownership of a negotiable instrument, such as a cheque, promissory note, or bill of
exchange. Endorsement typically involves signing the back of the instrument by the person
or entity that currently holds the instrument, and it allows the instrument to be passed on
to another party. For an endorsement to be considered valid, it must meet certain
requirements, including
● Signature of the endorser: The signature on the document for the purpose of
endorsement must be that of the endorser or any other person who is duly
authorized to endorse on his behalf.
● Spelling: The endorser should spell his name in the same way as his name appears
on the cheque or the bill as its payee or endorsee.
● No addition or omission of the initial of the name: An initiative of the name should
neither be added nor omitted from the name of the payee or endorsee as given in
the cheque.
● Prefixes and suffixes to be excluded: The prefixes and suffixes to the payee or
endorsee need not be included in the endorsement.
I) Married woman: If a cheque or bill of exchange is payable to a married woman, the
endorsement should be as follows;
 P a g e | 19

Payee Regular endorsement

Miss Roshan Bawliwals( now married) Roshan Bawliwals
( now Mrs-------------------)

II) Trustee: If a cheque is payable to the trustees of the late Mr. Marshall, the
endorsement should be as follows;

Mr. Marshall Trustees of the late Mr. Marshall.

III) Liquidator: If a company is liquidated and an official receiver is appointed, the latter
will sign on behalf of the company as follows;
For the Arora Mills Co. Ltd. in liquidation,
______________
Liquidator

IV) Institutions: In the case of institutions, endorsement should be made by persons

who are duly authorized to sign on behalf of these institutions.
For the Jolly Volly-ball club
_________________
Director, Manager, Secretary, or Accountant

Question Number (13): Define

I) Negotiation.
II) Endorsement.
How can a negotiable instrument— I)
Payable to the bearer.
II) Payable to the order, negotiated?
Answer: The term Negotiation and Endorsement are discussed below—
● Negotiation: According to section(14) of the Negotiable Instrument Act 1881." When
a promissory note, bill of exchange, or cheque is transferred to any person, to
constitute that person the holder thereof, the instrument is said to be negotiated."
The essence of negotiation this lies not in mere transfer of the instrument from one
person to another but also in the fact that the transferee gets the right as the holder
of the instrument. If the transferee of the instrument cannot be called its holder, as
defined in Section (8), the instrument is not said to have been negotiated. An
instrument may be negotiated in any of the following two ways- 1) By Delivery;2) By
endorsement and delivery.
● Endorsement:Endorsement is a term used in finance and banking that refers to the
transfer of ownership of a negotiable instrument, such as a cheque, promissory
 P a g e | 20

note, or bill of exchange. Endorsement typically involves signing the back of the
instrument
by the person or entity that currently holds the instrument, and it allows the
instrument to be passed on to another party.

Payable to the bearer- Negotiable instruments payable to the bearer are those that can be
transferred from one person to another by delivery alone, without any endorsement or
other written assignment. Examples of such instruments include banknotes, bearer bonds,
and some types of cheques.
To negotiate a negotiable instrument payable to the bearer, the holder of the instrument
simply needs to physically deliver the instrument to the new holder. The new holder then
becomes the rightful owner of the instrument and can negotiate it further by delivering it to
yet another party.
However, it is important to note that negotiable instruments payable to the bearer can be
risky because they do not require any endorsement or other written authorization for the
transfer. This means that if the instrument falls into the wrong hands, it can be negotiated
and transferred by anyone who physically possesses it. As a result, negotiable instruments
payable to the bearer should be handled with care and kept in a secure location to prevent
unauthorized transfers.

Payable to Order: A negotiable instrument can be made payable to order by including the
name of a specific person or entity on the instrument as the payee. This means that the
instrument can only be paid to the person or entity named on the instrument or to
someone who has been authorized by that person or entity to receive payment on their
behalf. For example, if a cheque is made payable to "Mr. Saiful or order," Mr. Saiful can
endorse the check (sign the back of it) and transfer it to someone else, who can then
deposit it or cash it. The new payee would need to endorse the cheque as well, to indicate
that they have received it and have the right to deposit or cash it.
A negotiable instrument that is payable to order is typically used in commercial
transactions, where a company or organization may need to make payments to multiple
individuals or entities. It provides flexibility in payment options and allows for the transfer
of ownership of the instrument.

Question Number 14: Explain clearly what is meant by negotiation. How is it effected?
** According to section 14,” when a promissory note, bill of exchange or cheque is
transferred to any person , so as to constitute that person the holder thereof, the instrument is
said to be negotiated.”
Negotiation means not only transfer of the instrument from one person to another person but
also get the right of the instrument as a holder. An instrument may be negotiated in any of the
following two ways:
 P a g e | 21

1) By Delivery: A promissory note, bill of exchange or cheque . Payable to bearer is negotiable

by delivery thereof. Thus in case of a bearer instrument mere delivery constitute its
negotiation.

2) By Endorsement and Delivery: A promissory note, bill of exchange or cheque payable to

order I negotiable by the holder by endorsement and delivery thereof. Thus the negotiation
of an order instrument requires first an endorsement thereon by its delivery to the
transferee.

**The endorsement of a negotiable instrument followed by delivery transfers to the endorsee

the property therein with the right of further negotiation. Thus the endorsee acquires property
or interest in the instrument as its holder.
An instruments may also be endorsed so as to constitute the endorse an agent of the endorser:
 To endorse the instrument further
 Pay C or order for the account of B
 To receive its amount for the endorser or for some other specified person.

Where a negotiable instrument is endorsed for any of the above purpose, the endorser
becomes its holder and property therein is passed on to the endorsee. The endorsee filed a
suit against the maker of the pronote for the recovery of the amount due.

15. What is ‘negotiation’? How is it effected and how does it differ from an ordinary
assignment?

Solution: Generally the word ‘Negotiation’ refers to transfer of anything.Broadly,

negotiation is the transfer of possession of any instrument previously held by someone. It
means the transfer of ownership of a document or instrument by the holder to another in
order to make the transferee the holder of the negotiable instrument.In the term of negotiable
instrument,According to section 14 of the negotiable instrument act 1881,”When a
promissory note,Bill of exchange or cheque is transferred to any person,so as to constitute
that person the holder thereof,the instrument is said to be negotiated.”Negotiation may be
accidental or intentional,but whoever possess the instrument transferred from the previous
parties,becomes the holder of the instrument.

Negotiation of negotiable instrument can be occur in two ways,

(a)By Delivery:The primary and most common form of negotiation is mere delivery.A
negotiable instrument that can be a cheque,Promissory note or a bill of exchange which is
payable to bearer,can be negotiated by delivery.the delivery can be given by the holder
himself and also by his agent. Any person can be the holder of the bearer instrument by mere
delivery.
(bBy Endorsement and delivery:In case of negotiable instruments being payable to
order,the delivery the ownership of the instrument to the transferee,proper endorsement is a
must.endorsement refers to signins by the holder or transferer in the back of the instrument
 P a g e | 22

for transferring the ownership of the instrument to the actual payee or to his
order.Endorsement without the purpose of negotiation will not be counted as endorsement.
Difference between Negotiation and ordinary assignment:

Negotiation Ordinary Assignment

1. Negotiation is the transfer of the Assignment refers to the transfer of

ownership of a negotiable instrument to Rights in respect of receiving debt
make the transferee the holder of that payments.
instrument.

2. For transferring it does not need any A transfer notice from the assignee
previous notice. must be served in this term.

3. Instrument can be negotiated by delivery an assignment should be made in the

or endorsement written form duly signed either on
the instrument itself or on a separate
attached document.

4. In Negotiation the holder in due course If there is a defect of the title of the
gets a better title than the previous transferor, the assignee does not get a
parties as his instrument is free from any better title than that of an assignee .
defects and prior charge.

Question 16: Define the term "Endorsement" and explain different kinds of
endorsements.
Answer: Under Section 15 the definition of Endorsement is -

"When the maker or holder of a negotiable 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
annexed thereto or so signs for the same purpose a stamped paper intended to be completed
as a negotiable instrument, he is said to have endorsed the same and is called endorser.

As per the Negotiable Instruments Act, endorsements are of the following types:

1. Endorsement in Blank - According to section 16, if the endorser signs his name
only. Endorsements are called "blank". The endorser does not mention the name of the
endorsee to the effect that an instrument endorsed in blank becomes payable to the bearer.
Although originally payable to order (Section 54) and no further endorsement is required for
its negotiation.
For example, if a check is payable to 'X or to the order' and X signs only on the back, such
an endorsement is called a bare endorsement. Such endorsement makes it a bearer check by
which further negotiable instruments are merely delivered. But if such a check is crossed, it
cannot be paid over the counter of the bank. Even if it is bare endorsed. If full endorsement is
 P a g e | 23

given after blank endorsement, it shall be payable to or to the order of the person mentioned
in the last endorsement.
2. Endorsement in Full - If, in addition to his signature, the endorser adds a direction to
pay the money specified in the instrument to a particular person or to his order, the
endorsement is called a 'complete endorsement' (Section 16). If in the above example X adds
the words "pay to Y" or "pay or order to Y", then such endorsement is called a full
endorsement. The instrument would then be payable to Y or to his order and would require
approval by Y for further negotiation.

A blank endorsement may be converted to a full endorsement. The holder of a negotiable

instrument endorsed in blank may, without signing his own name, convert the endorsement in
blank into a full endorsement by writing a direction to pay to another person above the
signature of the endorser, and the holder thereby incurs the liability of an endorser (section
49).

For example, if a check is endorsed in blank by Y signing X behind it, the holder can
convert the blank endorsement into a full endorsement by writing "Pay to Z or order" above
X's signature. Thus Z would become the endorser, but Y would not be liable to him as an
endorser as his name was not included in the entire endorsement. If the check is dishonored,
Z can hold all parties other than Y liable on the check.
3. Conditional Endorsement -
If the endorser of a negotiable instrument, by express words in the endorsement, creates his
liability. or the endorser's right to receive the amount due thereon. Conditional on the
happening of a certain event, though such event may never happen, such an endorsement is
called a conditional endorsement (Section 52). Such an endorser gets the following rights:

(a) He may make his liability on the instrument conditional upon the happening of a
specified event. He shall not be liable to the subsequent holder unless the specified event
occurs. In such cases the endorser may sue the other parties to the instrument before the
specified event takes place.
(b) He may authorize the approval of the instrument conditional on the happening of a
specified event.
For example, " X If he returns from Bombay." Thus X is entitled to payment only on the
occurrence of a specified event, i.e., if he returns from Bombay. If the event does not occur,
the endorsee cannot sue either party. Conditional endorsements do not pay.

4. Restrictive Endorsement - Generally, an endorser of a negotiable instrument is fully

capable of further negotiation but Section 50 allows for limited endorsement which takes
away the negotiable power of such instruments. "An endorsement, by express words. may
limit or exclude the right to negotiate or merely constitute an agent to endorse the instrument
or accept its contents for the endorsee or any other specified person," prohibiting such
endorsement from further endorsements and ' is called 'restrictive sanction'.
 P a g e | 24

For example, if B endorses an instrument payable to bearer as follows, C's right to further
negotiation is excluded:
(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 But the following endorsements are not restrictive
endorsements.

5. Endorsement 'Sans Recourse' - An endorser of a negotiable instrument may, by express

words in the endorsement, exclude his own liability thereon (Section 52).

For example, if endorses a cheque as follows:

(i) Pay to X or order at his own risk (ii) Pay to C without recourse to me.
he (R) will not be liable to X or any of the subsequent endorsees if the bank dishonors the
cheque subsequently. They may sue any party prior to such an endorser. But if an endorser
who so excludes his liability afterwards becomes the holder of the instrument, all
intermediate endorsers are liable to him.
For example, R has excluded his personal liability by endorsing the cheque "without
recourse". He transfers it to B. B endorses it to C, who endorses it back to R. Thus R shall
have the rights as endorsee against B and C, who endorsed the instrument, before it came
back to R.

6. Facultative Endorsement- The endorsee must give notice of dishonor of the instrument to
the endorser, but the latter may waive this duty of the endorsee by writing in the endorsement
'Notice of dishonor waived'. The endorser remains liable to the endorsee for the non-payment
of the instrument.

For example, 'X' has dishonored an instrument of 'Y' by giving notice, but the latter may
waive this duty of the Y by writing in the endorsement 'Notice of dishonor waived'. X
remains liable to the Y for the non-payment of the instrument.

Question Number 17:

Give correct endorsement on check payable to the order of:

(a) Smt R Dawood
(b) Messrs Chokshi & Co
(c) Trustees of the late Framrose Vakil
 P a g e | 25

(d) H C & Co Ltd (in liquidation) Answer :

(a) If Smt R Dawood wants to endorse an instrument to another person, he has to sign on
the face or back side of the instrument and write the name of the endorsee. He can
endorse the amount of the instrument partially but he cannot make it for several
person. Because the payable to order of cheque is very careful instrument of these
criteria

b) Messrs Chokshi can endorse an instrument for a Company, that endorsement will
be included in joint stock company endorsement. If Messrs Chokshi purchases any
kind of share from the Company, she can pay the money with the payable to the order
of cheques and she has to make a sign for making sure of the endorsement.

(b) If a holder of an instrument will eventually die, the amount of the instrument can be
endorse by the trustees of the holder. Just like that Trustees of the late Framrose Vakil
can make the endorsement of the late of the owner but there has a criteria that the all
trustees have to make sign on the face or back for the endorsement. Otherwise, it will
not acceptable to bank.

(c) H C and Co Ltd is in a relationship of liquidation. H C is the liquidator of the

company. If he wants to return the amount of liquidation with the cheque payable to
the order of H C to Co Ltd, An official receiver of the company and H C have to
make the endorsement by signing on the face or back of the instrument. Through this
way the endorsement can be valid and acceptable.

Question Number (18): Please state whether the following endorsement are correct. If
not, Please give correct endorsement:

Name Endorsement

1. Padmashri Krishna Rao Padmashri Krishna Rao

2. Fire and General Insurance Co. Ltd Per pro Fire and General Insurance
Co.Ltd
Rustamji Dalal Constitited Attorney

3. Kum Aruna Maitra Arune Wife of Subhash Maihotra

 P a g e | 26

( formerly Miss Aruna Manitra)

4. Manav Mandir Trust For Manave Mandir Trust

Ramdevi Managing Trustee

5. Dr. Keshavlal Bhatt Keshavalal D Bhatt M B B S

Answer:

Name Correct Endorsement

 Padmashri Krishna Rao  Krishna Rao, Padmashri

 Fire and General Insurance Co. Ltd  For Fire and General Insurance Co.
Rustamji
(Dalal Constituted Attorney)
 Kum Aruna Maitra  Aruna Malhotra
(Wife of Subhash Malhotra)
 Manave Mandir Trust  Manave Mandir
(Trustees of the Ramadevi)
 Dr. Keshavlal Bhatt  Pay to Keshaval Bhatt, Dr. without
recourse to me.

Question Number(19):- Give the correct endorsement on the cheque payable to the
order of :-
 Bombay Shroffs Association
 Shah Nathalal and Bros
 Ramanlal & Co. by the proprietor ‘C’ Mehata & Co. Ltd. A Ltd Company
 Bangalore Banker’s Club
 Bombay Cochin Transport Co. Ltd.

Answer:
 In case of Joint Stock Companies, Institution and associations etc. Endorsement
should be made by person who is authorized by the company. If Bombay Shroffs
Association is a Joint Stock Company, this endorsement are as follow:

Bombay Shroffs Association For Bombay Shroffs Association

XYZ
Principal
 P a g e | 27

 In Partnership Firm, The name of the firm must be signed by a person( partner,
Manager) who is duly authorized to sign on behalf of the partnership firm. Here, Shah
Nathalal and Bros is a partnership firm ,this endorsement are as follow:

Shah Nathalal and Bros For Shah Nathalal and Bros

Nathalal
(Partner)

 Ramanlal & Co. by the proprietor ‘C’ Mehta & Co. Ltd. A Ltd Company.
 This endorsement as follow:

Ramanlal & Co. by the proprietor ‘C’ For Ramanlal & Co. Ltd
Mehta & Co. Ltd Company C
Proprietor

 Bangalore Banker’s Club

 This endorsement as follow:

Bangalore Banker’s Club For Bangalore Banker’s Club

XYZ
Principal

 Bombay- Cochin Transport Co. Ltd

 This endorsement as follow:

Bombay-Coachin Transport Co. Ltd For Bombay- Coachin Transport Co. Ltd
XYZ
Principle

Question Number:-20.Please state whether the following endorsements are correct, If

not give correct endorsements and give reasons

Name Endorsement
(i)Messrs Jamnadas Ratanchand Jamnadas Ratanchand
(ii)Messrs Shorff & Co. Shorff & Co.
(iii)Principal B D commerce College For B D commerce College
Vice Principal
(iv)Trustees of late Dalichand Gadumal C K Zaveri
(v)Dr Keshavlal Bhatt M B B S Keshavlal D Bhatt M B B S
 P a g e | 28

Solution:

(i). The endorsement is not correct.

The endorsement of Messrs Jamnadas Ratanchand should be as follow:
For Messrs Jamnadas Ratanchand
Jamnadas Ratanchand
Partner.
Since Started the name of the firm with “Messrs”,It is a Partnership Firm.In case of
endorsement of a partnership firm,the name of the firm must be signed by a person who is
duly authorised by the firm.He can be a partner ,manager or agent.Since the name and title of
who is making the endorsement on behalf of the partnership firm is not mentioned in the
endorsement of the question, It is an incorrect endorsement.
(ii).The Endorsement is not correct.
The endorsement of Messrs Shorff & Co.should be as follow:
For Messrs Shorff &
Co. Shorff Manager.
Since the name of the firm starts with “Messrs' ',It is a Partnership Firm.Since the name and
title of who is making the endorsement on behalf of the partnership firm is not mentioned in
the endorsement of the question, It is an incorrect endorsement.

(iii). The given endorsement is not correct.

The correct endorsement should be as follows.
For B D Commerce College
Principal
The method of endorsement in this term was apparently correct but the title of the authorised
person should be “Principal” as mentioned in the question.But in the endorsement it is given
the title “Vice-President” which is not correct.Thus it turns out to be an incorrect
endorsement.
(iv).The above endorsement is incorrect.
The correct method of endorsement in this term should be as follows.
C k Zaver
Trustee of late Dalichand Gadumal
If an instrument is payable to the trustee on behalf of a deceased person,the endorsement in
this term must state the name and identity of the trustee.But in the endorsement of the
question the full identity of the trustee is not fully disclosed and mentioned which makes the
endorsement an irregular one.
(v).The endorsement is incorrect.
The correct method should be as follows:
Kheshavlal Bhatt
Or, Keshsavlal Bhatt
Dr,MBBS.
 P a g e | 29

Generally prefixes,suffixes,titles or ranks of ones name should be eliminated from the

endorsement.It is regular method.But in case the endorser intents to,he may indicate his title
or rank after his signature.Since the title in the above endorsement is included before the
signature name,It is an incorrect endorsement.

Question Number :-21.Define “Endorsement”.What are the different types of

endorsement?Give example

Endorsement refers to "writing on the back of an instrument".But under Negotiable

Instrument Act Writing of a person's name on the back or front of the instrument or on an
attached paper, with or without mentioning some direction, for the purpose of negotiation is
called endorsement. by endorsement a holder can transfer the right or possession of the
instrument to another in endorsement without the purpose of negotiation will not be counted
as endorsement.

According Negotiable Instrument Act, there are different kinds of endorsement.They are of
following kinds:

Blank Endorsement: If the endorser in purpose of negotiation,signs his name only on the
back or front of the instrument without mentioning any direction to endorsement,,such
endorsement is called Blank endorsement.It is also called “general endorsement”.A
negotiable instrument generally becomes payable to bearer instrument by blank endorsement
even though payable to order.It can be negotiated further by mere delivery.
For example,an order cheque payable to Sanjida or order will become a bearer cheque if
Sanjida signs on the back of the instrument without any further direction.Thus the cheque
becomes bearer cheque and can be negotiable without further endorsement.

Endorsement in full:In case the endorser signs his name and add some direction for paying
the amount to payee mentioned or to the order of a specified person,this is called Full or
Special endorsement.This endorsement clarifies the person to whom or to whose order the
payment is to be payable.
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For example, If Disha signs a bill for endorsement with the directions “Pay to Rajib or order”
she is specifying that the bill is to be paid to Rajib or any person by order of Rajib.

Conditional Endorsement: When the endorser limits or reduces or negatives his liability
and the right of the endorsee by putting some condition while endorsing an instrument then it
is called conditional endorsement. The payment of the amount received by endorsee or
further endorsement depends on some condition in this term.It is also called qualified
endorsement.
For example,If the endorser endorses an instrument with the words “Pay Jakia or order on her
getting the new marketing contract”, then this is called a conditional endorsement.

Restrictive Endorsement: If the Endorser Restrict the further negotiability of the endorsee
by not mentioning the words “or Order” then it is said to be restrictive endorsement. The
endorser Transfers the ownership of the instrument to endorsee but prohibits the rights to
further negotiating to anyone in this term. It restics the ownership transfer power by the
endorser.
For example, If endorser Sadat endorses a cheque to Jamila by writing “Pay to Jamila” only,
without mentioning the words “or order”,he restics the further negotiability power of Jamila.

Endorsement “San Recourse”: If the endorser decrease his own liability from further
negotiation of parties or any subsequent holder by expressing words or condition while
endorsing, then it is called Endorsement “San Recourse”.If the instrument is dishonoured in
future the endorser making such endorsement will not be liable for any loss.
For example, If Shamima endorse a cheque to Mila additoning the words “Pay to Mila
without recourse to me” ,it turns into an “San recourse endorsement and Shamima thus
excluding her liability from the instrument.

Fluctuative Endorsement:It is totally opposite to the endorsement “San recourse”.By this

endorsement, the endorser increases or extends his liability and reduces rights and make
himself liable to subsequent endorsee for any non-payment or dishonour of the instrument in
future by expressing the words of waiving the duty even though no notice of dishonour is
received by him from the holder.
For example,Mr Jamal endorse a bill to Mr. X of exchange signing with the words “Pay X or
order ,notice of dishonour is waived”, he is making himself liable to subsequent
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Question(22): Explain the meaning of the following terms: a) Allonge. b) Sans Recourse.

Answer: The meaning of allonge and Sans Recourse is described below:

1. Allonge: An allonge is a legal term used in the context of negotiable instruments,
such as checks or promissory notes. It refers to a separate piece of paper that is
attached to the original instrument, and it allows for additional endorsements to be
made when there is not enough space on the original document. The use of an
allonge is common when a negotiable instrument is transferred multiple times and
there is not enough space on the document to accommodate all of the necessary
endorsements. An allonge can be used to add endorsements to the original
document, and it must be attached to the instrument to be considered valid. It's
important to note that the use of
an allonge is typically only necessary in specific circumstances where the original
document does not have enough space for additional endorsements. In most cases,
a negotiable instrument can be endorsed on the back of the original document, and
an allonge is not required. However, if an allonge is used, it must meet the legal
requirements to be considered valid.
2. Sans Recourse: "Sans Recourse" is a French phrase that translates to "without
recourse" in English. In the context of the endorsement of negotiable instruments,
such as cheques or promissory notes, "sans recourse" means that the endorser is not
liable for any losses or damages that may arise from the transaction. Essentially, the
endorser is transferring ownership of the instrument without assuming any
responsibility for its payment. When an endorser includes the phrase "sans
recourse" or a similar phrase, such as "without recourse" or "without recourse to
me" on the back of a negotiable instrument, they are stating that they are not
responsible for the payment of the instrument. This means that if the instrument is
dishonored or there is a problem with payment, the endorser cannot be held liable.
It's important to note that the inclusion of "sans recourse" on an endorsement does
not necessarily mean that the instrument is not valuable or that it cannot be
negotiated. It simply means that the endorser is not assuming any liability for the
transaction.

Question Number:- 23.

(a)Define “Endorsement”.What are the different types of endorsement?Give examples.
(b)Give correct endorsement on cheques payable to the order of
(i)Smt R Bakshi
(ii)M/SS Bhattacharya & Co.
(iii) K L K & Co. Ltd (in liquidation)
(iv)Padmashri Rustonjee Sorabjee(v) Trustees of late
Gujarmal Metha
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Answer:

(a)Endorsement refers to "writing on the back of an instrument".But under Negotiable

Instrument Act Writing of a person's name on the back or front of the instrument or on an
attached paper, with or without mentioning some direction, for the purpose of negotiation is
called endorsement. by endorsement a holder can transfer the right or possession of the
instrument to another in endorsement without the purpose of negotiation will not be counted
as endorsement.

According Negotiable Instrument Act, there are different kinds of endorsement.They are of
following kinds:

Blank Endorsement: If the endorser in purpose of negotiation,signs his name only on the
back or front of the instrument without mentioning any direction to endorsement,,such
endorsement is called Blank endorsement.It is also called “general endorsement”.A
negotiable instrument generally becomes payable to bearer instrument by blank endorsement
even though payable to order.It can be negotiated further by mere delivery.
For example,an order cheque payable to Sanjida or order will become a bearer cheque if
Sanjida signs on the back of the instrument without any further direction.Thus the cheque
becomes bearer cheque and can be negotiable without further endorsement.

Endorsement in full:In case the endorser signs his name and add some direction for paying
the amount to payee mentioned or to the order of a specified person,this is called Full or
Special endorsement.This endorsement clarifies the person to whom or to whose order the
payment is to be payable.
For example, If Disha signs a bill for endorsement with the directions “Pay to Rajib or order”
she is specifying that the bill is to be paid to Rajib or any person by order of Rajib.

Conditional Endorsement: When the endorser limits or reduces or negatives his liability
and the right of the endorsee by putting some condition while endorsing an instrument then it
is called conditional endorsement. The payment of the amount received by endorsee or
further endorsement depends on some condition in this term.It is also called qualified
endorsement.
For example,If the endorser endorses an instrument with the words “Pay Jakia or order on her
getting the new marketing contract”, then this is called a conditional endorsement.
Restrictive Endorsement: If the Endorser Restrict the further negotiability of the endorsee
by not mentioning the words “or Order” then it is said to be restrictive endorsement. The
endorser Transfers the ownership of the instrument to endorsee but prohibits the rights to
further negotiating to anyone in this term.
For example, If endorser Sadat endorses a cheque to Jamila by writing “Pay to Jamila” only,
without mentioning the words “or order”,he restics the further negotiability power of Jamila.
 P a g e | 33

Endorsement “San Recourse”: If the endorser decrease his own liability from further
negotiation of parties or any subsequent holder by expressing words or condition while
endorsing, then it is called Endorsement “San Recourse”. If the instrument is dishonoured in
future ,the endorser making such endorsement will not be liable for any loss.
For example, If Shamima endorse a cheque to Mila additoning the words “Pay to Mila
without recourse to me” ,it turns into an “San recourse endorsement and Shamima thus
excluding her liability from the instrument.

Fluctuative Endorsement: It is totally opposite to the endorsement “San recourse”.By this

endorsement, the endorser increases or extends his liability and reduces rights and make
himself liable to subsequent endorsee for any non-payment or dishonour of the instrument
further even though no notice of dishonour is received by him from the holder.
For example,Mr Jamal endorses a bill to Mr. X of exchange signing with the words “Pay X
or order ,notice of dishonour is waived”, he is making himself liable to subsequent
endorsees.

(b)The correct endorsement on cheques payable to the order of following are given
below:
Payee Regular endorsement

(i) Smt R Bakshi Mukta Bakshi or order (Name imaginary included)

(Wife of Mr. R Bakshi).
(ii)M/S S Bhattacharya & Co. For M/S S Bhattacharya & Co.
S Bhattacharya or order
Partner .

(iii)K L K & Co Ltd(In Liquidation) For K L K Co Ltd in Liquidation

Liquidator or order.

(iv)Podmashri Rustonjee Sorabjee Rustonjee Sorabjee or order.

(v)Trustees of late Gujarmal Metha Mr X. , Trustees of late Gujarmal Metha,

Mr Y. or their order,
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 Conclusion
Endorsement is the most protective way of negotiation of Negotiable Instruments which are
payable to order. It is mainly for greater security of the instrument so that the true holder and
owner of the negotiable instrument can get his rights and authentic possession of it. It gives
the right of transferability or further negotiation to the actual holder who is entitled to have
the ownership of it or to subsequent endorsees without any risk.

In this case, to whom and with whose permission the money will be given is specified
previously so that any trouble arising later can be avoided. It also allows different situation
wise endorsement methods in favor of the endorser. Thus, it creates its own difference with
ordinary negotiation such as mere delivery.